The Wall Street Daily’s  Louis Baseness also noted that, by issuing Reg A+, “the SEC is hoping to revive the use of Regulation A offerings by putting a new spin on them. The SEC is significantly increasing the maximum amount of money that a company can raise—from $5 million to $50 million. That’s enough for such offerings to be considered mini IPOs. Additionally, the SEC is letting companies use Regulation A+ offerings to solicit investments from ‘the crowd.’ In other words, for the first time ever, non-accredited investors can invest up to 10% of their annual income or net worth in each deal.”

Finally, the costs of implementing Reg A+ may prove prohibitive. “It was estimated that a Regulation A+ offering will cost companies upwards of $100,000 or more to prepare the necessary documents,” Baseness wrote. “Then there’s the added expense of accountants’ fees, in order to comply with reporting obligations, as well as state regulatory fees, depending on the size of the offering.”

Regulation D
Given potential drawbacks of Reg A+, Regulation D (Reg D) offerings for accredited investors may dominate crowdfunding, barring regulatory changes. Under Reg D, accredited investors can gain immediate access to private equity and debt offerings, as well as crowdfunding opportunities, coming onto the market continuously.

Reg D’s Rule 506 allows accredited investors to commit unlimited amounts of money to an offering without an SEC filing or financial disclosures, so it may be faster and less expensive than Reg A+. Reg D issuers are obligated to determine that self-designated non-accredited investors understand their liability for vetting their investment choices.

Regardless of the regulation used, before accepting any crowdfunded investment, the investment sponsor must complete offering documents that include a description of the company's property and business, the security being offered, company management and financial statements certified by independent accountants.

Weighing Potential Pros And Cons
Supporters see equity crowdfunding as a potential game changer. Opponents believe the new regulations may lead to a record number of broken nest eggs. Equity Institutional’s “Crowdfunding Curriculum” cites the following potential pros and cons.

Potential “Pros”:
• Discovering the next Facebook: For investors who dream big, investment crowdfunding offers the excitement of playing the long odds on winning big.
• Diversifying: Having a strong diversification strategy is as necessary for alternative investments as it is for traditional investments.
• Building a network: As investors form crowdfunding groups, they may be open to other ideas from the same entrepreneur or investment sponsor.
• Simplifying: Crowdfunding may be easier to implement than traditional forms of capital investing.

Potential “Cons”:
• It resembles gambling. Barbara Roper, a director at the Consumer Federation, was quoted as saying the following in the Washington Post in 2012: “No one has to commit fraud, no one has to do anything wrong for this to be one stage removed from gambling. So now we’re going to connect unsophisticated investors with unsophisticated issuers to harness the power of the Internet to buy these stocks? What can possibly go wrong?”
• Start-ups are risky: Three quarters of start-ups backed by venture capital don’t return the original investment, according to a study by Shikhar Ghosh of Harvard Business School. Companies that rely on crowdfunding will likely be in their seed stage, and may be even riskier than venture-backed companies.
• Start-up stock is hard to value: Private company stock is difficult to value, as much of the company’s financial information is not made public.
• Limited liquidity: Investors may profit if the start-up is acquired or if it goes public, but otherwise there are limited options for selling an equity share.

When choosing specific investments, potential investors with industry experience may be aware of growth opportunities and may be able to apply their insights to vet crowdfunding opportunities.

“The Crowdfunding Curriculum” suggests monitoring companies closely for a given period and conducting research. You may want to research answers to questions such as: What experience does the leadership team have running a business? Does the startup have an established track record? What are the startups’ barriers to growth? Are any VC or angel investors invested who might add value beyond their capital infusion?