This document provides an overview of crowdfunding options in Idaho presented by Wendy Gerwick Couture, an associate professor of law at the University of Idaho. There are five crowdfunding options discussed: 1) non-equity crowdfunding where funds are raised in return for rewards or products; 2) equity crowdfunding under the JOBS Act where funds are raised in return for equity, though this option requires SEC rulemaking; 3) equity crowdfunding under Rule 506(c); 4) intrastate equity crowdfunding; and 5) intrastate SCOR offerings. Potential benefits and major considerations of these options are outlined.

1. Crowdfunding (in Idaho) 101
Wendy Gerwick Couture
Associate Professor of Law
University of Idaho
September 17, 2014

2. SlideShare: http://www.slideshare.net/wgcouture/presentations
Email: wgcouture@uidaho.edu

3. My definition: raising money from a broad-based
pool of people, using the internet

4. My definition: raising money from a broad-based
pool of people, using the internet
OPTION ONE: Non-Equity Crowdfunding
OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
OPTION THREE: Equity crowdfunding under 506(c)
OPTION FOUR: Instrastate equity crowdfunding
OPTION FIVE: Instrastate SCOR offering
…

5. POTENTIAL BENEFITS

6. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family

7. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing

8. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders

9. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers

10. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors

11. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
MAJOR CONSIDERATIONS

12. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?

13. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?

14. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?

15. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?

16. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?

17. OPTION ONE: Non-Equity Crowdfunding
***Raising funds from the crowd in return for a reward or a product

20. OPTION ONE: Non-Equity Crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X

21. Statutory Definitions of “Security”
Federal Securities Laws
§ 2(a)(1) of Securities Act of 1933
§ 3(a)(1) of Securities Exchange Act of 1934
“When used in this Act,
unless the context
otherwise requires—[t]he
term ‘security’ means any
note, stock, . . . investment
contract
. . .”
Idaho Securities Laws
§ 2(a)(1) of Securities Act of 1933
§ 3(a)(1) of Securities Exchange Act of 1934
“‘Security’ means a note;
stock; . . . investment
investment
contract
. . .”

22. Federal test for “investment contract”
SEC v. W. J. Howey Co., 328 U.S. 293 (1946).
• “common enterprise”
• “expectation of profits”
• “solely on the efforts of others”
Idaho test for “investment contract”
Idaho Code § 30-14-102(28).
“Includes as an ‘investment contract’ an
investment in a common enterprise with
the expectation of profits to be derived
primarily from the efforts of a person
other than the investor.”

23. Federal test for “investment contract”
SEC v. W. J. Howey Co., 328 U.S. 293 (1946).
• “common enterprise”
• “expectation of profits”
• “solely on the efforts of others”
Idaho test for “investment contract”
Idaho Code § 30-14-102(28).
“Includes as an ‘investment contract’ an
investment in a common enterprise with
the expectation of profits to be derived
primarily from the efforts of a person
other than the investor.”

24. OPTION ONE: Non-Equity Crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Not selling “securities”!!!

25. OPTION ONE: Non-Equity Crowdfunding
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to funders who are willing
to give funds in return for an award or
product
X
X

26. OPTION ONE: Non-Equity Crowdfunding
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to funders who are willing
to give funds in return for an award or
product
X
X
Yes, but only helpful if your business is
able to reach people on an emotional level
X

27. OPTION ONE: Non-Equity Crowdfunding
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to funders who are willing
to give funds in return for an award or
product
X
X
Yes, but only helpful if your business is
able to reach people on an emotional level
Yes, but only helpful if your customer base
overlaps with your funders
X
X

28. OPTION ONE: Non-Equity Crowdfunding
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to funders who are willing
to give funds in return for an award or
product
X
X
Yes, but only helpful if your business is
able to reach people on an emotional level
Yes, but only helpful if your customer base
overlaps with your funders
Yes, but be aware of potential for backlash
X
X
X

29. OPTION ONE: Non-Equity Crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Not selling “securities”!!!
Minimal. Consult counsel to
(1) review terms of use; and
(2) ensure accuracy of
disclosure. X

30. Kickstarter Basics:
What should creators do if they're having problems
completing their project?
If problems come up, creators are expected to post a
project update (which is emailed to all backers)
explaining the situation.
Indiegogo Terms of Use:
Campaign Owners
You will respond promptly and truthfully to all
questions posed to you by Indiegogo or any
Contributor.

