Advertising for Non-Accredited Investors? Yes, You Can - with Reg CF, the Rule 506 Alternative

Welcome to the Raise Capital Legally podcast and YouTube channel for Syndication Attorneys PLLC. This is your go-to source for insights on raising capital the right way. We dive into topics that matter most to real estate syndicators and fund managers on this podcast. I am attorney Kim Lisa Taylor. I am the founder of syndicationattorneys.com. Information discussed during this event is of a general educational nature and should not be construed as legal advice. We would love to talk to you if you do have a legal question. We'll talk to you about how you can get a hold of our guest at the end of the show, or also how you can get a hold of us through our website. There's a schedule a call link, so you could talk to one of us there if you have questions about anything we discussed today or any other. securities-related matter. So our topic today is advertising for non-accredited investors. Yes, you can with Regulation Crowdfunding, the Rule 506 alternative. Uh, in today's podcast, Cornelius Cannon, our esteemed guest of crowdfundmydeal.com, will explain how real estate sponsors can use Regulation Crowdfunding, also known as Reg CF. to raise capital from accredited and non-accredited investors through a registered funding portal. We'll discuss how Reg CF differs from Rule 506 and Rule 506, which deals are best suited for this exemption, and what sponsors need to know before they launch an offering. So Cornelius, thank you so much for coming to our show. You and I have known each other for years. We've crossed paths at many real estate events over the years, and I was really excited to learn not too long ago that you had set up this platform. I think it's been in operation for a while, but I just learned about it and I was super excited about it because this is a really hugely important tool that our clients need to know about, and it's another avenue for them to raise capital. So welcome to our show. We can't wait to hear what you have to say. So thanks for coming.

Thank you for having me, Kim. I've been waiting for the moment to actually get on a platform. Thank you so much. Yeah. Thank you for— I think you're doing a wonderful job, all the things you do.

Oh, thank you. Thank you. And I agree. I mean, I've seen you do some amazing things over the years and, uh, you know, you're really great at bringing people together and just always at the top of any new innovations that are going on. Cornelius, you're— I always hear your name whenever, whenever anything like that happens. So. Tell us a little about your background and what's Crowdfund My Deal? What's it about?

Great question. So I guess a few years ago I was in a very odd spot and it was one of them spots where I was questioning like, how did I get here? It seemed like everything I was doing just wasn't enough. My relationship wasn't going the way I wanted to. My business wasn't going, the money and the people, person I was just wasn't right. And I'll be honest with you, I really didn't know what to do. And I say I went to my 2 favorite Gs. I went to God and God sent me to Google, right? I started Googling, like, I started Googling, trying to figure out like how to get this financial freedom, all this generation wealth people always talk about, right? I kept searching so forth because I was doing flipping houses and I was doing the wholesaling, putting out band signs at 3 o'clock in the morning, but I just wanted something different. And I came across this 3-day workshop called Apartment Investing, How to Invest in Apartment Investing, right? Financial freedom. I thought, I said, got it, let's try it. So I went to it, you know, a 3-day workshop here locally, and it was great, so forth. And make a long story short, I ended up buying a program, coaching program, right? And I was like this, hey, this thing got to work. So I went to every course, every coaching call, I read every book. I was like, this thing has to work. And it seemed very simple. It was like, first you find a good property, underwrite it, then you raise capital and live happily ever after, right? Sounds simple. I can do it, right? So, I spent weeks, even months, meeting, going to meetup groups, hopping on phone calls, trying to meet brokers. Then I'll go to— then I will sit down with spreadsheets, buying software, trying to underwrite properties, right? Trying to make sure numbers work. And you know what happened? I got a deal on the contract, man. I was so excited. It was, um, a 40-unit property in Texarkana. Don't worry about it if you don't know where that's at. I didn't know where it was at first either. It's like this small city on the cusp of Texas and Arkansas. They touch in the middle. Half a city in Texas, half a city in Arkansas, right? So I, so I never knew it, but however, my first deal, I was excited. And, and I, and I remember going to doing a walkthrough. I called a broker, we were celebrating and so forth. Then all of a sudden he asked me a question, say, great, can you get under contract? So now I did walkthrough, nice. Now how you gonna bring the money, raise the money? I'm like this, oh, money, okay, got you, right? Oh, oh crap, now let's go get the money, right? So I'm gonna raise $5 million in this 30-day time frame. So I'm going back to my coach that I had, and coach said, well, ask people in your community, in the coaching community. So I asked them, told them what was going on, and it seemed like a lot of them was brand new too, asking me, oh, you got a deal on contract? Show me what you did so far. Like, no, I need money, help me out. So it was like, um, so it was like they were brand new too. So she said, well, ask your friends and family. So I asked my friends and family, they didn't really know what was going on and so forth. And they said, well, you need to start doing webinars. I started doing webinars, doing that, trying to make things work, and, and it seemed like everything I was doing just wasn't working. I'm like, so I was like, hey God, help me out, have some Please let something happen to help me out. Something did happen. They ended up canceling the contract because they couldn't raise money in time. And I had lost my money as far as my due diligence. I lost everything. And I really felt like a fail. Like, what'd I do wrong? I did everything I thought was right. What'd I do wrong? And I remember, um, they had an event called Apartment Investing Shark Tank. It was like Shark Tank for apartment investing. And I thought it was the coolest thing ever. So I said, okay, let me see how they raising capital. Because I was like, I was like, they Down on myself, like man, something got to give in life right now. So I went to this event, and um, and I thought it was cool because a guy got up there. He kind of told his deal. He pitched it, and everybody um got a chance to listen to the deal and got a chance to invest. Like wow, he actually raising money in his event. So how can I do the same exact thing where I'm at? So I took that idea, and I kind of create my own thing. They have part of the Shark Tank. I did part of the Shark Pool. Same but a little different. Pool Shark Tank. I get it right. So um. So it was cool, but we did ours on Zoom. And every Thursday it was like hundreds of investors coming, pitching their deals and learning by investors. And it gave me opportunity to actually get a part of them deals. So a couple raising capital. But one thing that changed was even though that we, every, every week people was pitching deals, people were investing deals, money deals were getting done. But I realized something when people pitch at some point in time, people start raising capital and slowed down what's going on. Even though we had 100 people on a platform. Half of them was credit investors because we did a poll, right? So even half of them couldn't even invest in the deal because of it was a public offering. Then of that half, most of them like this: Well, I will put $5,000, $100,000 in if I can be part of the leadership program or the team. So now like this. So now the thing is smaller. So then people who had the money like this: If you're doing it next week, I wonder what the deal can be next week. So they'll hold their money waiting until the next deal come along. I'm like this: Well, how? So like now I'm like okay well. This problem keep happening. So I went to an attorney. I said, hey, man, hey, I have this event going on. Everybody like them. Everybody learning how to invest. Everybody wants to invest. It's a great opportunity. But however, how can I get everybody the ability to invest in the deals? He said, well, you got 2 options. Either you can do a Reg A and be a part of every deal out there. But however, the liability of you getting sued is great. You probably don't want that risk upon you, right? Be a part of every deal. He said, well, the other option is you can be, you can create a crowdfunding portal. I said, what's that? He said, you create a portal. You be like the middleman, you bring them together and you charge a fee, but you can help everybody raise capital and help them invest and they choose their minimum amount. And he said, well, I said, well, I don't know anything about that. He said, well, listen, how about this? You handle the marketing side and I handle the legal side. So we got a law firm. I said, great. So it was a great partnership and we actually created that. 9 months later, we actually launched our crowd— went through FINRA, got registered and so forth, launched our crowdfunding offering, came from that, from that, right? So now, So now we had the concept, now we had the structure. Now the thing was like, how can we prove that it worked? And our first offering was, um, a guy, a group out in Vegas. He tried 506. No, he was trying to buy 233 units, um, in Las Vegas, Nevada, right? And he had a good mission. It was a good mission because of the idea was to buy these apartment— buy the apartment homes and take people who are getting out of prison, give them a way to get back, um, in civilian life. And the thing about it is, is the government will pay above rent so that way, so they can charge more above asking rent. And they have said it, so it makes sense on paper. But however, he tried 506, it did— he didn't raise enough capital with that. Then he tried 506, right? So still didn't get across, um, the threshold. So we actually, um, we actually, um, we met— us met together and we said, let's do a crowdfund with your unreg CF. No, so we did say do a crowdfund with your 506. So we had both of them same time, same time. And what he did is when we did that, he changed his marketing message. So it wasn't about the numbers. It was about the movement itself, the purpose. People invest with emotion, they back up with logic. So people who resonate with the opportunity, hey, we're helping people out and also we can make money at the same time. And he was able to raise over $2.8 million all through our crowdfund using that different strategy method. Okay.

