Monday, March 8, 2021

Digital Transfer Agent Vertalo adds 5 Regulation Crowdfunding Portals to Rapidly Growing Client Base

Vertalo, the digital transfer agent connecting and enabling the digital asset ecosystem, announced today that it has signed agreements with 5 leading Reg CF (Crowdfunding) portals FundersUSA, Fundopolis, Infrashares, Netshares, and Raise Green. This agreement enables these leading Crowdfunding Portals, their Issuers, and their investors to access Vertalo’s API-first digital Transfer Agent services to gain safe harbor benefits under updated rules related to Regulation Crowdfunding (‘Reg CF’).

Founded in 2017 as a wholly-owned subsidiary of Austin, TX Digital Asset holding company SeriesX, Vertalo is an SEC-registered transfer agent that manages the issuance and management of compliant digital securities and connects broker-dealers, issuers, investors, custodians, and exchanges through its B2B SaaS digital asset data management platform.

Reg CF (Crowdfunding) portals, created by the 2012 JOBS Act, utilize the Internet to access large and small investors to raise capital for businesses and projects.According to Statista, the global crowdfunding industry is projected to grow from $13.9 billion in 2019 to $39.8 billion by 2026.

In anticipation of rule changes that go into effect on March 15th, 2021, Vertalo began to establish integrative partnerships with Reg CF platforms in Q4 2020. These partnerships are predicated on the expected increase in Reg CF offerings driven by the new $5 million fund raise ceiling for the Jobs Act Crowdfunding exemption that was originally enacted in 2012. More information on Vertalo’s  partners can be found below.

Dave Hendricks, Vertalo CEO, explains the impetus behind their Regulation Crowdfunding integrations: “In the initial coin offering boom, many enterprises realized that community creation is as important as capital formation.  But unlike non-compliant ICOs, this much-needed update of the Regulation Crowdfunding exemption combines community and capital to help smaller projects and smaller investors to work together without dangerous regulatory tail-risk.

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Before the ceiling was raised from $1.07 million to $5 million, the Reg CF exemption was an expensive option for smaller companies that would not have ordinarily engaged Venture Funding, and the average Reg CF raise of $260,000 across 1200 offerings in 2018-2019 demonstrated that not only was the exemption under-utilized (versus more than 12,000 Reg D offerings during the same time period), but also most of the issuers who leveraged it paid a higher percentage of fees than even Reg D issuers utilizing so-called ‘nickel BDs’.  While we believe that the recent changes to Reg A+ offering rules are very exciting, the post-covid fundraise environment demands a product that can address needs of newer businesses that don’t have the financial history or budget to raise using that exemption.

Vertalo’s goal is to empower and supply our Reg CF portal partners, their Issuers, and investors with the most easy to use and advanced technology for digital asset data management in the market while providing Seed and Series A startups- as well as cutting edge community projects – with a real alternative to early-stage Venture Capital.”

About the recent Changes to Regulation Crowdfunding

On November 2, 2020, the Securities and Exchange Commission (SEC) announced changes to the Crowdfunding laws that recognized the growing importance of Crowdfunding while facilitating larger capital raise through Crowdfunding portals:

  • Effective March 15th, 2021, the amount of the maximum capital raise for a Crowdfunding campaign will increase from $1.07 million to $5 million.
  • Limits on the amount of investment by accredited investors in crowdfunding campaigns were removed.
  • Issuers raising under updated Reg CF exemption may now exceed 2000 investors, and avoid having to file a registration statement (S-1) if utilizing the services of an SEC-registered transfer agent like Vertalo.

These changes, subject to a final review by the Biden Administration, open ‘Regulation Crowdfunding’ to a broad range of companies and projects (Issuers) whose capital needs exceeded the earlier limits.

As Crowdfunding campaigns increase in size (to $5 million), Issuer cap tables are likely to become considerably larger and more complex. Vertalo, as a digital SEC-registered Transfer Agent (TA), provides Crowdfunding Portals and their Issuers with these important benefits:

  • A digital cap table that eliminates spreadsheets and the associated risk of file corruption and fat-finger mistakes along with the need to issue and track paper certificates as indicia of ownership
  • Integrated Investor Onboarding via Vertalo.io (www.vertalo.io) an investor onboarding as a service offering
  • A secure web-based investor portfolio management service hosted by Vertalo
  • A path to secondary liquidity via Vertalo’s API connections to US based Alternative Trading Systems like Vertalo partners tZero, North Capital, and Texture Capital.
  • The use of a SEC-registered Transfer Agent (Vertalo) by Issuers and Portals in Crowdfunding campaigns can provide relief from two SEC requirements:
    • Section 12(g) mandates that companies “held of record” by either 2,000 persons, or 500 persons who are not accredited investors become a public reporting company and file an S-1 registration statement.
    • Rule 301(a), whereby a Crowdfunding Portal has an obligation to have a reasonable basis to believe that an Issuer has the means in place to accurately maintain the Offering’s ownership records. Rule 301(b) states that this requirement is met by the Issuer using an SEC registered TA.
  • Lower cost TA services (compared to traditional TAs) along with a path to secondary liquidity as these companies and projects grow.

