Great question! But first…

Are you a portal? The answer is “NO!”, there is no such thing as a “crowdfunding portal”. In fact, there is no such thing as equity or debt crowdfunding. Yes, seriously.

This is where regulators and the rest of the world depart. To them a portal is a Congressionally authorized but still-not-SEC-authorized, broker-dealer-like creature that some day in the undefined future will be permitted to conduct business pursuant to the not-yet-released-rules for “Regulation Crowdfunding” which creates a new 4(a)(6) exemption under the Securities Act of 1933 as per the JOBS Act. And since the rules aren’t issued and unaccredited investors cannot invest in anything online, neither portals nor crowdfunding exists.

Yes, we all commonly refer to 506(b) and (c) offerings as “crowdfunding”. Yes, we all commonly refer to online websites where issuers display their capital raises as “portals”. And yes, I’ve even seen SEC staff make these references in speeches and casual conversations (during which they are always clear that their views are personal and not representing the SEC). However, to the SEC, FINRA, and NAASA (state regulators) neither portals nor crowdfunding exists (in a federal sense).

So at FundAmerica we tend to say “funding platform” instead of “portal” when writing contracts and processing transactions.

So…what is a “funding platform”? Isn’t it a regulated thing, just like a portal will be someday? No.

Funding platform” is another word for a “website” which displays, among other things, offerings of securities conducted via 506(b) and/or (c).

Broker-dealers can have websites. Investment advisers such as hedge funds and venture capitalists can have websites. Search engines can have websites. Marketing firms can have websites. Classified ad businesses can have websites. Magazines can have websites. Issuers themselves can have websites. And they can all display offerings of securities, in rich color and detail. They can all help generally market and advertise those offerings, pursuant to rules particular to (b) or (c) offerings.

And sure, the website may have some neat backend SaaS technology to aid the issuer in processing their sales of securities. It might incorporate an electronic document signature service like Docusign, and perhaps a service to verify investor accreditation like VerifyInvestor, or an escrow, AML and payment processing service like FundAmerica. It might be built from scratch by the website owner, or it might license the front-end from firms such as CrowdEngine, GroundBreaker, CrowdWithEase or Katipult. Nifty, but still just a website with technology tools for an issuer who is raising capital by conducting an offering of securities.

The website (aka “funding platform”) isn’t itself selling securities. The issuer is. And employees of the owner of the website (except for broker-dealers and, in some cases, issuers) aren’t selling securities, they are just marketing the website to a broad audience and perhaps being compensated by the issuer to generally advertise an offering to a niche group. The owner of the website might charge fees for listing and/or advertising an offering (e.g. Google would charge AdWords or Display ad fees, DMList might provide lists of accredited investors and aid in email blasts, EquityNet or EquityRound might charge listing fees, Crowdnetics may charge fees for tools and services, etc). If it belongs to a broker-dealer (e.g. CrowdClear, NorthCapital, WealthForge, SilverPortal, CircleUp, etc) then that firm might charge commissions. And if it belongs to an investment adviser (e.g. iFunding, AngelList, Fundable, Prodigy, Loquidity, CBRE, etc) then it’s usually free for offerings of funds they manage.

So, in summary, lets understand how we in the industry commonly use terms vs how regulators view things: “portals” don’t yet exist (on a federal level, not getting into the state discussions here), “funding platforms” are just “websites” and 506(b) and (c) deals are not “crowdfunding”, they are just “offerings”.

Cheers,

Scott Purcell
CEO
FundAmerica Technologies, LLC

Legal Disclaimer:
These materials are my personal opinions and for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professionals to obtain advice with respect to any particular issue or problem.