Major Changes to Securities Rules

Major Changes to Securities Rules

For those of us who care about moving investment dollars into the businesses we love, March 4, 2020 was like Christmas, New Year’s Eve, and the Fourth of July all wrapped into one. The Securities and Exchange Commission (SEC) released proposed rule changes that will make raising funds from investors easier for smaller businesses. The new rules aren’t perfect, and there are some things we wish they had included but didn’t, but these changes are really exciting! 

We are currently in a comment period, and we expect the new rules to take effect in the next couple of months. Please let us know if you have any comments you’d like us to add to our comment letter!

Here is a summary of the most exciting changes. But first, a big caveat: these rules do not preempt state law. So, for example, even though the new federal rule may allow you to publicly announce that you’re raising money at a pitch event, the law of the state you’re in very well may not.

Integration of Securities Offerings

Under current rules, if you switch from one type of offering to another (e.g. from a private offering that includes unaccredited investors to a publicly advertised offering under Rule 506(c)), you generally have to let six months pass between the end of the first offering and the beginning of the second. Under the new rules, the maximum amount of time you would have to wait between two offerings is 30 days. Unfortunately, state level integration rules could still prevent this.

Speaking at Pitch Events

We have often told our clients that if they speak at a pitch event, they cannot mention they are raising money without violating the rules against public solicitation of an investment offering. The new rules state that if you speak at certain types of events and publicly say that you are raising money, this will not be considered a public solicitation. The event has to be sponsored by a college, university, or other institution of higher education; a local government; a nonprofit organization; or an angel investor group, incubator, or accelerator. The sponsor would not be permitted to charge a fee to attendees of the event, other than reasonable administrative fees.

Testing the Waters

Under the current rules, you cannot offer an investment opportunity unless you have determined what compliance strategy you plan to use and, in many cases, complete compliance filings. The new rules propose to permit the solicitation of interest in an investment opportunity before having to incur the expense and effort associated with securities compliance. This is especially exciting if you are planning to raise under Regulation Crowdfunding because you will now be able to talk about a potential Reg CF offering without first having to complete all of the compliance requirements. And Reg CF preempts state requirements so you will be able to do this country-wide.

Offering and Investment Limits

The proposed rules increase the limit of how much you can raise under Rule 504 from $5 million to $10 million. This exemption allows you to include both accredited and unaccredited investors. The proposed rules also increase the amount you can raise under Reg CF from $1.07 million to $5 million, increase the cap on what each investor can invest, as well as remove caps altogether for accredited investors.

Crowdfunding Vehicles

The rules allow the creation of a special type of entity called a Crowdfunding Vehicle. The purpose of this entity is to hold equity investments that are then invested in the company that is raising money under Reg CF.  This means that all of the equity investors in a Reg CF raise can be combined into a single entity. There are significant limitations on the nature and scope of the crowdfunding vehicle’s permitted activities under the proposed rule.

Regulation Crowdfunding Eligible Securities

The rules propose to prohibit the offering of SAFEs (Simple Agreements for Future Equity) under Reg CF.

Stay tuned for updates on the final rules!

Major changes for maximum impact

Major changes for maximum impact

Dear Community,

This is my last blog post for 2019, and I want to thank you for all your support this year. As we work to change the face of investment in our country, your outpouring of love for our amazing entrepreneur clients, and of course your investments in them, mean everything to us!

2019 was a year of major change for Jenny Kassan Consulting. For the first time we didn’t do our signature training event, Fund and Fuel Your Dreams, because it felt like we were being called to serve in a different way.

It was time to acknowledge that raising significant investment dollars, for many entrepreneurs, is an undertaking that requires an extremely high level of support—coaching, legal services, support with communications, and help with connecting to the right investors. While a three-day training is a great start, it barely scratches the surface of what is needed to meaningfully support an entrepreneur with fundraising. Plus, now that my book is published, everything we taught at the event is easily accessible without the need to attend a three-day live event.

So, in 2019 we focused our efforts on one-on-one client services, allowing us to address each individual client’s unique goals and challenges and to bring the right resources to the table.

We also put more energy than ever into cultivating the investor side of the equation. With such amazing entrepreneur clients, the obvious next step was to leverage the relationships we already have with “outside-the-box” investors and to encourage connections between investors and our clients. We do this through our WeCapital Community—where we connect our current and former female clients with investors—and also through Angels of Main Street—a community of angel investors that is open to people anywhere in the US regardless of wealth or income.

In its first year, the Angels of Main Street have already moved several hundred thousand dollars into direct investments in mission-driven companies.

In 2020, we will continue 1) to focus on providing highly customized services for entrepreneurs who want to raise investment capital on their own terms and 2) to grow the movement of investors wanting to learn how to move their money into ventures they love.

We hope you’ll stay involved—here’s what you can do:

· Follow us on social media

· Join Angels of Main Street

· Invest on Crowdfund Mainstreet

· Buy and gift my book here

· Refer entrepreneurs to us here

· Continue to read our newsletter and encourage friends to join our mailing list by going to our website

Thank you again for your support and encouragement!