So let me stop you right there because I think we have to explain to the audience What regulation crowdfunding is and how it actually allows them to advertise for non-accredited investors. Because I think it's important what you've just said is that we've got, when you're raising under 506 or 506, you got to sell the deal. You got to sell your team, right? But when you're using regulation crowdfunding and that there's a little shift in the thinking that people are looking more at the investment and saying, hey, is this a worthy investment? Is this something that I'd feel good about investing in? And that's a different mind shift. So instead instead of just focusing on the financial metrics, they're actually looking, you know, at the purpose and the, you know, there's a benevolent purpose. Who doesn't want to invest in that? So how does that work then? How is it that people under Reg CF, okay, so maybe this is where I jump in for a minute.

Sure.

Regulation Crowdfunding is another securities exemption that's available to you as a syndication sponsor, right? So real, it doesn't matter if you're raising money for real estate or you're raising money for small business, You can raise money. It's just another securities exemption under the 1933 Securities Act that allows you to raise money. So as you know, if you've ever heard me speak before, every time you want to qualify for exemption, you got to figure out the rules because you're going to have to specifically follow those very same rules in order to be able to do your— follow that exemption and claim the exemption and then get the protections that that exemption affords you that allow you to go out and actually legally raise the capital. So Reg CF allows you to raise money from anybody, okay, as long as they limit the dollar amount of their investment. And if they want to go over that dollar amount of their investment, then you do have to take a look at maybe their income or net worth. And then there's also no limit again for this exemption on accredited investors. So any accredited investors can invest through it. But because you're soliciting non-accredited investors, the SEC has Included this gate. All right. And so the gate is a regulation crowdfunding portal. So this is what Cornelia set up. It takes— it's not a small effort to set up a crowdfunding portal. This isn't something just anybody can go out and do. It's not the same as setting up a website. You actually have to go through a regulatory preapproval process, an application. You have to submit a bunch of forms and policies, procedures, and then you have to adhere to them. So there's a lot of rules that go along with setting up the platform and the portal. But once that's approved, then what Cornelius has is this portal where you can post your deal on his portal, and then he can help you promote it out to all these different groups of investors. Now you are going to have to still do some work, right? Is that not true? The issuer and the sponsor, you still got to drive people to that portal.

Right.

You still got to advertise, you still got to promote, but instead of coming directly through you, those investors are going to go through that gate. They're going to go through that portal. The portal's going to help make sure that they're qualified, that they're not investing more than they can based on the rules of that exemption. And then with that gate in place and using that portal, you are able to legally advertise for non-accredited investors and get them into your deal. Did I explain that?

Yes, you did. I think, yeah, I think you did very well. And I think because of when people think about raising capital, I think that is a very heavyweight to think about what is raising capital, right? What is it? Matter of fact, and when does it start? Um, we always say that in order for crowdfunding to work, you need a crowd. And, um, we, we have an acronym that we use called the RAISE method. R-A-I-S-E, right? RAISE method, right? So the first thing to do is, um, we tell people you have to rally behind the mission you're behind, right? Because it's not about what you know, it's not about who you know, it's about who knows you and what they know you for. Right? So rally. What do you want to be known for? Then A, we say I'm gonna attract. How do you attract investors to you? Right? You can do webcasts. You can do podcasts. You can do webinars. You can do lead magnets. How do you get them coming to you? Right? Then once you got them, you do I. You identify what they would invest in and what they would not invest in. Right? Because a lot of people don't understand that as well. What they don't want to invest in and their threshold. Then from there, we go to, um, so now we know that. Now we go to S. Now what we do as far as showcase, now we say, hey, this is what you're looking for. In crowdfunding, we can do something called test the waters to say, hey, it's one, I'm looking at buying this apartment complex and I'm thinking about making this about these prices here. Will you be interested? So now we already have a soft commitment before we even do the offering. Then the other thing about it is, is this E, empower or expand. Now this is where crowdfunding is its best at, I think, because of, we can, let's say $1 million, use that for math purposes, right? If we do simple math, $1 million is $1,000, 1,000 people give you $1,000, right? Right? Now, question. Um, do we have 1,000 friends on Facebook? Probably so. We have 1,000 friends and so forth. So, so the thing is, is if you got— if I got apartment in your backyard and saying, hey, hey, do you want to— you want anybody to be part of this apartment for $1,000? So question is, do you want to buy another course or actually invest in the apartment building? Right? And that's where the power goes in. So, man, then not only that, if people feel like they own the— be a part of ownership, they share with what? Their friends, their families. Hey, we got apartments in our backyard. You can join for $1,000. And that way it expands more than That's how one investor could become 5, 5 become 10, 10 become 50 because of people spreading the word for you. Your mission can go faster. That's what we've seen. That's how people come in. Like, that's how our first offering had 300 investors from our crowdfunding, one crowdfunding opportunity.

