By Vanessa Malone

This week, Horizon, Crowdie Advisors and the Crowdfunding Professional Association (CfPA) hosted a webinar to discuss the state of liquidity in the crowdfunding market.

Crowdfunding pioneer and Horizon President, Mark Elenowitz; and JOBS Act lawyer and Crowdie Advisors Principal, Maureen L. Murat, Esq., discussed progress for the crowdfunding industry, the legislation that has created opportunities and roadblocks, and a revolutionary use case aimed at unlocking liquidity in the market.

The webinar is now up on our YouTube channel to watch here. Below please find some key takeaways.

Reg A+ and Reg CF by the numbers

  • We’re still in the early days of equity crowdfunding. Regulation A+ (Reg A+ went into effect on June 19, 2015 and Regulation CF (Reg CF) went into effect on May 16, 2016.
  • $1.3 billion was raised through Reg A+ offerings and $88 million was raised through Reg CF offerings from July 1, 2019 to June 30, 2020.¹ 
  • Since 2016, over 2600 companies have conducted over 3000 crowdfunding offerings raising an average of $342,000.² 
  • During July and August of 2020, companies raised the same amount of capital using crowdfunding ($48 million) as the first full year (2016–2017) of online fundraising.³

Access to funding

  • Capital raising options for entrepreneurs are limited.
  • Reg A+ and Reg CF gives companies the opportunity to raise meaningful capital from fans, turn them into shareholders, and create brand ambassadors through their journey.
  • One obstacle with equity crowdfunding is that there aren’t many opportunities for investors to get a return. The company would need to IPO or get acquired. At some point investors do want a return. 
  • Traditional exchanges are not typically built for small cap issuers. 

ATSs and secondary markets for crowdfunding

  • Broker dealers began to apply for and create Alternative Trading Systems (ATSs). These are dark pools where members can come in and transact with each other privately. These aren’t stock exchanges, so these tickers are not marketed on Yahoo, Google, etc. 
  • Companies like North Capital and Start Engine who have ATSs are a great step towards liquidity in the equity crowdfunding market. 
  • Regulators have not been in a position to approve live trading for crowdfunded securities. We believe this goes against what today’s traders are used to in the era of Robinhood, E*trade, and other userfriendly retail trading apps. 
  • Reg A+ and Reg CF are exemptions that allow issuers to sell securities to non-accredited investors across state lines without violating what are known as Blue Sky Laws. These are state-level, anti-fraud regulations that require issuers to be registered and to disclose details of their offerings. This ability to sell securities to non-accredited investors across state lines during the primary offering does not apply to secondary markets. This can create hurdles for secondary trading venues.
  • There have been new guidelines at the end of 2020 surrounding digital securities and blockchain-based securities. When it comes to Reg CF securities, there needs to be guidance from regulators on whether crowdfunded securities fall into the digital securities category, uncertificated securities category, or traditional securities category. Further, there is a question of whether uncertificated securities fall into the same category as traditional securities. 
  • Current exchanges are T+2, which means that if you buy a stock on a Monday, the settlement date would be Wednesday, but the digital world is moving towards T+0 trading and settlement. Upstream (expected Q2 2021)is a T+0 exchange with instant trades and settlements.

Fintech use case for the crowdfunding market

  • We believe that the next generation of trading for these securities will look more like traditional marketplaces but with greater investor protections in place and technology features to best suit the retail investor.
  • This is why Horizon built Upstream, a joint venture between Horizon and MERJ Exchange, an affiliate of the World Federation of Exchanges, set to be one of the first exchanges dedicated to the $4.9-billion-dollar global equity crowdfunding market.
  • Upstream is an investor-driven marketplace with best bids and offers transparently displayed. Investors of all levels can buy, sell, and settle securities in real-time directly from the userfriendly trading app.
  • Upstream doesn’t allow U.S. investors to come in and trade but if a U.S. issuer lists on Upstream, those investors can liquidate their stocks, they just can’t participate in other opportunities on the exchange.
  • Because we’re part of the World Federation of Exchanges, companies can dual-list, which could be a great opportunity for issuers to widen their investor pool.

Latest favorable regulation

  • The SEC proposed new amendments to Reg A+ and Reg CF to simplify and improve access to capital. This includes raising the capital raising maximum under Tier 2 Reg A+ offerings from $50 million to $75 million and Reg CF capital raising maximums from $1.07 million to $5 million. These rules are to become effective March 15, 2021.
  • The SEC updated the accredited investor rule to enable investors to qualify as accredited investors based on defined measures of professional knowledge and experience or certifications, in addition to the existing tests for income or net worth. 

Concluding thoughts

Equity crowdfunding is quickly establishing itself as a viable method for issuers to raise meaningful capital from the crowd. We believe a combination of favorable regulation and investor interest will continue to put pressure on the industry to meet issuer and investor demand. We also expect to see more quality issuers utilize these exemptions to raise capital and bring investors new opportunities. 

We hope you enjoyed these insights into the state of the liquidity for the crowdfunding market.

To hear more insights, we invite you to watch or listen to the full conversation here. If you’re a crowdfunding market participant interested in unlocking liquidity for your investors on Upstream, please visit or reach us at


1,2 OASB annual report

Leave a comment

Your email address will not be published. Required fields are marked *