Originally Published at Entrepreneur.com on September 7, 2016

Three months have now passed since Title III of the JOBS Act legalized true equity crowdfunding where startups can raise up to $1 million in capital online to jumpstart and grow their companies. As an attorney whose practice centers around the JOBS Act and helping companies raise funds through crowdfunding, I am excited to see that Regulation CF’s first report card shows some very encouraging grades for entrepreneurs everywhere.

Image credit: Chip Somodevilla | Getty Images

Image credit: Chip Somodevilla | Getty Images

Let’s remember: the JOBS Act was signed into law on April 5, 2012 and it took the Securities and Exchange Commission four years, five months and six days (but who’s counting) to put out the rules that allowed this law to finally go into effect.  On May 19, 2016, the multi-named law (in addition to being called “Title III” and “Regulation CF,” is known as the CROWDFUND Act – which is a ridiculously contrived acronym Congress concocted that stands for “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act”) went into effect. Three months later, equity crowdfunding gets its first report card. The early results look like the law is on the verge of making the honor roll, as it finishes its first quarter of securities law kindergarten.

  • Despite limitations in the law that prevent a Regulation CF offering from marketing the campaign like a rewards campaign on Kickstarter, or like a Regulation A+ Mini-IPO, the rate of success of these new equity crowdfunding campaigns has been pretty good. Eighty-two Title III equity crowdfunding campaigns were filed with the Securities and Exchange Commission in the first quarter and 20 campaigns have exceeded their target amount so far. That 24.4 percent success rate is two to three times the success rate that most rewards-based crowdfunding sites like Indiegogo or GoFundMe reportedly have.
  • The average investment commitment to date is $810, which is more than 10 times the average donation on Kickstarter, the most well-known rewards-based crowdfunding site. This should not be surprising, given that investors are actually buying equity and owning stock in these companies, not just paying for a “reward” or a pre-sale of a product to be manufactured.
  • Three campaigns have already raised $1,000,000, the maximum allowed by the law. This is remarkable when you put it into perspective. This means that 4 percent of all Title III equity crowdfunding campaigns raised $1,000,000 in three months. According to Kickstarter’s published statistics, of all rewards-based campaigns on their site, only .06% have raised $1,000,000. For those of you without a calculator (or an abacus) that means one out of 25 equity crowdfunding campaigns was able to raise $1,000,000, compared to one out of 1,667 on the most popular rewards-based crowdfunding site. 
  • The target goal of Regulation CF offerings so far has been a huge predictor of success. Companies that set lower and realistic target goals (the minimum amount they need to raise to be allowed to keep the committed investment funds) have exceeded these minimums by 423 percent. Companies that have set unrealistic target goals have failed miserably. As I preach to my clients, set the lowest realistic goal that allows you to fulfill your promises to investors with the money they are giving you, then blow through that goal and be able to over-perform. As I mentioned in one of my Entrepreneur articles many moons ago, setting a realistic crowdfunding goal is one of the biggest predictors of crowdfunding success. These numbers prove my point, again.

While I still feel that another part of the JOBS Act -- the Regulation A+ Mini-IPO -- is a better law and gives a company more bang for their buck because they can raise up to $50 million rather than being capped at $1 million, the early report card is encouraging for Title III and it appears that the law will be a success despite the legal limitations it imposes. If we can just get Congress to fix those remaining issues with the law, most notably removing the unnecessary marketing restrictions, Regulation CF has a chance to fulfill its original promise.

A special thanks to one of the pioneers of the JOBS Act, Sherwood Neiss at Crowdfund Capital Advisors for putting together these numbers. And a special thanks to the American public and to risk-taking entrepreneurs everywhere for proving that equity crowdfunding can truly be a game-changer for small businesses and an evening of the playing field that democratizes the investment process for all of us.