31. OPTION ONE: Non-Equity Crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Not selling “securities”!!!
Minimal. Consult counsel to
(1) review terms of use; and
(2) ensure accuracy of
disclosure. XX
Minimal. (1) Update if
delays/problems providing
award or product; and (2)
respond to questions.

32. Kickstarter Terms of Use:
•Project Creators agree to make a good faith attempt to fulfill
each reward by its Estimated Delivery Date.
•Project Creators are required to fulfill all rewards of their
successful fundraising campaigns or refund any Backer whose
reward they do not or cannot fulfill.
Indiegogo Terms of Use:
Campaign Owners
You shall meet all commitments you make in your Campaign
including, but not limited to, delivering all Perks you offered with
your Campaign. . . . If you are unable to fulfill any of your
commitments to Contributors (including delivering any Perks), you
will work with the Contributors to reach a mutually satisfactory
resolution, which may include refunding their Contributions.

35. OPTION ONE: Non-Equity Crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Not selling “securities”!!!
Minimal. Consult counsel to
(1) review terms of use; and
(2) ensure accuracy of
disclosure. XX
Minimal. (1) Update if
delays/problems providing
award or product; and (2)
respond to questions.
Potential breach of
contract/fraud/deceptive
practices liability.
X

36. OPTION ONE: Non-Equity Crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Not selling “securities”!!!
Minimal. Consult counsel to
(1) review terms of use; and
(2) ensure accuracy of
disclosure. XX
Minimal. (1) Update if
delays/problems providing
award or product; and (2)
respond to questions.
Potential breach of
contract/fraud/deceptive
practices liability.
X
Doesn’t affect capital
structure
X

37. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
***Raising funds from the crowd in return for equity

38.  It’s illegal under federal law to offer or sell a security
unless it’s registered or satisfies a federal exemption from
registration. Securities Act of 1933 § 5.
 It’s illegal under state law to offer or sell a security unless
it’s registered, satisfies a state exemption from
registration, or state registration requirements are
preempted. Idaho Code § 30-14-301.

39.  It’s illegal under federal law to offer or sell a security
unless it’s registered or satisfies a federal exemption from
registration. Securities Act of 1933 § 5.
 It’s illegal under state law to offer or sell a security unless
it’s registered, satisfies a state exemption from
registration, or state registration requirements are
preempted. Idaho Code § 30-14-301.
Registered? Exempt? Preempted?
Federal Law
Idaho Law

40. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
Registered? Exempt? Preempted?
Federal Law X
Idaho Law X

41. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption

42. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
***Raising funds from the crowd in return for equity
***Not legal until the SEC issues final rules!

43. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
Securities Act of 1933 § 4(a)(6)
SEC Proposed Rules
Amount
raised?
Number of
purchasers?
Per-investor
dollar limit?
Initial
information
provided to
investors?
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?
***Not legal until the SEC issues final rules!

44. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
Securities Act of 1933 § 4(a)(6)
SEC Proposed Rules
Amount
raised?
• $1,000,000 (during 12-month period)
Number of
purchasers?
Per-investor
dollar limit?
Initial
information
provided to
investors?
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?
***Not legal until the SEC issues final rules!

45. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
Securities Act of 1933 § 4(a)(6)
SEC Proposed Rules
Amount
raised?
• $1,000,000 (during 12-month period)
Number of
purchasers?
• No limit on #
Per-investor
dollar limit?
• $ limit on amount each investor can invest (based on
annual income & net worth)
Initial
information
provided to
investors?
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?
 If both the investor’s
annual income & net
worth are less than
$100,000, limit of
$2,000 or 5% of annual
income or net worth,
whichever is greater.
 If either the investor’s
annual income or net
worth is equal to or
more than $100,000,
limit of 10% of annual
income or net worth,
whichever is greater,
but not to exceed
$100,000.
***Not legal until the SEC issues final rules!

46. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
Securities Act of 1933 § 4(a)(6)
SEC Proposed Rules
Amount
raised?
• $1,000,000 (during 12-month period)
Number of
purchasers?
• No limit on #
Per-investor
dollar limit?
• $ limit on amount each investor can invest (based on
annual income & net worth)
Initial
information
provided to
investors?
• Laundry list of required information (description of
business, purpose of proceeds, risk factors, target
offering amount, ownership and capital structure, ...)
• Description of financial condition
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?
 If raising $100,000 or
less, most recent tax
return & financial
statements certified by
principal executive
officer.
 If raising between
$1,000,000 & $500,000,
financial statements
reviewed by
independent public
accountant
 If raising more than
$500,000, audited
financial statements.
***Not legal until the SEC issues final rules!

47. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
Securities Act of 1933 § 4(a)(6)
SEC Proposed Rules
Amount
raised?
• $1,000,000 (during 12-month period)
Number of
purchasers?
• No limit on #
Per-investor
dollar limit?
• $ limit on amount each investor can invest (based on annual income
& net worth)
Initial info to
investors?
• Laundry list of required information (description of business, purpose
of proceeds, risk factors, target offering amount, ownership and
capital structure, ...)
• Description of financial condition
Ongoing
reporting?
• Must file annual report that includes a description of financial
condition (& other disclosures)
Nature of
investors?
Manner of
offering?
Issuer
qualifications?
Obligation
continues until
the company:
(1) goes public;
(2) repurchases
the securities;
or
(3) liquidates or
dissolves.
***Not legal until the SEC issues final rules!

48. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
Securities Act of 1933 § 4(a)(6)
SEC Proposed Rules
Amount
raised?
• $1,000,000 (during 12-month period)
Number of
purchasers?
• No limit on #
Per-investor
dollar limit?
• $ limit on amount each investor can invest (based on annual income
& net worth)
Initial info to
investors?
• Laundry list of required information (description of business, purpose
of proceeds, risk factors, target offering amount, ownership and
capital structure, ...)
• Description of financial condition
Ongoing
reporting?
• Must file annual report that includes a description of financial
condition (& other disclosures)
Nature of
investors?
• No requirement
Manner of
offering?
• Must use a registered broker or registered funding portal
• No other advertising, except for notices that direct investors to the
funding portal or broker
Issuer
qualifications? ***Not legal until the SEC issues final rules!

49. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
Securities Act of 1933 § 4(a)(6)
SEC Proposed Rules
Amount
raised?
• $1,000,000 (during 12-month period)
Number of
purchasers?
• No limit on #
Per-investor
dollar limit?
• $ limit on amount each investor can invest (based on annual income
& net worth)
Initial info to
investors?
• Laundry list of required information (description of business, purpose
of proceeds, risk factors, target offering amount, ownership and
capital structure, ...)
• Description of financial condition
Ongoing
reporting?
• Must file annual report that includes a description of financial
condition (& other disclosures)
Nature of
investors?
• No requirement
Manner of
offering?
• Must use a registered broker or registered funding portal
• No other advertising, except for notices that direct investors to the
funding portal or broker
Issuer
qualifications?
• “Bad actor” disqualification
• No reporting issuers
***Not legal until the SEC issues final rules!

50. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but individual investor
dollar limits; $1,000,000 cap
X

51. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
POTENTIAL BENEFITS
X
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but new barrier: working
through funding portals.
X
Yes, but individual investor
dollar limits; $1,000,000 cap

52. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
POTENTIAL BENEFITS
X
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but individual investor
dollar limits; $1,000,000 cap
Yes, but new barrier: working
through funding portals.
X
X
Yes, but more difficult when
accompanied by all of the
required disclosures.

53. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
POTENTIAL BENEFITS
X
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but individual investor
dollar limits; $1,000,000 cap
Yes, but new barrier: working
through funding portals
X
Yes, but more difficult when
accompanied by all of the
required disclosures.
X Yes, but only helpful if your
customer base overlaps with
your investors X

54. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption
• Securities counsel
• Audited financials if raising
$500,000+
• Funding portal/broker fee
X

55. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption
• Securities counsel
• Audited financials if raising
$500,000+
• Funding portal/broker fee
X
Ongoing annual reporting
requirement (included
audited financials if raised
more than $500,000)
X

56. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption
• Securities counsel
• Audited financials if raising
$500,000+
• Funding portal/broker fee
X
Ongoing annual reporting
requirement (included
audited financials if raised
more than $500,000)
X
Federal & state securities
fraud; new § 4A(c) strict
liability provision with
“reasonable care” defense for
misrepresentations
X

57. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
$1,000,000
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption
• Securities counsel
• Audited financials if raising
$500,000+
• Funding portal/broker fee
XX
Ongoing annual reporting
requirement (included
audited financials if raised
more than $500,000)
Federal & state securities
fraud; new § 4A(c) strict
liability provision with
“reasonable care” defense for
misrepresentations
X
Must ensure that investor
base doesn’t scare off
venture capital
X

58. OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
POTENTIAL BENEFITS
X
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but individual investor
dollar limits; $1,000,000 cap
Yes, but new barrier: working
through funding portals
X
Yes, but more difficult when
accompanied by all of the
required disclosures.
X Yes, but only helpful if your
customer base overlaps with
your investors X
X Stigma???

