Crowdfunding allows companies to raise funds from a collective group of people. Every day investors can invest as little as $50 in companies. Examples of active sustainable investment crowdfunding opportunities include:
- Solgaard, which makes premium travel and lifestyle gear, created with ocean-bound plastics
- The National Energy Improvement Fund which finances energy efficiency and resiliency improvements in homes and commercial properties
- COMMUNITYx, a women of color founded coalition-building platform that connects like-minded activists from local and global communities around the issues they care about most.
Crowdfunding Investment Platforms
Opportunities for investments in start-ups are available on a number of different crowdfunding platforms. Sustainable investment opportunities can be found on platforms such as:
- Crowdfunder which allows for filtering by industry, category, and location.
- NextSeed which allows for filtering by types of founder (e.g. women, minorities, veterans) and start-up location.
- RaiseGreen which is focused on climate solutions
- SeedInvest which focuses on technology and consumer facing businesses.
- StartEngine which allows for filtering by industry and funding progress. StartEngine also offers one of the first secondary markets for where non-accredited investors can publicly trade investments in startups that have raised capital via Regulation Crowdfunding and Regulation A+.
- Wefunder which allows for filtering by sector, location, social impact, types of founder, and more.
In the past, investing in start-ups was limited to accredited investors. Now, every day investors can invest during crowdfunding capital raises. A number of investor protections are included in the Jumpstart Our Business Startups (JOBS) Act. Transactions must occur through regulated intermediaries. Companies must satisfy a number of accounting and disclosure requirements. Investors are limited in how much they can invest within a 12-month period. Limitations are determined by the type of crowdfunding.
Types of Crowdfunding
There are two main types of equity crowdfunding: Regulation crowdfunding and Regulation A+ or “Reg A+”. Rules for both were amended in November 2020 with the aim to “harmonize, simplify and improve various structural and procedural aspects of our exempt offering framework.” The updated rules are discussed below.
Regulation crowdfunding allows a private business to be able to raise a maximum of $5 million from retail investors over a 12 month period. The limit was increased in November 2020 from $1.07 million. After one year, investors’ shares are tradable, so if they no longer want to own the shares, they can sell them. It is worth noting that
Reg A+ Crowdfunding
Reg A+ crowdfunding offers two tiers. Tier 1 allows for offerings of up to $20 million in a 12-month period. Tier 2 allows offerings of up to $75 million (previously limited to $50 million) in a 12-month period. Tier 2 offerings max out individual investors at the higher of 10% of annual income or net worth per offering. Investors can sell their shares the day after purchase. Companies that do Reg A+ crowdfunding can also be listed on the stock exchange if they choose to and provide enhanced disclosure.
Words of Caution
Check platform requirements to find minimum investment levels and any fees charged. Note that investing in start-ups is highly risky and investors should invest with caution. One risk of note is that there may be limited liquidity. An investment may be tied up for years in the business.