Crowdfunding

SeedInvest Continues Selective Approach With Title III Crowdfunding

Amy Cortese | May 14, 2016

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SeedInvest was founded in 2012 by Ryan Feit (above, right) and James Han (left) after they saw how hard it was for their Wharton classmates to raise money for their startups. Since then, SeedInvest has helped over 65 companies raise capital through Title II (accredited investors) and Title IV (Regulation A+) of the JOBS Act, for which they were early advocates. The New York-based company is one of the first platforms to receive approval to conduct offerings under Title III, or Regulation Crowdfunding, which goes into effect on Monday. We talked to CEO Feit about his plans for Title III.

Amy Cortese: SeedInvest will be one of the first platforms out of the gate to go live with Title III/Regulation Crowdfunding offerings. What can we expect to see?

Ryan Feit: Historically, SeedInvest has only accepted 1% of companies and we plan to take a similar approach with regard to Title III.  We’ll continue to operate very different than any “listing service” platforms out there. So expect to see a few hand-selected deals out of the gates.

AC: What’s been your experience working with these first issuers to prepare for their Title III offerings? Is it a steep learning curve?

RF: Like all new things there is a fair amount of education required upfront.  However, overall people are greatly overestimating the cost and complexity of preparing for a Title III fundraise.  As long as you are using a platform with technology that streamlines the onboarding process, it’s not much different than any other fundraise.

AC: You founded SeedInvest in 2012 with Title III crowdfunding in mind. How does it feel now that, four years later, it’s finally here? Are you seeing pent up demand on the part of issuers and/or investors?

RF: It’s sort of mind-blowing that it’s been four years now!  We’ve definitely been witnessing the pent-up demand from investors already.  Virtuix (a virtual reality platform) recently raised $4.7 million from over 1,000 investors under Reg A+ on SeedInvest.

SeedInvest At A Glance

Based: New York

Employees: 20

Type of intermediary: Broker/Dealer

Track Record: Has helped 65 companies raise a total of $40 million

Issuer Fees:  5% cash/5% equity

Successful offerings: Virtuix, a virtual reality gaming startup; Patch of Land, a real estate crowdfunding platform

AC: You’ve done Reg A and Title II offerings to date. What have you learned from that?

RF: One of the biggest things we’ve learned is that consumer-facing companies can gain a lot from tapping their user base as investors.  Turning your customers into investors can result in an army of passionate brand ambassadors who will help get the word out about your product or service.

AC: What are the biggest challenges with Title III, in your view, and how can they be addressed?

RF: The biggest challenge is ensuring that companies raise capital in a way that does not inhibit their ability to raise additional capital in the future.  There are a number of ways to structure Title III deals thoughtfully to ensure that companies don’t have any issues down the line.

AC: Issuers will have a number of funding platforms to choose from. What differentiates SeedInvest from other platforms out there?

RF: Companies should choose whatever platform gives them the highest likelihood of success.  I’d advise companies to do their homework and look into how many companies the platform has funded in the past, how many investors are on the platform and how a given platform can help my company as it grows and needs additional capital down the line. SeedInvest has already processed over $40 million in investment volume and funded over 65 companies. And we have over 100,000 investors.

AC: Will retail investors to invest alongside professional angel and venture investors on your site?

RF: The majority of the deals done on SeedInvest over the past three years have been alongside professional venture capital funds and angel groups and we expect that to be the case going forward as well.

AC: What kinds of companies do you think Title III will be a good fit for? And how do you steer potential issuers down one capital-raising path as opposed to another?

RF: This change will be groundbreaking for startups which are too early for venture capital and for Main Street small businesses.  Title III can be a great fit for a startup that’s raising its first $500,000 to $1 million.  That company might go on to use Title II to raise a $3-5 million Series A as it gains traction, followed by a $10-$20 million Series B through Reg A+.  SeedInvest wants to continue to help companies at all stages of their lifecycle.

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