59. OPTION THREE: Equity crowdfunding under 506(c)
***Raising funds from “accredited investors” in return for equity

60. OPTION THREE: Equity crowdfunding under 506(c)
***Raising funds from “accredited investors” in return for equity
Registered? Exempt? Preempted?
Federal Law X
Idaho Law X

61. OPTION THREE: Equity crowdfunding under 506(c)
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption

62. OPTION THREE: Equity crowdfunding under 506(c)
Securities Act of 1933 § 4(a)(2)
SEC Rule 506(c)
Amount
raised?
• No limit
Number of
purchasers?
Per-investor
dollar limit?
Initial info to
investors?
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?

63. OPTION THREE: Equity crowdfunding under 506(c)
Securities Act of 1933 § 4(a)(2)
SEC Rule 506(c)
Amount
raised?
• No limit
Number of
purchasers?
• No limit, as long as “accredited”
Per-investor
dollar limit?
• No limit
Initial info to
investors?
Ongoing
reporting?
Nature of
investors?
• Must be “accredited”
Manner of
offering?
Issuer
qualifications?
 Any natural person
whose individual net
worth, or joint net
worth with that
person’s spouse,
exceeds $1,000,000.
 Any natural person who
had an individual
income in excess of
$200,000 in each of the
two most recent two
years or joint income
with that person’s
spouse in excess of
$300,000 in each of
those years and has a
reasonable expectation
of reaching the same
income level in the
current year.

64. OPTION THREE: Equity crowdfunding under 506(c)
Securities Act of 1933 § 4(a)(2)
SEC Rule 506(c)
Amount
raised?
• No limit
Number of
purchasers?
• No limit, as long as “accredited”
Per-investor
dollar limit?
• No limit
Initial info to
investors?
Ongoing
reporting?
Nature of
investors?
• Must be “accredited”
• Issuer must take reasonable steps to “verify” this status
Manner of
offering?
Issuer
qualifications?
 For example, tax
returns, bank and
brokerage
statements, & credit
reports – combined
with written
representations from
investors

65. OPTION THREE: Equity crowdfunding under 506(c)
Securities Act of 1933 § 4(a)(2)
SEC Rule 506(c)
Amount
raised?
• No limit
Number of
purchasers?
• No limit, as long as “accredited”
Per-investor
dollar limit?
• No limit
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
• Must be “accredited”
• Issuer must take reasonable steps to “verify” this status
Manner of
offering?
Issuer
qualifications?

66. OPTION THREE: Equity crowdfunding under 506(c)
Securities Act of 1933 § 4(a)(2)
SEC Rule 506(c)
Amount
raised?
• No limit
Number of
purchasers?
• No limit, as long as “accredited”
Per-investor
dollar limit?
• No limit
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
• Must be “accredited”
• Issuer must take reasonable steps to “verify” this status
Manner of
offering?
Issuer
qualifications?
• “Bad actor” disqualification

67. OPTION THREE: Equity crowdfunding under 506(c)
Securities Act of 1933 § 4(a)(2)
SEC Rule 506(c)
Amount
raised?
• No limit
Number of
purchasers?
• No limit, as long as “accredited”
Per-investor
dollar limit?
• No limit
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
• Must be “accredited”
• Issuer must take reasonable steps to “verify” this status
Manner of
offering?
• May advertise, including online
Issuer
qualifications?
• “Bad actor” disqualification
May use a
crowdfunding
portal!