Yeah. And so, you know, so you can, and you can legally advertise on the internet also, right? As long as you're driving people to the portal. So instead of driving them to your website, you're driving them to the portal. They can still talk to you, right? They're still going to get your contact information at the portal. They're going to be able to talk to you. You're going to be able to post webinars and Things there in order to get information out to everybody about your deal. But it's just a matter of making sure that they come legally through that portal and that, you know, they're going to help you make sure that all of those checks and balances are in place, that you have the right offering documents, that you have the right messaging and that kind of stuff that helps bring people to the portal, gets them to invest in your deal. But, you know, what you just said was so powerful, Cornelius. I think we all know, like, who of us wouldn't just like, hey, okay, I'll I'll throw $1,000 at this thing. I mean, I do that on, you know, Robinhood, like, oh hey, this sounds interesting. Let's see him toss a grand in it. You know, who knows if it ever goes anywhere, but whatever. You just kind of, you're willing to do that. You're willing to take that risk and maybe it's going to pay off for you. And so it's a way to kind of get your family, friends into the idea of coming in, but not making such a huge commitment that, you know, I'm sure a lot of our clients have met that reluctance from family and friends. Like you said, I'll invest in your second deal. Let's make sure you get this one done. Yes. first and then I'll see if you were successful, then I'll do it the second time around. If you can, if you can remove that high barrier, that $25,000 or $50,000 barrier to getting in, all of a sudden they'll maybe willing to invest the first time around. No, go ahead.

Oh, if we've seen before, because if we look at the numbers, because the SEC says is there's only 12% of America equals accredited investors, only 12%. So that's, so it's 88, it's almost 80% of people can't invest in your deal in the first place. So now, as you— as we said earlier, like, credit investors, they invest differently. So however, if you brand new, you just getting started, they don't know it, they might probably give you $1,000 upfront. But however, they may give you $5,000 or $10,000 to see how you do to grow. Because of investors, they want to invest, right? They want to— they enjoy the game of it. They only— so I think that it also gives you an opportunity to open your doors to get those big whales and those big fish because of, hey man, try me out, let me see, give me a chance, so forth. And that's what we've seen before because of Then then you get a chance to to grow, and they get a chance to diversify their portfolio. And I think because of we when we when you think about investing, I think that raising capital. I think that we have to understand is these are real people, right? It's not they invest in real people. These are somebody moms, my sisters, and my brothers, my grandmother who investing for investing for a purpose. And the thing about it is is if you honor that, you understand is they they have a bigger vision and understand what they trying to invest for because of like I said before, the mindset shift. It's like. Sometimes when on this level, crowdfunding is a lot of people, best of what, start with emotion, then back up with logic. So it's like, how do I get them triggered by emotion and so forth, right? We're doing it for a good cause. We're doing it for this, or it's doing your backyard. We're doing it for, um, help you retire. Like they understand it and they can tangibly understand the process of investing. I think crowdfunding kind of got the phrase from, from GoFundMe. It's kind of like a GoFundMe page, but however, this is for investing purposes.

Right.

So you can do it for a donation, but however, we're doing it for investing. And they— and the thing about it is, is I think that the other tangible thing about investing that I found out was the fact that they have ownership in something. Because as soon as you make that investment, now you have part ownership in a 44-unit apartment or a 1,000-unit apartment. Like, now you say, I own, I have ownership in that. And that— and then imagine you can give that to a gift to a son, give it a family, a father give it to their daughter. Right. Hey, you have ownership in this building down the street. Like, that's something that's tangible that you can actually claim, claim, and so forth. I think that's one of the big things that we actually look for to create a movement.

Yeah. So let's talk a minute about what's the difference between 506 and Reg CF. So I kind of explained the rules of the Reg CF before, but 506, which is the traditional friends and family exemption that's still out there, it's still alive and well. But it's a little bit onerous because you have to be able to prove that you had a preexisting substantive relationship with every investor before you make an offer. And that means that you have had to have had a financial conversation with them before your offer even existed. And a lot of times, you know, you get in the same situation that Cornelius was describing earlier where he is like, wait, I got a deal. I, I, you know, I did the work. I, I made the relationships with the brokers. I learned how to underwrite. I got all that done. And then, you know, it's like, oh, but now you need the money. And, you know, how do you, how do you get past that? If you haven't already had those conversations and already have a pre-vetted network of prospective investors that are willing to invest $25,000 or $50,000 in your deal, then you're kind of dead in the water at that moment, you know? And so this is where you can bridge that gap. All right, I don't have enough investors. Maybe I got enough investors that I could raise half of that money that I need or a third of the money that I need, but how do I get the rest? And so this is where you just open it up to the crowd and now you can start talking to all your family and friends. You don't have to worry about, did I have that financial conversation with anybody or anything like that? Because they can all invest. The amount that they can invest before they have to get qualified, Cornelius, what's that amount?

So that amount is based upon their net worth, which is based upon, and also a net worth, so which is based upon that the credit That the investor self-attests to. They qualify themselves on our portal. They tell how much their net worth is. Now, one thing that we try to educate people on is your net worth, how you evaluate your net worth. Because of— it say if you can sell in the market, it's like Pokémon cards, that, that increases your net worth because you can sell on the market, right? Um, if you got Louis Vuitton bags, you got some old Jordans there, it's like, like, how do you increase your net worth? People don't understand that these things are valuable. They can increase your net worth. So as you start to calculate your net worth, That allows you to, um, to determine how much you can invest because you can invest a percentage of your net worth.

Now— And what, isn't there a minimum though? There's a minimum that they can invest without having to qualify at all.