~ Jenny

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We are the Ones We’ve Been Waiting for

We are the Ones We’ve Been Waiting for

This year’s CoCap (Community Capital Conference) was our best yet, and I walked away feeling very hopeful. One of the main themes was this: we don’t have to wait for a white knight to move capital into what we love. For example:

  • Anyone in California can invest in the East Bay Permanent Real Estate Cooperative, an organization that protects land from the speculative market—everyone can buy equity in the co-op for $1,000. Those who cannot make a one-time payment of $1,000 may set up regular payments, with a minimum first payment of $100.
  • Anyone (if you have self-employment income) can work with The Next Egg to set up a low-fee self-directed retirement account from which you can invest your retirement funds into businesses you care about.
  • Anyone can go to Crowdfund Mainstreet and invest as little as $100 in a mission-driven business. This platform offers investments under Regulation Crowdfunding, an investment tool which has only been legal since 2016. According to data gathered by, while 66% of investment crowdfunding campaigns are successful, 77% of women-owned companies and 75% of people of color-owned companies that raise money using investment crowdfunding are successful.

These are just three examples of how everyone can invest in the next economy—one that is just, sustainable, and creates equitable prosperity for all.

Rather than putting energy into trying to get the big players in the financial markets to stop being extractive and rapacious, let’s use our own money to create the world we want to see. Collectively, we have a lot!

Be a part of the movement to unleash community capital to fund what we want to see in the world.  If you’re interested in learning more about the power of community investing, go to to join our movement.    

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How to get your fundraising done quickly so you can move on with your life

How to get your fundraising done quickly so you can move on with your life

Here is an exercise we recommend in order to make sure you get your fundraising done within a reasonable amount of time.

1. Imagine you have reached your fundraising goal. You are looking at the list of all your investors and how much each one invested.  What is the lowest amount that someone invested and what is the highest amount?  Try to create a clear picture in your mind of your investor list and the amounts invested.

2. In your imagination, scan the list and estimate what the average investment size per investor is. For example, you may picture that you’ll have some people come in at $5,000, some at $10,000, a few at $25,000, maybe one or two at $50,000, and one at $100,000.  In that case, you may estimate the average per investor to be $20,000.  You can use this tool to decide how much you’ll ask for from each potential investor:

3. Now, take the total amount you want to raise and divide it by the average per investor. That will tell you the approximate number of investors you’ll have when you reach your goal.  So, if you want to raise $400,000, you’ll end up with around 20 investors.

4. Multiply that number by 10. That is the approximate number of potential investors you’ll need to talk to about your offering.  (This assumes that an average of one out of ten people you talk to will say yes—you may do much better than that, but it’s best to be conservative).  In our example, this would be 200.

5. Divide that number by the number of weeks you would like to devote to reaching your funding goal. This is the number of people you will contact per week about investing.  So, if you’d like to reach your goal within six months, divide 200 by 26 weeks—you need to contact 7-8 people per week.

6. Assume that for each contact you’ll need to spend 30-60 minutes on average. Multiply the number of people you’ll talk to per week by the average number of minutes you think each contact will take.  That is the total number of hours you should schedule into your calendar for contacting potential investors.  Add at least half that many hours to give yourself time to follow up with people who haven’t yet given you a definitive answer.  In the example above, I would assume eight hours per week plus another four for follow up—so a total of 12 hours per week should be spent contacting potential investors.

7. Now block out that time in your calendar for the number of weeks you gave yourself to reach your goal.

If you use this method, you’ll keep your momentum going and get that fundraising done before you know it!

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Investor Management 101

Investor Management 101

I advise my clients to be open to having a larger number of smaller investors rather than one or two big ones.  Why? There are two reasons: (1) it’s easier to reach your fundraising goal when you allow lower minimums per investor and (2) when each investor puts in a relatively small amount, it is very unlikely that any of them will try to micromanage or bug you with constant requests for information.  Because they have put in an amount that is not ‘make or break’ for their financial situation, they are far too busy to worry about your day-to-day decisions.

I have raised money four times from hundreds of investors, and I have never had a single one become demanding or irritating.  On the contrary, all of my investors have been patient, supportive, and tolerant when things haven’t gone quite as planned.  

What do you need to have in place to take care of your investors and meet your financial obligations to them?

  1. A professionally managed accounting system that allows you to track your investors
  2. A process to ensure that you have up to date contact information for your investors including W-9s so you can report to the IRS the payments you make to them
  3. A system for providing regular updates—a quarterly email newsletter works great
  4. A process for making payments to your investors in accordance with your agreement with them—this often involves sending an annual dividend or loan repayment to each investor, via check, ACH, or wire.

Of course, the more investors you have, the more time and effort may be involved in maintaining these systems and processes.  I recently sent out about 140 checks to investors and am now trying to track down those who haven’t cashed their checks yet.

Don’t let the thought of these obligations deter you from raising money!  Depending on how you design your offering, most of the effort happens just once a year or even less frequently.  And the benefit of having supportive investors—who have no interest in telling you how to run your business—far outweighs the relatively small effort needed to treat them well and pay them for the use of their money.

If you would like to get my eyes on your particular situation, please apply for a strategy session, and we’ll reach out if it’s a fit.

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FAQ:  How can I get funded without giving up too much of my business?

FAQ: How can I get funded without giving up too much of my business?

In a recent virtual training, I asked participants to submit their top questions about raising funding from investors.  Below is one of the most commonly asked questions.

How can I get funded without giving up too much of my business?

Many business owners think that if they raise money from investors, they will have to give up a big chunk of ownership and maybe even control of their company.

This is a myth! It is absolutely possible to raise money from investors without giving up any ownership at all or giving up an ownership percentage that you feel comfortable with.

The reason this is possible is that the return on the investment you offer does not have to be tied to ownership of your company. If the only way an investor can ever get any return is via the sale of your company, then yes, investors will want as big a chunk of ownership as possible. But there are lots of other ways for investors to get paid.

The key is to carefully design your investment offering so that it fits with your goals, values, and plans. If you need help designing your offering, please sign up for a complementary financing strategy session. 

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