Crowdfunding Cannabis: Marijuana Start-ups Get the Capital They Need – CannabisFN


The cannabis industry may be booming in terms of revenue, but marijuana start-ups looking to raise capital face a number of hurdles. The traditional banking sector has shunned the industry, despite the Obama Administration’s attempts to open up access. In 2013, Attorney General Eric Holder created a “reduced prosecution safe harbor” for commercial banks, but that’s a far cry from legalization. Banking executives were quick to point out that prosecutorial discretion only works as long as the administration in power supports non-enforcement – and elections are coming this year. Many venture capitalists and institutional investors have been equally reluctant to invest in the sector. MassRoots Inc.’s (OTCQB: MSRT) treatment at the Consumer Electronics Show (CES) and in previous years at Tech Crunch Disrupt is a sign of just how taboo cannabis start-ups remain in the general public. Of course, there are a few notable exceptions including Peter Thiel’s Founder’s Fund, which invested $75 million in Privateer Holdings. These dynamics forced many companies to pursue one of two options. First, companies can undergo an expensive and time-consuming process to try and raise angel investment rounds from high net worth individuals, but that’s difficult because there’s no good exit strategy without VC involvement. Second, companies can list their stock on over-the-counter exchanges, but that involves regulatory hurdles and high costs associated with auditing and making filings. Regulation A+ Crowdfunding Changes the Game For the past 80 years, only accredited investors that make over $200,000 per year or have at least $1 million in assets (excluding their personal residence) could invest in start-ups and the process was difficult, but the so-called Crowdfunding Act is quickly changing the rules. Title IV of the JOBS Act has opened the door for start-ups to raise up to $50 million from the general public under what is called Regulation A+ Tier 2, which was adopted by the SEC and went into effect in June 2015. While it still costs $50,000 to $100,000+ to audit financials and make regulatory filings, the process is far cheaper than the cost of a reverse merger, SB-1 transaction, or traditional IPO that can cost in the millions of dollars. The cost of remaining a publicly traded company are also much lower with Regulation A+ thanks to fewer mandated SEC audits, regulatory filings and other requirements. “The original Reg A had a state-by-state registration requirement and was prohibitively expensive for issuers,” says Darren Marble, CEO of CrowdfundX. “Reg A+ Tier 2 offerings pre-empt state securities registration, which reduces costs for issuers. More importantly, Reg A+ allows for both unaccredited and accredited investors to invest in private companies, and empowers those companies to market their offerings through the Internet.” Michael T. Williams, an SEC attorney with Williams Securities Law Firm, P.A. noted many other benefits of Regulation A+ compared to traditional S-1 offerings, including:

Continue Reading: Crowdfunding Cannabis: Marijuana Start-ups Get the Capital They Need – CannabisFN

Advertisements

About Stephen G. Barr, Group Publisher

Author, Syndicated Columnist, Editor In-Chief and Group Publisher at SGB Media Group, a social media marketing firm specializing in digital media content production, publishing, affiliate marketing, public relations and advertising. Over 25 years experience in retailing, advertising, website & online forum development, niche social networking, affiliate marketing, search optimization, branding and identity, site location, non-profit fund raising. Event planning, promotion, production and MC/Host at public events. Author, Editor & Publisher of 35 syndicated, digital publications utilizing multiple digital distribution channels in conjunction with launching and administrating national advertising campaigns for major Fortune 500 advertisers in partnership with Google, Ning, Facebook, Myspace, Yahoo, DoubleClick, LinkShare, PepperJam and other industry leading third party affiliate networks. Product development team member from conception to launch on many websites, tangible goods and organizational structure for start ups. Specialties: Public relations, retailing, advertising, website & online forum development, niche social networking, blogging, email campaigns, affiliate/performance marketing, search optimization, branding and identity, site location, event production & promotion, non-profit fund raising and tasteful, responsible adult content publishing. An internationally recognized and read social media columnist & pundit on The Examiner, Associate Content, Vator.tv, X-Biz.net and Technorati and his own affiliated sites.
This entry was posted in cannabis, crowd funding, Legislation and tagged . Bookmark the permalink.

Your comments & opinions are most welcome!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s