So it's $2,500.

That's right. So anybody can invest $2,500. And then when you put your offering on Cornelia's platform, then you can establish what's the minimum anybody can invest. If you want to set your minimum at $2,500, you can do that. Or if you want to set it lower, some people might even set it at $100, right?

Just to get—

certain number of investors in there. And, you know, the, you know, the downside of it is that you end up with a lot more investors, but the upside of it is they're a lot smaller investors. They're probably gonna, you know, not be hounding you every day about their small investment wondering, you know, hey, how's it doing? What's going on? But you're gonna, of course, do be transparent, keep them informed just like you would in any other offering anyway. So, you know, you're just gonna have a larger group on your, on your webinars, right? On your—

No. Project status And I think it's very important because a lot of people think about non-creditors and they all say, oh, I don't want to deal with them. But I'm saying, like, if you think about the math itself, because of a non-creditor doesn't mean that what, they make less than $200,000 a year, right? If you're offering take half of their income and you don't call them, of course they're gonna bug you, right? You took half their yearly income, you didn't call them. So yes, they're gonna be a pain in the butt because of why they don't have it. So I mean, so yeah, so I think that with crowdfunding, it allows you to allow people to invest something that once again, they— the money that they can't invest. And you're right. So now the other thing is you have more investors. Now we're in the age of software. Software manages more stuff than anything. So you can, you can automate so many different things, do group calls and so forth to manage so many investors as well. And also, when you have more investors, usually that comes from people sharing your deal to other people, right? So it's like, hey, this opportunity that we got, hey, I invested, do you invest too? Because of just like a good restaurant, you tell more people about a good restaurant, the food is good.

Yeah.

Right? So I mean, that's what it actually— so we kind of build that emotional drive and so forth. That way that it spans more things, you get more. So that way that then what happens is your investors start bringing you deals. Hey, I got a deal in my back— in my backyard, can we do this over here? Can we do crowdfunding over here? If we've seen so far, if people start bringing you deals to do, so that way they can invest in your deal.

That, that's a fantastic thing because you really can't do that with a 506 offering because, you know, you've got to know the people in advance and you got to make sure that all these people that maybe want to refer people to you aren't out there illegally soliciting your deal either. So you gotta be careful, you know, cuz people do get excited about your deal. They do wanna share it. And this is gonna be a way that you can promote that and say, hey, if you know other people that like to invest in this deal, please, hey, introduce them to us. You know, send 'em to the portal, let 'em look at the deal for themselves. We're happy to talk to them. And all of a sudden, you know, your friends and family are investing with you in the same deal and you're all, you know, excited about the same thing. So here's a question. So the, just going back to kind of the 506 or 506 contrast with this, you know, in 506, you gotta have the preexisting relationship. You have to have it documented. You can't do any advertising. And that's how you prove you didn't advertise is by showing that you had that preexisting substantive relationship. It does allow you to bring in 35, up to 35 non-accredited but sophisticated investors, but they still have to be sophisticated. So that's more than just somebody with some savings and a job. With 506, you're allowed to advertise, you can advertise freely, but the investors have to go through this verification process and a lot of them don't want to be bothered. I can't tell you how many times we've done 506 offerings for people that have come back and said, we want to convert back to 506 because we, you know, all these investors don't want to be bothered with again going through the verification because it's kind of painful. They got to upload all their, you know, financial data or their income. information to some third party and then wait for a letter. And it's just kind of a pain. They don't want to be bothered with it. But in Reg CF, even the accredited investors, can they self-attest?

Yes. So you, everybody does it. When you go through the portal, it asks you your income, your net worth, right? And that determines how, it determines how much you are able to invest on the portal because of in a timeframe. Now, if you're accredited, you can invest unlimited amount, but if you're not accredited, you kind of regulated to basically According to your net worth.

Got it. Okay. But you don't have to figure all that out. So you as the sponsor—

They do it. Yeah, they do it. Sponsor. Yeah, it's on them. It's on the investor. They just type in the numbers.

It's on the investor, but it's not the sponsor that has to go out and have those conversations. They're going to do it right through your portal. Right. And they're going to anonymously be able to go on, answer those questions. They don't feel— have to feel like they're sharing financial information with you that they might not be comfortable with. They, you know, they're doing it through this third party. Of course, this Portal is going to be protected, so that you also aren't the one that's housing all of their personal financial information. And that's also a concern. You know, we were hacked last year, and somebody was looking for whoever hacked us was looking for personal identity information like Social Security numbers, things like that. Luckily, we don't have that kind of information. But if we had it, and you know, you might have that in an investor context, all of a sudden that could become a big. You know, a big concern. All right. So what types of real estate sponsors and deals are best suited for Regulation Crowdfunding? Is this a platform where somebody is going to go raise $10 million on a deal that has to close in 90 days?

And so I think that, um, that's a good, that's a good question. And I think that crowdfunds should be seen as, I, as, so I think the best opportunity comes from a person who wants to do multiple deals at one time. Because of the time it takes to do it. Because of— we, we— the way we structure it is you have the funds ready in escrow before you actually get the deal, right? So like, you have your offering up, you have the thing, so that way you're not pressing, so forth. Then you can go shop for what they want, and that way that is not a press, not a run for the— trying to run for closing. So like, example, like we build a crowd up, build anticipation up, and so forth. They put it— get the money up and put in escrow. Now you can get— now as you look for the deals, You can get a deal that fits your crowdfund criteria.

Okay. So what I'm hearing from you, and let's just have this discussion so people understand it, is that on your platform or your portal, you're suggesting that they actually don't do a single offering, like a single syndicate. Is it more like you set it up for a fund where you can have a business plan and then look for different opportunities to invest in? Is that how it works?

I think, I think that's best because of, it, it can go ongoing because like I said before, because of once you build, when you build momentum, You can launch another crowdfund. You guys learn how to crowdfund because of doing one-off, because now you have 35 investors or 100 investors, they want to do more, right? So it's like now you have this momentum to do more. But if you're just doing one-offs, then it's like you stop starting over again, stop and start over again. So we try to create— how can we create momentum that can grow over time and create a real business behind it and a real movement, we call it, behind it, behind your mission?

So if you're— So just mechanically then You're going to create a fund that allows you to invest in multiple deals. And then you're still going to do a big promotion. Hey, this is a deal we have under contract right now. If you're interested in investing, go to the portal and learn more about it. You're going to have information about the fund, information about that property, but you're going to explain to people, hey, you're not just investing in this one property because we're going to go buy more.

