"I had a pleasant experience raising funding on the Common Owner platform for India Home.  Since it was our first time using regulation crowdfunding there was a learning curve, but the Common Owner team went the extra mile to help us comfortably navigate the process.
They met with our board members and staff to explain everything, and were quick to respond to our emails. I have already recommended the Common Owner platform to other non-profit organizations.”

- Dr. Kalasapudi, Executive Director of India Home

Offering Highlights

• $652,250 raised in 2 months
• 27 investors
• 42% of funds were invested in a single week

The Client

India Home is a non-profit organization dedicated to addressing the needs of the Indian and larger South Asian senior immigrant community in New York City. Since being founded in 2007, India Home has served over 5,000 seniors with senior center programs such as culturally competent Halal and vegetarian meals, enriching programming including yoga, meditation, educational sessions, health and recreational sessions, creative aging activities, know-your-rights sessions, ESL classes and technology classes, and advocacy among others.

The Challenge

India Home was seeking funding for development costs for a first-of-its-kind adult assisted living facility with enriched housing for seniors. Having recently offered an investment opportunity to their accredited investor donors, they were looking to open up the same type of opportunity for all of their donor base including those who are not accredited investors. India Home needed a partner to help them easily accept investments online from their donor network of roughly 3,000 people, and connections to fund the project.

The Solution

After talking to multiple crowdfunding portals India Home decided to work with Common Owner because the platform supports non-profits, allows for a deal structure that worked for their project, supported the executive team to get buy-in from the board of directors, and provides hands-on support for investors who may not be tech-savvy.

As a registered funding portal, Common Owner guided India Home through the preparation and launch of the investment opportunity for their donors to invest in. After launch, Common Owner supported India Home during webinars, and by providing hands-on customer support to make the process as easy as possible for all investors. India Home and Common Owner worked together for a successful outcome in the following ways.

1. Navigate SEC compliance and due diligence.
   Beyond the background checks, Common Owner helped India Home apply for EDGAR codes to file the offering documents with the SEC. The main document you need to file for an Investment Crowdfunding offering is a Form C and associated disclosure documents. Common Owner provides a guided template for the Form C and disclosure documents. Other documentation including formation documents, organizational chart, promissory notes, record keeping practices, investor communication plan, and other required documents - some of which Common Owner has templates for and/or provides helpful feedback on to streamline the offering preparation process.
2. Prepare agreements and investment documents.
   There is a lot of flexibility when structuring a Regulation crowdfunding (Reg CF) offering. India Home decided to structure their offering as a loan with an 8% annual interest rate. Common Owner provided templates for the Investment Agreement and Promissory Note document required to accept investments in accordance with this debt structure.
3. Offering page creation.
   When creating a crowdfunding page there are a few key elements. You need to introduce yourself and your team, explain the project to investors in a concise and simple way, include financial information related to the business and project, and give them some reasons to invest. India Home did an excellent job at all of the above, as shown on their offering page here.
4. Get Board of Directors buy-in for crowdfunding.
   Common Owner joined India Homes executives in speaking to their Board of Directors to ensure all stakeholders were informed and comfortable working with Common Owner through the heavily regulated process of raising funds using Investment Crowdfunding. The concerns of the board were mostly about the legalities of accepting investments from non-accredited investors through crowdfunding, and how accessible investing would be for investors who may not be good with computers. These concerns were extensively discussed and addressed with the Issuer and its Board of Directors.
5. Investment Updates.
   India Home wanted to keep an eye on investments as they came in during the offering. Common Owner provides the capability to see investment details and the status of each in real time. This enabled India Home to know who to follow up with to drive further investment, at all times.
   

The Result:

India Home was able to achieve their goal of bringing in their donor-base and connections as investors to help fund the project. Within a couple months India Home exceeded their funding goal of $600,000 through the Common Owner platform by raising a total of $652,250!

If you need help funding your own project or business, apply here.

There are many ways to raise funds from investors. When raising money, you need to decide on what to sell to investors, and for how much. Most people think of investing as an investor giving you money in exchange for equity, shares or stock in the company. Although this is a common and simple way to structure an investment, it is not the only way.

For early stage fundraising like a seed round, businesses often use a different method - a convertible instrument. With a convertible instrument, investors give the business money now, and in return, the business promises to set shares aside for those investors when certain terms are met. Terms will vary deal to deal, and typically coincide with another round of raising money.

