On September 23, 2013, Title II of the JOBS Act took effect, lifting the Securities and Exchange Commission’s ban on general solicitation for the first time since the Securities and Exchange Act of 1933 effectively prohibited any startup in the U.S. from advertising an offering. Many people have speculated on the impact of this change for entrepreneurs and investors alike, though few have taken advantage of the new regulations to test the waters.
The first company to generally solicit
Shahab Kaviani, CEO of CoFoundersLab, was an enthusiastic first adopter of Title II, and believes that his startup was the very first company to take advantage of this opportunity by sending this tweet at 12:01am on September 23rd:
CoFoundersLab opened a bridge round on the same day after having raised $525K previously and has recently surpassed its funding target of $675K for this round. Kaviani shares his insights into publicly advertising his crowdfunding efforts under Title II.
As the CEO of a company that helps connects founder a la match.com for entrepreneurs, Kaviani notes that, “while our startup needed to raise funds, we chose to leverage crowdfunding for a few reasons. First, we’re building a mission-based global internet brand and I felt it was important to have stakeholders who could represent our interest outside our home market. Crowdfunding opened the door to speak with investors in Australia, New Jersey, Moscow, Switzerland, Texas, and the list goes on. Some of these investors are now investors in CoFoundersLab.”
“Prior to crowdfunding,” he states, “I would have no way to discover potential investors outside of my personal network.” Likewise, “since CoFoundersLab is a community of close to 25,000 founders, I wanted to try crowdfunding first to see if it works, blaze the trail, and pass on my learning’s to benefit our members.”
Now that the round is oversubscribed, the startup has investors in 4 cities beyond its home market. These investors are not only important contributors of capital, but they are also incentivized to promote CoFoundersLab within their communities to help spread the word.
RockThePost vs. AngelList
While CoFoundersLab had a profile on AngelList, all of CoFoundersLab’s accredited investors discovered the company through RockThePost. “We benefited from promotion as one of Barbara Corcoran’s Top Startup Picks in a special RockThePost report,” Kaviani notes, in addition to having pitched to dozens of accredited investors during the November Digital Demo Day webinar, and being featured in several emails to RockThePost’s accredited investor base. Furthermore, CoFoundersLab was featured in a newsletter blast to over 1 million people through one of RockThePost’s established partnerships for free, which would otherwise hundreds of thousands.
What attracted CoFounderLab to RockThePost was the level of curation of every startup listed on the platform and the opportunities it presented for founders to interact with investors across the country. In addition, once CoFoundersLab became listed, the RockThePost platform attracted seasoned startup investors.
From Kaviani’s experience, many are professionals who want to invest in a startup, but don’t know where to look given that they aren’t plugged into the main hubs of startup investing in Silicon Valley, Boston, or New York where the deal flow is easier to find. “What excites me about crowdfunding,” Kaviani adds, “is that startup investing gets out of the clubhouse and creates opportunities everywhere else.”
Of his experience with AngelList, Kaviani feels like it is a network that works best when you already have an established, reputable group of investors whose backing sends signals to the AngelList community and their own personal networks to encourage investment via the platform.
“Investors are easier to attract on AngelList if you’re based on the West Coast,” Kaviani speculates, “as thousands of companies have raised millions thanks to AngelList.”
Kaviani actively took advantage of the newfound ability to publicly advertise, not just by tweeting about his fundraising round, but also by writing about it in a blog post, sharing it among the CoFoundersLab community, and promoting it via the general solicitation option on RockThePost and AngelList. With the additional investments he received from investors from RockThePost, he is confident that extra promotional efforts were worth it – he reached investors from across the country who he would not have otherwise found.
Kaviani will file Form D in accordance with the Title II regulations. As the rule stands now, companies that generally solicit their offerings must check a box on the form indicating as much. The proposed rules that were released by the SEC for public commenting over the summer include many additional requirements, such as pre-filing advertising language before generally soliciting, but the final version of these rules have not been released at this time.
Although Kaviani’s round is fully subscribed, he is still open to considering additional investments up to $145K to extend CoFoundersLab’s current bridge round, especially from investors who may offer strategic benefits. Visit CoFoundersLab on RockThePost to learn more.