Right.

And we'll let you know when we got another. So you can kind of just keep, you know, getting people that momentum as you're talking about. to invest because, hey, we've got another deal and another deal and another deal, you know. And how many in the 506 world, you know, it's just a fact. And I don't mean to naysay people that are doing funds, but only a small percentage of people actually do blind pool funds that raise the money, that try to raise the money before they actually have deals. And the reason for it is because it is the hardest possible way to raise money from Your typical accredited or more sophisticated investors. And that is a hard way to go because they all want to wait till you have a deal. So even with our fund clients, everybody thinks, oh, I'm going to do a $5 million fund. I'll just raise $5 million away. I'll be able to, you know, right away I'll be able to deploy it however I want. That's not how it works. It's still the same way that we're talking about here. You get a— got a $5 million fund, but you go get the first property under contract. You raise what you need for that property. And then the next time you get a property under contract, you do a big promotion again to, okay, we got our Now you're going to have the advantage of these 2 properties and then, you know, 3 and 4 and so far. So, you know, it, it's still all based on that initial getting something under contract is going to help you get that momentum. Because it's hard to raise money before you have any deals unless you've got enough family, friends that believe in you that are like, hey, I'm willing to put in, you know, $1,000 up front. And, you know, maybe you raise $50,000 or $100,000 that you've now got to be able to go out and start shopping with for deals with.

So it's possible.

possible with a Reg CF offering that you could actually do it that way and maybe be more successful than a traditional blind pool fund.

Yeah, because usually, um, what we do, we get a lot of soft commitment before we actually get the offering. And when I do, we do our test awards page, right? That's a test award campaign, and that allows you to basically shop the test awards and see what people's interest is in your deal. And you said something very valuable, like even people think that accredited investors— now, like I said before, the math speaks for itself. It's 12% of America. Right. And not all credit investors want to invest in real estate, and all of them know about— they are credit investors, but however, not want to invest. But it's still 12% of America. So, um, so then you say, if I was to say B, if you say 35 non-credit investors, let's say you're trying to raise $1 million. Let's do the math. 35 divided by $1 million is $28,000 per person, roughly, right? Now, dude, can everybody say they know $28,000? Their family, friends can give them $28,000 every day, every offering? Probably not, right?

No.

I mean, all your cousins and brothers can't give you $20,000 every deal you have.

Right.

So let's— so I mean, so let's— so I think that you already have the odds against you, but people don't really see that in those lines. I think the math speaks for itself. And I think that, um, that's why I experienced it so far. I think that's why crowdfunding is— now people think that I love— because once again, you're doing a public offering, so everything is public. But however, if you're doing everything according to plan, like, there's nothing to worry about. It's like you've been transparent because of— you won't be transparent with your You want them to see what you're doing. You want them to do an audit and say, hey, we're legit, we're better than everything, we certified, here you go. And I think that's where the key is because of you build that trust through transparency and through by doing the work.

Yeah, I think you're absolutely right about that. All right, so how long does it take? Well, so let's just talk for a minute about what the documents entail. So it's similar to a 506 or offering. You have to have a disclosure document that explains to the investors all the risks of the investment, and that is called a Form C. That actually gets filed with the SEC explaining to them what it is you're doing and all of that. So it's a little bit different because with a 506 or , you don't file your actual offering documents with the SEC. They only get a notice that you're claiming this exemption, how much you're raising, and who's behind the deal. But in the, you know, with the Reg CF, we've got to file this Form C. And, but it's a lot like a PPM. It has the similar kind of information that you would have in a private placement memorandum. So the investors are getting the same kind of material facts and information about how the risks of the investment and all of that. So you have the same kind of protections. Obviously, whenever you're dealing with securities laws, you have to be cautious about making misrepresentations, fraudulent statements, anything that could be construed as false. You have to be very careful that you and your team don't Don't say those words because if you do, then somebody's going to have a record of them, and later on if something goes wrong, then they could use those things against you. So you've always got to be conscious of the fact that anti-fraud rules apply in every securities offering, no matter what exemption you're talking about. But okay, so we've got the reg, the Form C, but you also have to have, just like in a regular offering, a company that they're investing in. That, you know, is issuing them the securities. So that's going to be usually an LLC or a limited partnership, and then you're going to have a subscription agreement, and they're going to subscribe to that offering. And, you know, they're going to make their own attestations to you about whatever is required for their level of investment. So that, and of course, they're going to go through the questionnaire at the portal. Do they upload their funds through the portal?

So they invest— the investor will invest through the portal. So like, it's an investment portal. So, uh, they can invest through the portal. You can do it, uh, they can qualify, they can, they can qualify, they can put information through the portal, and they can see documents through the portal. So everything— the portal does everything right there. Like, it's all like all-in-one compass. They help manage their investors all in one thing. So you say the time for it to take. So, um, it, it varies according to time because of— we say they need 4 things to be successful, right? You need a company, right? A company has to be a company. You say real estate, real estate, a company-owned real estate, right? And that company has to get audited if you raise more, more than $1 million, like $1.2 million, right? That company needs to be audited. Even, even when that company is brand new, it's still gonna be audited. So sometimes the audits say $0 because nothing's been in there. But however, it's a public offering, and all those things fit on the Form C, right? That Form C gets filed with SEC. So, um, then the fourth thing is basically advertising, right? Because of— you can advertise while you're doing this stuff because you can start momentum. But however, that you would take— that, that can take roughly— it can take a week, right? If everything done fast, it can take— wait, average week, probably less. You can do it fast according to what it is. And then we file with SEC, SEC with Edgar, and it's filed. And now you're on running. Now, however, The thing about Reg CF that people don't— I want to preface is the 21-day hold time. What it means is, what it means is the funds, before you can pull the funds out, the offering has to be open at least 21 days. So I say because of sometimes when you raising capital, so you asked me earlier when she crowdfund get launched. So if you're trying to get crowdfund and got closing within 21 days, you may be in a, maybe in a bad situation. So best to get Offering up, get a crowd— get a crowdfund season, I guess, at that period, because of— it has to be— the money has to be in escrow, has to be open at least 21 days. After that, after that, you can put money in, put money out as much as you want to. However, it has to be open for 21 days.

