Investment Crowdfunding (Direct Public Offering (DPO)) is a generic term that includes any offer and sale of an investment opportunity to the public where the entity that is raising the funds is offering the investment directly, without a middleman like an investment bank.
DPOs can involve several different legal compliance strategies, some of which are surprisingly simple and easy to do!
For example, let’s say your organization is based in Washington state and pretty much all of your customers are in Washington state. You are incorporated under Washington state law. And you want to raise capital from Washington state residents. You would likely be able to conduct a DPO without doing any federal filings because you would be eligible for the federal intrastate exemption. All you would have to do is register your offering with the state securities regulators. How do you do that? You need to complete an application that includes an offering document that describes your company, the investment you’re offering, the risk factors that potential investors need to be aware of, etc. You file this with the state and then the state will either grant you permission to conduct your offering or will ask you to clarify some things in your application. Once the state is satisfied that your offering documents disclose enough information for investors to make an informed decision, you should be granted the right to offer your securities to the public in Washington.
On the other hand, let’s say your organization does business in multiple states and even internationally. You still can do a DPO and you may only be required to do a simple filing with the SEC or, if you’re a nonprofit, no filing at all. Usually, state level registration in each state where you want to solicit investors will be required.
When you do a DPO, there are no limits on the number of investors, accredited or unaccredited (note that going over 500 unaccredited investors or 2,000 total investors in a single class of equity securities can be inadvisable under some circumstances).
Is a Direct Public Offering right for me? Read more about DPOs, some examples, and how to decide whether or not they are right for you.