Convertible instruments may be preferred for early stage fundraising because they delay the need to determine a valuation up-front, saving time and money. This can be beneficial  for fundraising at the early stages of a company. These types of investments are viewed as higher risk, and therefore often have higher rewards than other types of investments.

There are two types of convertible instruments - Convertible notes, and SAFEs. In this blog post, we will focus on SAFEs.

For a more in-depth primer on convertible instruments with examples, see the video below.

What is a SAFE?

A SAFE (Simple Agreement for Future Equity) is when investors give money to the business, and in return the business promises to convert that money into shares later on if a triggering event occurs. For a SAFE, the investment typically converts into shares when the business raises a round of money that puts a valuation on the business.

Key terms to understand for a SAFE

• Share price: How much money a single share of a company is worth.
• Priced Round: A round of financing where each share of the company has a set price. This gives the company a valuation.
• Valuation: How much money a company is worth, in total. This is the sum of all share values.
• Conversion: SAFEs convert into shares of stock when a “triggering event” occurs. The triggering event is usually the company’s first priced financing round. When this happens the SAFEs convert into equity (shares, stock, LLC interests, etc.) of the issuer after taking into account any early-stage incentives, such as valuation caps or discounts, relative to the price paid by the new (priced round) investors.
• Early-stage Incentives:
• Valuation Cap: The predetermined value that a company uses to calculate SAFE investment share prices when the SAFE investments convert into shares.
• Discount Rate: A discount, per share, for SAFE investors that gets applied to the SAFE investments when they convert.
• MFN (Most Favored Nation) Clause: If future SAFE investors receive better terms (e.g. lower valuation caps or larger discounts), then the initial SAFE holders have the option to receive those same terms.
  

Example SAFE Investment Scenario

1. Today, Mike invests $1,000 in your company using a SAFE note that has a $1 Million valuation cap. Mike is investing with the expectation that your company will be worth more than $1 Million by the time you raise money that gives your company a valuation. At the time of this investment, your company does not have a valuation. Nobody knows what shares are worth or what the company is worth, however, depending on the type of SAFE, everyone may know how percentages will be split upon conversion.
2. One year later, you raise money again. As a result of the investment of a new investor, Sydney, your company is valued at $2 Million (valuation). Sydney invests $1,000 in your company in exchange for 1,000 shares. This means that each share of your company is now worth $1 (share price), and you have a total of 2 million shares.
3. Mike’s initial SAFE investment converts because this new round of investment meets the SAFE’s requirements for existing SAFE holders, like Mike, to convert into shares of stock. With the valuation cap of the SAFE at $1 Million, your business issues shares to Mike as if the company is worth $1 Million and makes a corresponding entry on your capitalization table.
4. To calculate Mike’s share price from the early SAFE investment, you take the valuation cap of $1 Million and divide it by the new valuation of $2 Million. This results in $0.50 being Mike’s share price.
5. Mike’s $1,000 SAFE investment converts into a total of 2,000 shares because he bought each share for $0.50.
6. Mike now owns 2,000 shares for his initial $1,000 SAFE investment. Sydney now owns 1,000 shares for her $1,000 investment.

For a great explanation and example of how SAFE investments work, see video below.

When does it make sense to use SAFEs to raise money?

SAFEs create a streamlined way to raise capital at an early stage because it is hard to give early stage companies a valuation. So these convertible instruments are typically used for early stage companies that need money for rapid growth, but are too early to provide a comfortable valuation. Unlike convertible notes, Issuers do not need to pay interest accruing during the time until the SAFE converts to equity. Due to how SAFEs work, they are sometimes considered a higher risk higher reward opportunity for investors. If the following aspects are important to you for your funding round, then you should consider using a SAFE. For issuers, SAFEs provide:

• Less negotiation
• Fast process
• Delay company valuation

Please note that this blog post discusses SAFEs in general, and the terms of any specific SAFE could and likely will be different than what is shown in the examples above. Like any other type of investment SAFEs come with serious risks, including the risk that you could lose all of your money. To better understand the risks of investing in a SAFE we recommend you read FINRA’s article on 5 Things to know about SAFEs and Crowdfunding.

With so many ways to raise money, structuring an offering can be intimidating. We do our best at Common Owner to make it as easy as possible, so we can provide SAFE templates upon request for your crowdfund offerings. Please reach out with any questions!

Email us anytime at info@commonowner.com.

Ready to raise money for your business? Apply Here!