All right, so let's just kind of digest that a little bit. So if somebody invests through the portal, then their money is going to go to an escrow account that the sponsor has set up, and then that— those funds won't be released until whatever minimum Offering amount may have been set.

We set the escrow up on our side.

You'll set that up.

Okay. Yes.

And so then they've got to be held for 21 days before they can be released. And if there's any other conditions like the amount you raise or whatever, that has to be met. All right. So what we've seen is, and I think I'll hold this thought until we get to another question. But so we've got the 21-day hold. Beware of that because like you said, if you're trying to close something in 30 or 60 days, but here's how it could work. If you do this as not the sole way that you're raising money, but an auxiliary way that you're raising money, because you can have a concurrent Rule 506 offering with a Reg CF offering, and they can both invest into the same company. And you could even have different classes of investors go into— come in through the Reg CF offering than you're giving to the people that are coming in through the Reg D offering. So if you wanted to offer slightly different returns to people that are investing more through your Reg D offering that are coming to you directly versus the ones that are coming through the portal and investing these smaller amounts. You can do that. It's just that it all has to be disclosed to all investors. So the, you know, your Reg D investors have to know you're going to be bringing in these crowdfunding investors. And then the, you know, crowdfunding investors have to know that, you know, these different terms are being offered to these different people because maybe if you have an accredited investor that wanted to come in through the Reg CF They may, they may say, well, wait a minute, why don't I get these better terms? You know, invest a different way. You don't really want to create competition between the two, but you want to make sure that, you know, you're following the rules of both exemptions to the T and you're not doing too much crossover because that is kind of prohibited, right?

I think that's a good point because of the— so you may ask, people may ask, why would you have both at the same time? Because one of the things The Reg CF is limited to $5 million per year. So if we run both of them at the same time, you can raise unlimited capital, more capital. So what you said earlier was very key because of— if you— first thing investors usually ask, are you a credit or non-credit investor, right? So what you could do is have 2 offerings, a Reg CF and a Reg D, and both of them sit side by side and both of them have a different kind of minimum. And so what you do is, like you said, the terms may be higher for the— for— if you invest more, you get higher returns. So that's, that's the way we try to incentivize people to raise more capital. Because while you have this one higher with high returns, you have this low returns. So somebody who can afford to, um, to invest more will, will invest more and get rewarded for investing more. So you— so as we go through our— as we go through your league structure, we sign up in the beginning to understand it's designed for that purpose, right?

Mm-hmm.

So we try to fill the $5 million with unaccredited investors because of the lower amount. No problem. All people invest more, we incentivize them to invest more, allows you to raise more capital faster.

And then another thing that you brought up is that you have to do an audit if it's your initial offering and you're gonna raise more than $1.2 million, then you would have to audit that company. If you keep the limit to less than $1.2 million, then you wouldn't have to offer that company. But then there's some rules on subsequent offerings, right? As far as the audit limits start to drop.

Well, we try to shoot, so we try, so you can do an audit review. So we try to audit everything just in case you may raise more money than you needed, right? So if you raise more money than you needed, If you don't, you raise— I'd rather you raise more money than raise less money, you know, scenario, right? Opposed to getting short.

Well, so on auditing though, you know, I think everybody's like, oh gosh, I don't want to go through an audit. You know, isn't that going to cost me $15,000, $20,000? What do people typically pay? I know there's auditing companies that are kind of catering to that Reg CF crowd. You know, what do you see as auditing fees?

So the thing is, you usually audit— yes, auditing, it does, can get expensive. However, what we have found partners to do it for a lower amount, but also So when you're doing a crowdfund, so forth, you're saying we're starting a brand new company. So usually it's not that the offering has— the company has to get audited. So usually it's not a lot to audit, so that way the price is lower. So, um, so according to what you have, it varies that. But however, it's not— it's like a true full-blown— it's a full-blown audit, but it's not deep because of you have less transactions.

That's right. And then do you have to do the audit annually for as long as you have that company, or How does that work?

Now, audit's done one time, done one time for the offering. Then after that, you have to, you have to do a review of the— you have to inform investors what you have done after that.

Okay.

Once the company's done.

So you could just use an independent CPA to review the filings and make sure everything's correct. And that's not going to be as expensive as having to do a full-blown audit. So, you know, these, these are the things that the portal is going to help you with, is making sure that you're aware of these requirements, that you're complying with these requirements. They're not going to let you post your deal until you've done everything that's necessary for the deal to be legally posted. So that's going to help you because you don't have to just kind of like wing it and figure all this stuff out by yourself. Cornelius has partners that have worked with other issuers on his platform, so he knows who he can refer you to, and that's going to help streamline that whole process. So I think that, you know, don't be afraid of it. Yes, there's a few regulatory hurdles, as with every exemption. There's always something that has to be done. You just to get, you know, become aware of the rules and make sure that you're following them so that you can maintain that exemption. And that's— the portal is going to be your partner in making sure that happens.

So I think one thing about it is the portal, we are your partner in it because we get compensated according to how much you raise. So it's like we in it with you to make sure you're successful in raising. I know many times what I experienced, I know this, this may be a legal and it is a legal issue, but however, what I've seen in the past where let's say say if, uh, someone need to raise $10 million, right? What they would do— what they do— let's talk about getting 9 GPs to raise $1 million each, right? And gotta give out equity and so forth. And you got this, this deck with about 10 people or 30 people on your pitch deck because why? Everybody trying to raise capital and so forth.

Yeah.

But now with crowdfunding, you don't have to give up all that equity. You don't have to deal with that because of why? For example, because like you have the power to go— we once again, we in it with you to help you raise capital, but we don't see no equity. But however, we Also, you have your crowd and your team help build a crowd for you. And once you— and we do a lot of the— a lot of work before you actually offer and get launched. So it's like you don't need to have 10 baby mamas asking for money if you—

Yeah, yeah. No, no, the whole co-GP scenario just dilutes all the returns to everybody in the management. And, uh, you've got to be cautious. Plus there's other, you know, regulatory concerns with how those people are being paid and whether they have to be investment advisors. All of those things, you know, you now don't have to worry about that because you have the mechanism. You just need to get the marketing done. So do you have marketing affiliates that help with generating a marketing campaign around a Reg CF offering?

