Regulation CF

Regulation CF (Regulation Crowdfunding) is the SEC framework that allows startups to raise up to $5 million annually from non-accredited investors via approved funding portals. Effective May 2016 under authority of the 2012 JOBS Act, it requires offerings to run through online platforms registered with the SEC and FINRA, with per-investor contribution limits, mandatory disclosure requirements, and platform-mediated investor flow. It is the regulatory mechanism behind US equity crowdfunding and the first time non-accredited individual investors could legally invest in private startups at small dollar amounts.

The key parameters:

• Maximum raise: $5 million per 12-month period (raised from original $1.07M cap in 2021).
• Per-investor limits: depend on income and net worth. Investors with annual income or net worth under $124,000: can invest the greater of $2,500 or 5% of the lesser of income/net worth, up to ~$124,000. Investors above those thresholds: can invest up to 10% of income or net worth, capped at ~$124,000 per company per 12 months.
• Required intermediary: offerings must run through an SEC-registered funding portal (Wefunder, Republic, StartEngine, NetCapital, Microventures, etc.). The portal handles investor onboarding, processes payments, manages communications, and provides certain protections to investors.
• Disclosure requirements: companies file Form C with the SEC including financial statements (audited if raising more than $1.235M, reviewed if more than $124K), business description, capital structure, and risk factors. Annual reporting required for as long as securities are outstanding.
• Investor protections: 48-hour cancellation window before the offering closes, anti-fraud provisions, and certain communication restrictions on issuers during the offering.

The platform economics: funding portals typically charge 5-10% of capital raised plus various other fees (filing assistance, marketing, escrow). Wefunder and Republic are the largest by volume; StartEngine combines Reg CF and Reg A+ offerings under one platform brand. The 2020-2024 evolution: total Reg CF raise volume reached approximately $500-600M annually by 2022-2023, then leveled off as the novelty wore off and economic conditions tightened.

What founders get wrong: Underestimating the cap-table administrative burden of 500-2,000 small shareholders. Reg CF investors are real shareholders with information rights, voting rights (in some structures), and administrative needs (tax forms, transfer requests, etc.). Some platforms offer SPV structures that pool all Reg CF investors into one cap-table line; use those structures if available to manage complexity.

Related: Equity Crowdfunding · Regulation D · Regulation A · JOBS Act · Accredited Investor

FAQ

What is Regulation CF?
The SEC framework, effective May 2016 under authority of the 2012 JOBS Act, that allows startups to raise up to $5 million annually from non-accredited investors via approved "funding portals" (online platforms registered with the SEC and FINRA). The regulatory mechanism behind US equity crowdfunding.

How much can a startup raise under Reg CF?
Up to $5 million per 12-month period (raised from the original $1.07M cap in 2021). Per-investor limits apply: roughly $2,500 to $124,000 per company per 12 months depending on income and net worth.

What are the disclosure requirements?
Form C filed with the SEC including business description, capital structure, risk factors, and financial statements (audited if raising more than $1.235M, reviewed if more than $124K, unaudited if smaller). Annual reporting required for as long as securities are outstanding.