69. OPTION THREE: Equity crowdfunding under 506(c)
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption
Federal & state securities
fraud
X

70. OPTION THREE: Equity crowdfunding under 506(c)
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption
Federal & state securities
fraud
X
• Securities counsel
• Must “verify” accredited
investor status
• Sophisticated investors will
demand sophisticated
disclosures, both initially &
ongoing
X
X

71. OPTION THREE: Equity crowdfunding under 506(c)
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
preemption
Federal & state securities
fraud
X
• Securities counsel
• Must “verify” accredited
investor status
• Sophisticated investors will
demand sophisticated
disclosures, both initially &
ongoing
X
X
Can structure so as not to
scare off future investors
X

72. OPTION THREE: Equity crowdfunding under 506(c)
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to “accredited
investors”
X Yes, but other barrier: only
“accredited investors”
X

73. OPTION THREE: Equity crowdfunding under 506(c)
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to “accredited
investors”
X Yes, but other barrier: only
“accredited investors”
X
X
X
Yes, but must ensure that
adequate disclosures to
prevent liability
Yes, but only helpful if your
customer base overlaps with
your investors

74. OPTION THREE: Equity crowdfunding under 506(c)
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to “accredited
investors”
X Yes, but other barrier: only
“accredited investors”
X
X
X
Yes, but must ensure that
adequate disclosures to
prevent liability
Yes, but only helpful if your
customer base overlaps with
your investors
X YES!

75. OPTION FOUR: Instrastate equity crowdfunding
***Raising funds from in-state crowd in return for equity

76. OPTION FOUR: Instrastate equity crowdfunding
***Raising funds from in-state crowd in return for equity
Registered? Exempt? Preempted?
Federal Law X
Idaho Law X

77. OPTION FOUR: Instrastate equity crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
exemption

78. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised?
Number of
purchasers?
Per-investor
dollar limit?
Initial info to
investors?
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?

79. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit
Number of
purchasers?
• No limit
Per-investor
dollar limit?
• No limit
Initial info to
investors?
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?

80. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit
Number of
purchasers?
• No limit
Per-investor
dollar limit?
• No limit
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
Manner of
offering?
Issuer
qualifications?

81. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit
Number of
purchasers?
• No limit
Per-investor
dollar limit?
• No limit
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
Manner of
offering?
Issuer
qualifications?
• Incorporated or organized in Idaho
• 80% of gross revenue derived from Idaho, 80%
of assets in Idaho, 80% of proceeds intended to
be used in Idaho, AND principal office in Idaho.

82. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit
Number of
purchasers?
• No limit
Per-investor
dollar limit?
• No limit
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
• Offerees and purchasers are residents of Idaho
Manner of
offering?
• May advertise, but all offerees must be Idaho
residents
Issuer
qualifications?
• Incorporated or organized in Idaho
• 80% of gross revenue derived from Idaho, 80%
of assets in Idaho, 80% of proceeds intended to
be used in Idaho, AND principal office in Idaho.

83. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit
Number of
purchasers?
• No limit
Per-investor
dollar limit?
• No limit
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
• Offerees and purchasers are residents of Idaho
Manner of
offering?
• May advertise, but all offerees must be Idaho
residents
Issuer
qualifications?
• Incorporated or organized in Idaho
• 80% of gross revenue derived from Idaho, 80%
of assets in Idaho, 80% of proceeds intended to
be used in Idaho, AND principal office in Idaho.
SEC Compliance & Disclosure
Interpretations:
At a minimum, must:
• include disclaimers &
restrictive legends making it
clear that the offering is
limited to residents of the
relevant state under
applicable law
&
• limit access to information
about specific investment
opportunities to persons who
confirm they are residents of
the relevant state

84. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit
Number of
purchasers?
• Individualized determination
• These guidelines are based
• No limit
Per-investor
dollar limit?
on the following two orders
of exemption that Idaho has
previously approved:
• No limit
Initial info to
investors?
 In the matter of Treasure
Valley Angel Fund, LLC, No.
2012-7-02
• Based on market and liability considerations
Ongoing
reporting?
 In the matter of Bright Flash
Development, Inc., No. 2014-
7-04
• Based on market and liability considerations
Nature of
investors?
• Offerees and purchasers are residents of Idaho
Manner of
offering?
• May advertise, but all offerees must be Idaho
residents
Issuer
qualifications?
• Incorporated or organized in Idaho
• 80% of gross revenue derived from Idaho, 80%
of assets in Idaho, 80% of proceeds intended to
be used in Idaho, AND principal office in Idaho.

85. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit • $2,000,000
Number of
purchasers?
• No limit
Per-investor
dollar limit?
• No limit
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
• Offerees and purchasers are residents of Idaho
Manner of
offering?
• May advertise, but all offerees must be Idaho
residents
Issuer
qualifications?
• Incorporated or organized in Idaho
• 80% of gross revenue derived from Idaho, 80%
of assets in Idaho, 80% of proceeds intended to
be used in Idaho, AND principal office in Idaho.

86. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit • $2,000,000
Number of
• No limit • No limit
purchasers?
Per-investor
dollar limit?
• No limit • $2,500 per individual investor, unless accredited,
&
• Cannot exceed 10% of net worth, excluding
home, auto, & furnishings
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
• Offerees and purchasers are residents of
Idaho
• Per-investor dollar limit of $2,500 if non-accredited
Manner of
offering?
• May advertise, but all offerees must be Idaho
residents
Issuer
qualifications?
• Incorporated or organized in Idaho
• 80% of gross revenue derived from Idaho,
80% of assets in Idaho, 80% of proceeds
intended to be used in Idaho, AND principal
office in Idaho.

87. OPTION FOUR: Instrastate equity crowdfunding
Securities Act of 1933 § 3(a)(11)
SEC Rule 147
Idaho Code § 30-14-203
Individual Order of Exemption
Amount raised? • No limit • $2,000,000
Number of
• No limit • No limit
purchasers?
Per-investor
dollar limit?
• No limit • $2,500 per individual investor, unless accredited,
&
• Cannot exceed 10% of net worth, excluding
home, auto, & furnishings
Initial info to
investors?
• Based on market and liability considerations
Ongoing
reporting?
• Based on market and liability considerations
Nature of
investors?
• Offerees and purchasers are residents of
Idaho
• Per-investor dollar limit of $2,500 if non-accredited
Manner of
offering?
• May advertise, but all offerees must be Idaho
residents
Issuer
qualifications?
• Incorporated or organized in Idaho
• 80% of gross revenue derived from Idaho,
80% of assets in Idaho, 80% of proceeds
intended to be used in Idaho, AND principal
office in Idaho.
• No reporting companies
• “Bad actor” disqualifications

88. OPTION FOUR: Instrastate equity crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
exemption

89. OPTION FOUR: Instrastate equity crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
exemption
• Securities counsel
• Sophisticated investors will
demand sophisticated
disclosures, both initially &
ongoing X
X

90. OPTION FOUR: Instrastate equity crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
exemption
• Securities counsel
• Sophisticated investors will
demand sophisticated
disclosures, both initially &
ongoing X
X
Federal & state securities
fraud
X

91. OPTION FOUR: Instrastate equity crowdfunding
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
exemption
• Securities counsel
• Sophisticated investors will
demand sophisticated
disclosures, both initially &
ongoing X
X
Federal & state securities
fraud
X
Can structure so as not to
scare off future investors
X

92. OPTION FOUR: Instrastate equity crowdfunding
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to Idaho
investors
X

93. OPTION FOUR: Instrastate equity crowdfunding
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to Idaho
investors
X Yes, but other barrier: must
ensure that only offered & sold
to Idaho residents
X

94. OPTION FOUR: Instrastate equity crowdfunding
POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
Yes, but limited to Idaho
investors
X Yes, but other barrier: must
ensure that only offered & sold
to Idaho residents
X
X
X
Yes, but must ensure that
adequate disclosures to
prevent liability
Yes, but only helpful if your
customer base overlaps with
your investors
X YES!

95. OPTION FIVE: Instrastate SCOR offering
***Raising funds from in-state crowd in return for equity

96. OPTION FIVE: Instrastate SCOR offering
***Raising funds from in-state crowd in return for equity
Registered? Exempt? Preempted?
Federal Law X
Idaho Law X

97. OPTION FIVE: Instrastate SCOR offering
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
registration

98. OPTION FIVE: Instrastate SCOR offering
Securities Act of 1933 § 3(b)(1)
SEC Rule 504
Idaho Code § 30-14-304
Idaho Rule 20.02
Amount raised?
Number of
purchasers?
Per-investor
dollar limit?
Initial info to
investors?
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?

99. OPTION FIVE: Instrastate SCOR offering
Securities Act of 1933 § 3(b)(1)
SEC Rule 504
Idaho Code § 30-14-304
Idaho Rule 20.02
Amount raised? • $1,000,000
Number of
• No limit.
purchasers?
Per-investor
dollar limit?
• No limit.
Initial info to
investors?
Ongoing
reporting?
Nature of
investors?
Manner of
offering?
Issuer
qualifications?