Yes, we do. We actually spin off a whole nother thing called trycrowdfunding.com, and that's what it's really all about. We help build your— before you even come on, our onboarding process is helping you build your capital raising roadmap and capital raising campaign. pain. So when you come— when you become on board, you will have a very structured way of how we're gonna get the money, where we get the money from, um, in our plan. Like example, like we, we preach that RAISE method, right? What are you rallying behind, right? What are we known for? How we attract investors? How we identify what they want? When we do our showcase? When do I test the waters page? And how we're gonna empower people to raise capital for you? So we, we harp that. So we, we very hard on that before we actually— because of we want, we want to be Yeah.

And a marketing campaign can take a while to set up. So is this something, and can you say that website again?

TryCrowdfunding.com. So T-R-Y, T-R-Y Crowdfunding.com.

Perfect. Is that something that our clients could go to start setting up a marketing campaign now, even before they have a deal?

Yes. Yes. Go there, go there, book a call and we'll get one-on-one with you. We'll set you up and see what best fits you because of, and because of the So the thing about it is, is us being a portal, we can see what works in the past and what didn't work in the past. So you're not starting from scratch. Yeah.

Oh, wow. That's fantastic. And Cornelius has been around for a while doing this. Like he said, he originated that Shark Tank event. He had that going for several years. He understands all of this stuff. And sometimes it's a mystery to us who are in the trenches just trying to do the work to figure out, oh, how do we also bridge that gap and figure out how to market this stuff? So it's, you know, maybe not an area where you really can do it effectively on your own. And so I think especially when you're using an online campaign, you really have this— the whole reason crowdfunding was created, it came out of the JOBS Act during the President Obama administration. And then the JOBS Act was the Jumpstart Our Business Startups Act.

Mm-hmm.

And the whole point of it was that it was hard for people to get money from banks at that time. And we were going through the recession. They, you know, so they were— the administration was trying to figure out a way to kind of broaden the availability of private investment opportunities to a wider audience of retail investors. And that's when they came up with Reg D Rule 506, which allowed online advertising, Regulation A+, which allows you to do a streamlined public offering. You can raise up to $75 million a year with that. And regulation crowdfunding was the one that I think got the biggest press at that time was because it was all about opening up opportunities to the crowd and letting the crowd decide and, and also discuss which, which investments were worthy. You know, I think that goes to what Cornelius has been saying. You know, you can, you can add a benevolent purpose to your project, even though your project itself might not be aimed at some, you know, uh, group that, you know, maybe you're just trying to do retail investments for multifamily, but you can always add a component to it with, you know, maybe you're going to donate a share of the profits to, uh, some other worthy cause or something like that to try to get people behind you on that emotional level, like what Cornelius was talking about. So there's always different ways that you can do that. And I know a lot of our clients do benevolent purposes in the things that they do, and they have carved out a niche for themselves in those areas. So they would be perfect for this. I just think that you've got to be aware it's maybe not the way to raise all the money for a deal you've got under contract and you need to close in 90 days, but it's another tool in your tool belt. And maybe instead of bringing in a co-GP and splitting the money with them and all of that, that this is, uh, maybe another option for you to try this and see if you can, you know, generate enough that you don't have to pay somebody else to bring in that $500,000 or whatever you're going to bring in. Um, and we have had a client who very successfully co-marketed a 506 offering— I think it was a C— and also a Reg CF campaign. So same company, 2 different offerings, 2 different groups of investors. They were very heavy into marketing and promoting that offering, and, but I believe they reached their targets, and that's one that was on your platform. Here's a question I've always had for these crowdfunding platforms.

Yes.

So if you're, if I have an offering and I'm going to refer my investors to your deal or to your portal, are they going to see everybody's offering or They're gonna see just yours.

Uh, we, we focus on— like, some people do it—

some—

oh, you're right, some crowdfunding portals have a marketplace, try to promote other people's deals. But however, we're— we being a real estate investor myself, I understand the value of keeping, keeping, uh, what's his name. Now, um, so I— we just designed it where if someone see your offering, they come through your funnel portal, they invest through your funnel, right? Your portal will have a funnel.

Yeah.

It has a test of waters page, have an offering Everything will be towards you. And they will not see anybody else's offerings through that pathway. Matter of fact, they probably won't even see CrowdFundMyDeal. They will see your company throughout the process. They'll see CrowdFundMyDeal in the footer because of how we have to do disclosure and so forth. But however, everything will look like yours as well.

Right.

So that's where the key thing at because of they are investing, as you said, in your beloved opportunity. Now, for examples, let me give you some examples that we had. Like, one of the offerings we had was Tracy. She had SHAD. SHAD is an acronym for She Has a Deal. And her movement was all about helping women build their own hotels. Once again, that's her purpose behind it. So once again, they don't care about CrowdFundMyDeal, they care about Shad. So we— so her funnel was all about Shad and Shad and how help women, um, build their own hotels. We had another one, Fabio. Fabio was all about helping Hispanic community on real estate. What's his name? They don't know. They don't care about CrowdFundMyDeal. They want to know about Fabio and how he helping Hispanic Americans own hotels in America, I mean, own real estate in America. So his portal was designed for that. I think even, even when your offer named Jason, right? Jason was a real estate— he's a real estate broker in Rochester, New York. He's got what his movement was, Invest in the Rock, simply about people who want to invest and own stuff in Rochester, New York. That's his purpose.

Yeah.

They don't care about my deal. They just want to know about that opportunity. So we designed it that way, Jake, because of that purpose. Your mission is all about you. We just a partner along the way. We your guide on the Right. Then make sure that you get to your goal.

Now you do have a little bit of a marketplace though, right, where all of your deals are posted. And do you do campaigns to try to attract people to your platform or to your portal where they might see all the different opportunities that are offered?

Correct. So we do have our own marketing channel to get investors. We have our investor showcase. We showcase deals to our investors as well because So we're doing our— we testing our own campaigns to see what works, then we can use them for you as well. I mean, for the issuers. So we're marketing things to see what lead magnet work, what thing work. Like, we have 6 different type of investors and how they invest before, so we personality type. So we try to figure out— we're doing a lot of research on the back end because of the way we can just hand it off to you to an easier path, hand off to our issuers, if you will.

All right. Um, so how do you get paid? If somebody posts on your portal, we get a percentage of what's raised. Okay. And is it a standard percentage?

Yeah, right now it's a standard percentage. It's a standard percentage. We, in the beginning of the offering, the percentage is defined and we, and it's right up to $5 million. That's a percentage up to $5 million.