The 5 inaugural Regulation Crowdfunding portals integrating Vertalo as their SEC-registered transfer agent for their Issuers address capital formation challenges across multiple verticals are:

  • Fundopolis: Focus: Community-oriented businesses www.fundopolis.com

Fundopolis helps simplify the process of raising capital through equity crowdfunding, saving businesses time and money by making it easy to set their own terms and communicate with their supporters. For investors, Fundopolis aims to provide the highest degree of transparency about the status of their investment and how they will receive payment and/or redeem perks.  Fundopolis nurtures investment needs and opportunities through community engagement, whereby people can support each other financially in more meaningful, personal ways to invest in and support the businesses they love.

“Communities can provide even greater support to their favorite local businesses as the Reg CF campaign limits increase to $5 Million,” says Michael Mook, Fundpolis CEO, regarding the Reg CF changes. “Fundopolis will work with these larger Issuers to bring exciting offerings to our crowdfunding investors. As these larger offerings are likely to have larger cap tables, we are announcing a partnership with Vertalo, a digital Transfer Agent, to assist these companies in maintaining digital records of their investor ownership records.”

  • Funders USA Focus: Technology companies www.fundersusa.com

Funders USA provides Equity to startups and larger projects through Crowdfunding. We have a top-notch community of industry-leading securities, technology, and startup experts.

“Startup companies are certain to benefit from the new $5 Million Reg CF campaign limits,” says Peter Stridh, Funders USA’s CEO. “FundersUSA is excited to work with these larger startup offerings and provide crowdfunding investors with access to these new, larger deals. We are also pleased to partner with Vertalo, a digital Transfer Agent, to assist startup companies with maintaining their investor ownership records.”

  • Infrashares: Focus: Infrastructure projects www.infrashares.com

Infrashares: As part of the built environment, infrastructure is a critical foundation for much of our economic activity and social life. We want to empower the changemakers that are trying to solve these problems by connecting them with investors like you.

“Infrastructure projects can easily cost millions of dollars, so InfraShares sees increased use of Reg CF for project financing now that the campaign limit is increasing to $5 Million,” says Brian Ross, Infrashares CEO. “This larger limit broadens how communities can improve their daily lives by investing in high impact public infrastructure projects through InfraShares. Our relationship with Vertalo, a digital Transfer Agent, provides digital ownership records to these larger, long-lived infrastructure projects.”

  • Netshares: Focus: Franchise businesses www.netshares.com

Netshares empowers individuals and small businesses to create and operate restaurant franchises that create jobs and add vitality to our communities.

“I believe franchising is perfect for crowdfunding. Franchise businesses, communities and investors will benefit as the Reg CF campaign limit increases to $5 Million, says David Lee, Netshares CEO. “Netshares can provide new investment opportunities to crowdfunding investors through emerging and established franchise brands. As these offerings increase in size, we are excited to partner with Vertalo, a digital transfer Agent, to provide digital ownership records to crowdfunding companies and projects using the Netshares portal.”

  • Raise Green: Focus: Green energy projects www.raisegreen.com

Raise Green is the climate tech marketplace for local impact investing. We create a healthy, just, and sustainable future by offering everyday people a platform to create and invest in clean energy and climate solution projects. Our goal is to democratize renewable energy ownership, increase community resilience, and help facilitate the transition to a decarbonized future.

“There is a $400 billion dollar unmet need for community-level clean energy in the U.S. and many clean energy projects that could not be crowdfunded within the $1.07 million campaign limit,” says Franz Hochstrasser, Raise Green CEO. “Now, as the crowdfunding campaign limit increases to $5 Million, Raise Green is excited to expand our offerings into larger projects and companies that create a positive impact on social, environmental and resiliency issues in more communities.By working with Vertalo, a digital Transfer Agent, Raise Green can offer digital ownership records to more projects and more investors.”

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