Thanks to the JOBS Act, the world of equity crowdfunding is blowing wide open.
FlashFunders, an equity crowdfunding platform, is announcing a new program that automates the process for entrepreneurs, making it entirely free to raise or invest in a seed round.
Most crowdfunding platforms like AngelList and FundersClub are used for a small portion of the round, facilitated online, and usually allow for much smaller checks to go into an SPV. With FlashFunders, the company offers that same functionality alongside the ability to send the FlashFunders listing to a VC firm like A16Z or Union Square Ventures to participate or even lead the round with a larger (>$25K) check, meaning the entire round is facilitated online.
And beyond that, FlashFunders automates everything that a securities law firm like Cooley LLP would normally handle through integrations with Lexis Nexus, DocuSign, IRS, and the SEC Edgar Portal.
Going through a securities law firm for an early-stage investment can cost a company between $10K and $30K, according to FlashFunders founders Vincent Bradley and Brian Park, and some will spend up to $80K on the process. With FlashFunders, a company not only gets to execute on the newfound ability to solicit their smaller deals and crowdfund that equity, but they get to do so without spending a dime on a securities law firm.
FlashFunders, like other crowdfunding investment platforms, requires investors to be accredited in order to participate, but they can browse the platform and invest as little as $1,000 all from the comfort of their desk chair.
For VCs who want to invest more than $25K in a company, it only takes a few clicks on the FlashFunders website. For VCs who want to write smaller checks (between $1,000 and $25,000), FlashFunders sets up a FlashFund (an SPV) on which the company takes a 10 percent carry from the investor as well as a one-time setup fee for creating the fund (which ranges between $6,000 and $8,000 depending on the size of the deal).
For entrepreneurs, the process is entirely free. But there is one requirement: Companies looking to raise deals through the FlashFunders platform are required to set up a FlashFund to publicly solicit a portion of their deal. Bradley and Park say that they haven’t landed on a definitive minimum percentage of the deal yet, but are experimenting with the idea of a 10 percent minimum on each deal.
FlashFunders is focusing predominantly on early-stage deals, as Series A and beyond can become too detail-intensive to automate the securities process. Still, companies looking to raise a seed round can save between $10K and $30K that they would normally spend on a securities law firm by going through FlashFunders’ automation process.
The company has crossed on their seventh deal, and raised more than $3 million through the platform, with rounds ranging from $150K to $1.5 million.