Got it. Okay. And so that's something that you're going to negotiate with Cornelius directly based on what your offering is. Because, you know, we've seen other portals out there that are sometimes a little— seem a little cost prohibitive with the amount that they want. But I can tell you that when I've spoken to Cornelius in the past, his were not cost prohibitive. His fees were very, very reasonable for the market and for all the things that he does. So I would encourage you to have that conversation with him and find out, you know, just explore, hey, we're doing this deal, we're going to raise this much money. We think, you know, we've got this much from our network, but we'd like to do a little offering on yours. How could we go ahead and do that? We do have a client that we're helping do that right now. So what you end up doing is you'll hire us to do your Reg D offering, and then you'll also— we'll do an add-on for the Reg CF portion of that. And then you can get on your way and get set up on his portal as quickly as possible. All right. So, um, yes.

For the goal.

What kind of common mistakes do you see sponsors make that maybe aren't as successful?

I think the common mistakes is the, um, what I said earlier, right? You find a deal, get it on a contract, and underwrite. I think that, um, we all talk, we all laugh at a concept, find a good deal, the money will follow, but however, we still do it, right? We try to find a good deal and hope the money will follow, so forth. I think that, um, I think that people also, people think that raising capital is a one-time scenario. I think that raising capital, I think that it's 2 transactions. One is creating a list of investors is. Second is getting a list to give you, give you money. So it's constantly— you should be also constantly doing what? How can I build more lists? How can I get more people out there? How can people know who I am and what I do? And I think it's constantly, as a business— like, a business, you are the owner of the business. If you can't do it, find somebody else to do it for you, because the business needs somebody to do it for them. And I think that— I think that that should be— raising capital is all— it's not just all about giving money. It's about how do I make more noise that people know who I am and what do. So I think that's, that's the, the issue that people have is they're like, well, I don't have a deal, so I don't even raise capital. Like, that's, that's what you should, you should start before you even get a deal. Because of, if you— we use the ACS method, right? Attract, create a list of what they're looking for, they go shopping for what they want. Because of, if you know what people invest, invest in, want, you're not raising capital. You're saying, hey, this is what you told me, this is what you like, are you interested? Because it's a different position opposed to I'm doing this, give me money for it this. It's like, I didn't like that. Sorry for me. So now you shopping for what you want. Now you have a list. Hey, this is what, this is what Kim want to invest in. Bam. Hey Kim, this is what you want. Let's do it. If not, gotcha, I'll find something else. So it's like you, you are a concierge. And so I think that people is, is different. It's like they all say that he who hold gold make the rules. I think that's what it boils down to.

Yeah, I think those are all really great points. So, all right, so what should someone do? I think that if any of our, uh, you know, audiences watching this right now, my recommendation to you is be— go check out crowdfundmydeal.com, look at the different types of offerings that are out there and how it works, get a feel for it. And then also check out trycrowdfunding.com. So maybe you can start using that campaign. It doesn't matter if you're raising money for Reg CF or raising money for anything else. It's really just getting your campaign in place. So that you can start creating that database of ready, willing, and able investors. And and I think that Cornelius made a really good point just here in this last discussion: is you know you really still should be trying to get to know your investors, right? You should be trying to have a phone call with them so that you're not just bombarding them with saying things they don't want. Because if you keep doing that, then they're just going to unsubscribe and you won't have any be able to talk to them anymore. But if you Have a conversation with them and start talking to them about what would you be interested in investing in? You know, we're seeing these kinds of opportunities. Are these of interest to you? Our clients, we have a pre-syndication program for people who aren't ready to syndicate yet, but are just kind of in those beginning planning stages. And one of the things we offer them is a as an explainer pitch deck on how they can explain syndication and how it works to their investors so they can understand all the tax benefits. As well as, you know, where in the process do they get to earn money from cash flow, from sale of a property, or, you know, depending on what kind of property it is. And so we want to just educate people. If you see your job as an educator and you approach it as, I'm not pitching and I'm not selling, because, you know, people feel uncomfortable with that, I'm just teaching. I'm teaching and I'm offering investors opportunities that they need because they need these investment opportunities in order to grow their own portfolio and achieve their own dreams. And they're all looking for them. And we're all a little bit skeptical of what could happen in the public markets because we know that they're fickle and they can, you know, fluctuate heavily up and down, and you could lose half your net worth in a day. So we are all a little, you know, looking for this diversity. And if you can help teach them how that could for them. This just gives you the avenue to be able to teach them how to do it, even if they're not accredited, even if they're not sophisticated. You know, these are your coworkers, your family, your friends, your brother, your, you know, people in college. It doesn't matter what their financial qualifications are. If they want to invest up to $2,500, they can do that. So, um, any parting words? Anything else you'd like to share with the audience, Cornelius?

Yeah, I also think that as we look at so many different things out there, I think that in this world, in America, like, real estate is one of the things that people understand, right? It's like, is— you got crypto, all kind of AI, so forth. I think people need a box to stay in of some sort, and people pay you. So I think that when it comes down to foundation, even though it's— I think that people want to— we had a point of time in life where it's like investing is not It's not a want, it's a need now, right? You need to make your money grow faster than you spend. So I think that people want to invest. They want to be a part of it. It's just that you just gotta give them an opportunity to do it.

Yeah, I think so too. And all right, so we've directed the audience to trycrowdfunding.com and to crowdfundmydeal.com. Is there anything else you'd like them to do if they'd like to reach you, ask questions? How do they do that?

That's it. You find me, you find me Excellent.

All right, Cornelius, I am just impressed by you and all the things that you've accomplished and the things that you're doing for this industry, I think, are huge. We're excited that you invited us to be part of it and to participate and to help you grow your platform. And we really want to— we're committed to helping do that because we think that it'll help a lot of our clients, but not just them. It's going to help their investors too, and not just the accredited and sophisticated ones, but the ordinary And we all know them. We all know people that can use a boost. And you know, that's one of the reasons that we do what we do. And and I know that's one of the reasons that our clients do what they do. And I am so happy that you have have created this additional avenue. And the reason I say created, it's not that Cornelius came up with Reg CF by himself. It's that all the other platforms out there, there are very very few that do real estate offerings for real estate sponsors. And so, you know, we've looked before, we've talked to some before, some have come and gone. And, you know, it's, it's, you know, Cornelius is out there. He's in a big way. He's committed to this. He's passionate about it, clearly. Let's, let's all make this work together. We can all be part of the same crowd.

Thank you.

Thank you so much. All right. You have a great day.