US$ 57 Trillion
Is Yours For the Asking

Published : Jan 31, 2024

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The world of start-ups, SMEs, securities and investment banking did not realise the  dramatic change to the way companies raise money to grow their ventures when USA Congress passed the Jumpstart Our Business Startups (JOBS) Act in April of 2012. The trajectory started during the pandemic and many US companies started to raise money – online.

With the Title II of Jobs Act passed in 2012, $1.4 billion were raised from Accredited Investors (people with net worth above $1 million and annual income above $200,000). It was a slow start and there were teething problems.

With Title III of the Jobs Act going into effect from 2016, companies can now raise money from ANYONE publicly but there was not much traction.

A year later, the US government made it more attractive and allowed firms to raise up to $5 million with very little documentation unlike a typical public listing on a main bourse like the Nasdaq or NYSE. All companies need to do is to submit to the Securities and Exchange Commission “SEC” a Form C. Plus firms are allowed to “test the waters’ to see if there are takers for their debt or share offerings before going all out publicly.

Entrepreneurs who traditionally relied on family, friends and fraternity to raise money for their ventures can now deploy  social media to turbo-charge their fundraising online. That is to get almost anyone who can put aside as little as $100 and then use a debit or credit charge to pay for that investment. The online social media, card payment system, e-signing of contracts, e-share registry, digital authentication, private equity platforms – all these and more – make investing in such private equities/debts so easy, so fast, so cheap, so effortless. 

According to Market Data Forecast, the online crowdfunding gathered momentum and $20 billion were raised in 2023 and it is projected the growth to be more than 18% a year and possibly $47 billion will be raised in 2028 – via online fundraising.

To put into perspective, the EY Global IPO Report 2023 shows that the funds raised through IPO on the North America traditional stock exchanges were only $9 billion for 2022 and $23 billion in 2023. Mind you, this fundraising method started in 1790 and online fundraising only in 2012. Seriously, the take-off was in 2020 with Corvid’s help.

Efunding is a new way and fundraising will never be the same again. Firms, including pre-revenue start-ups, can go online to raise up to $5 million without an IPO. This is a disrupting change in the capital market. You do not need to have a 300-page prospectus to secure the funds. All you need is to get listed on a private equity platform to display your offer (shares or debts), Form C and subscription agreement. Importantly, you need to work your social media and public relations to get the news out to get investors to click onto the website to know what they would be investing in. 

IPO – initial public offering – on a main stock exchange is STILL a very complicated, costly and risky process for many firms. They will incur millions of dollars in audit, legal, lead manager, investor relation and advisor fees without knowing if they can get listed and raise the money they need. Furthermore, the listing criteria and qualifications are very high compared with raising through online crowdfunding by filing Form C with the SEC.

But then what got the above megashift changes got to do with business founders who are not Americans. America was, still is and will continue to be the world’s preeminent financial centre and any company that is worth its salt would want their shares to be listed on one of their three established stock exchanges – CBOE (Chicago Board Options Exchange), Nasdaq and NYSE (New York Stock Exchange). Many foreign companies who want to be listed on these exchanges can relocate their holding company (the company that is to be listed on the stock exchange) to any of the tax efficient locations in America such as Nevada, Delaware or Wyoming. By doing so, foreign companies now become US firms that hold operating subsidiaries around the world and of course America.

As the Indo-Pacific region is the world’s fastest growing economies of the world, many firms, especially those who are listed and wanting to be listed in the US, would find solace that there are more than $57 trillion invested by 158 million US investors who are and will continue to be big investors of stocks and debts of US companies. So what are business owners waiting for? Entrepreneurs need to reach out to these investors and persuade them to invest in their firms now (not when they are successful and cash rich).

The key is how do you open up the $57 trillion vault to fund your venture.