By Joe Wallin, Seattle Crowdfunding Attorney
The Washington crowdfunding law is not perfect. No law is. However, I think the Washington crowdfunding law comes close. And I don’t just say that because I am the person who dreamed up the idea in the first place.
What are the best things about the Washington equity crowdfunding law?
- You can raise money from both non-accredited and accredited investors
- You can raise up to $1M during any 12 month period.
- You do not need audited financial statements.
- You do not have to comply with the horrendous complexity of the federal equity crowdfunding law.
- The DFI has published an easy to use form to get you started in the process.
- A relatively small fee to pay to the state securities regulatory agency ($600).
What are the worst things about the Washington equity crowdfunding law?
- You can’t advertise your offering using the unrestricted Internet. (This is a consequence of the interplay between state and federal law.)
- In order to use the Internet to raise money, you are going to have to post your offering on web sites accessible only by people who can demonstrate that they are Washington residents.
- You have to be organized or incorporated in the State of Washington.
- You can only take investors who are resident in the State of Washington.
- Once you crowdfund you have to make public disclosure of executive officer and director compensation, and financial results. Many companies may not want to make these public disclosures.
- The exemption is not available for debt offerings.
Many of the above negatives are a consequence of the overlay of federal law. In order for the Washington State crowdfunding law to not have to comply with Title III of the JOBS Act, offerings have to be completely intrastate. This explains the first four items listed above.
Should You Take Advantage of the New Law?
Before plunging ahead, carefully consider your fundraising alternatives. For most companies, the traditional path–an all accredited 506(b) offering–will still be the best route. For others, a 506(c) generally solicited offering may be appropriate. Consult with counsel who is familiar with all of the choices available and your business and long term goals.