100. OPTION FIVE: Instrastate SCOR offering
Securities Act of 1933 § 3(b)(1)
SEC Rule 504
Idaho Code § 30-14-304
Idaho Rule 20.02
Amount raised? • $1,000,000
Number of
• No limit.
purchasers?
Per-investor
dollar limit?
• No limit.
Initial info to
investors?
• No, as long as registered by state that requires
substantial disclosure document.
Ongoing
reporting?
• Based on market and liability considerations.
Nature of
investors?
• No requirement, unless state imposes.
Manner of
offering?
Issuer
qualifications?
• No reporting companies.

101. OPTION FIVE: Instrastate SCOR offering
Securities Act of 1933 § 3(b)(1)
SEC Rule 504
Idaho Code § 30-14-304
Idaho Rule 20.02
Amount raised? • $1,000,000
Number of
• No limit.
purchasers?
Per-investor
dollar limit?
• No limit.
Initial info to
investors?
• No, as long as registered by state that requires
substantial disclosure document.
Ongoing
reporting?
• Based on market and liability considerations.
Nature of
investors?
• No requirement, unless state imposes.
Manner of
offering?
• May advertise, if offered & sold exclusively
in state where registered.
Issuer
qualifications?
• No reporting companies.
BY ANALOGY
SEC Compliance & Disclosure
Interpretations:
• Issuers generally use their
websites and social media
presence to advertise their
market presence in a broad,
indiscriminate manner. Although
whether a particular
communication is an "offer" of
securities will depend on all of
the facts and circumstances,
using such established Internet
presence to convey information
about specific investment
opportunities would likely
involve offers to residents
outside the particular state in
which the issuer did business.

102. OPTION FIVE: Instrastate SCOR offering
Securities Act of 1933 § 3(b)(1)
SEC Rule 504
Idaho Code § 30-14-304
Idaho Rule 20.02
Amount raised? • $1,000,000
Number of
• No limit.
purchasers?
Per-investor
dollar limit?
• No limit.
Initial info to
investors?
• No, as long as registered by state that requires
substantial disclosure document.
• Form U-7 (can often use reviewed rather than
audited financial statements)
Ongoing
reporting?
• Based on market and liability considerations.
Nature of
investors?
• No requirement, unless state imposes.
Manner of
offering?
• May advertise, if offered & sold exclusively
in state where registered.
Issuer
qualifications?
• No reporting companies. • Corporation or centrally-managed LLC
• “Bad actor” disqualifications

104. OPTION FIVE: Instrastate SCOR offering
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
registration
• Securities counsel
• Either reviewed or audited
financial statements
• Form U-7
X

105. OPTION FIVE: Instrastate SCOR offering
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?
X
Federal exemption; state
registration
• Securities counsel
• Either reviewed or audited
financial statements
• Form U-7
X • Sophisticated investors will
demand sophisticated
disclosures, both initially &
ongoing
X
Federal & state securities
fraud
X
Can structure so as not to
scare off future investors
X

106. OPTION FIVE: Instrastate SCOR offering
POTENTIAL BENEFITS
X Yes, but new barrier: must
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
ensure all offers and sales are
to Idaho residents
X
Yes, but limited to Idaho
investors; $1,000,000 cap

107. OPTION FIVE: Instrastate SCOR offering
POTENTIAL BENEFITS
X Yes, but new barrier: must
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
ensure all offers and sales are
to Idaho residents
X
Yes, but more difficult when
accompanied by all of the
required disclosures.
X Yes, but only helpful if your
customer base overlaps with
your investors X
X
Yes, but limited to Idaho
investors; $1,000,000 cap
YES!

108. My definition: raising money from a broad-based
pool of people, using the internet
OPTION ONE: Non-Equity Crowdfunding
OPTION TWO: Equity crowdfunding under Title III of the JOBS Act
OPTION THREE: Equity crowdfunding under 506(c)
OPTION FOUR: Instrastate equity crowdfunding
OPTION FIVE: Instrastate SCOR offering
…

109. POTENTIAL BENEFITS
Raise funds from
people other than
friends and family
Break through
traditional barriers to
financing
Connect emotionally
with your funders
Gain loyal customers
Demonstrate viability
of your business to
bigger investors
MAJOR CONSIDERATIONS
 How do I comply with federal
and state securities regulations?
 What initial expenses will I incur?
 What ongoing expenses will I
incur?
 What is my potential for liability
to the crowd if things don’t work
out?
 How will this affect my future
ability to obtain funding?