We teamed up with Foot Future WNY, EForAll Buffalo, and Buffalo Niagara Medical Campus to host a Train the Trainer event in Buffalo's Innovation Center!

This event was to discuss crowdfunding for farmers, food business owners, economic development professionals, and anyone who supports local farm and food businesses.

Investment crowdfunding is an excellent tool for these businesses (and others) to raise capital. The average successful crowdfunding business now raises over $300,000 and the most successful businesses have been those run by women or BIPOC CEOs. During the interactive event we discussed the basics of crowdfunding, and how it can be used to make a huge impact for these local businesses.

Key Speakers:
Michael Shuman, Senior Economist

Over the last 25 years, Michael has focused on the relationship between the local and the global by helping communities create economies that can take advantage of the world economy–and not be whipsawed by it. He promotes “local economic development” grounded in local ownership, self-reliance, high social standards, and entrepreneurship.

Michael has authored ten books and hundreds of papers and articles that have made him one of the world’s top experts on local economy building. He is also credited with being a key architect of the federal and state laws legalizing investment crowdfunding. He has worked with hundreds of local governments, businesses, and nonprofits.

Rich Rogers, local Attorney, and CEO of Common Owner, a funding portal based in Buffalo, NY. Rich has extensive experience with legal structure around business and real estate financing. Rich has experience crowdfunding his own real estate project, and has helped others with multiple aspects of crowdfunding.

Nowadays everybody and their grandmother says they want to invest in real estate. And why wouldn’t they? It’s a simple concept that has generated returns for countless people for hundreds of years. However, a simple concept does not mean a simple process. Especially when you aren’t familiar with real estate investing terms, concepts, and most importantly how the returns work.

It’s important to understand some fundamental concepts about real estate crowdfunding before we get to the returns.

What is Real Estate Crowdfunding?

Real estate crowdfunding is the process of raising capital from a pool of investors,online, for a real estate project. It’s a way for real estate entrepreneurs and teams to get the cash they need to renovate a building, flip a house, buy a property, or execute on any other type of real estate project.

On the other side of the equation, real estate crowdfunding provides any average person with the opportunity to invest their cash into the real estate market without financing and managing a project on their own.

Why consider Real Estate Crowdfunding?

1. Diversification.
   Whether you already have investments or are just starting, practicing diversification is a great way to reach your long-term financial goals while minimizing risks. Real estate is a popular alternative asset to stocks or crypto that can help round out a portfolio and hedge risk.
2. Hands-off investment.
   Real Estate Crowdfunding is a great way to get exposure to real estate investing as a beginner. You do not have to search for property, get an acquisition or construction loan, manage or screen tenants or oversee maintenance and repairs. More importantly, in most cases, someone else is responsible for loans used for the project. Your obligations and involvement are minimized, yet the potential for profit still exists.
3. Accessibility.
   You can invest in some Real Estate Crowdfunding projects for as little as $100.
4. Community Participation.
   You are literally helping to build or renovate buildings that could be in your own neighborhood or city, alongside like-minded investors.
5. Hedge against inflation.
   Real estate has sometimes offset inflation with it’s appreciation in value. A study utilizing NCRIEF national data over a 38-year period showed that property values of certain real estate sub sectors provide an almost complete inflationary hedge. When lease terms and debt are advantageously structured, the probability of real estate performing well during inflationary periods can be enhanced.

Who can invest in Real Estate Crowdfunding?

Anybody. There are limitations on how much you can invest when you are not an accredited investor.

There are several ways to qualify as an accredited investor. The most frequent qualifications are:

• A person with a net worth of at least $1 million; or
• A person with an annual income of $200,000 or $300,000 if filing jointly with a spouse

How Do Real Estate Crowdfunding Returns Work?

There are primarily two types of real estate crowdfunding returns - equity and debt. And there are a couple types of debt returns you may see in crowdfunding.

Equity, in real estate, is investing in a Company that owns property. You will receive shares or stock in exchange for your investment in the Company. See example diagram below to illustrate the structure.

In equity real estate investments, money is typically generated from rental income, appreciation, and profits generated from any business activities that depend on the real estate.

First the Company that owns the property generates revenue through rent and related fees. The Company then pays for operating expenses, amounts due on any loans borrowed by the Company, and puts cash aside for reserves. Then the remaining cash, typically quarterly, gets distributed amongst the equity partners (i.e. you). In some cases, publicly traded companies (i.e. on the stock market) will do this as well, this is frequently called a “dividend” but it is increasingly rare compared to real estate, where it is more common. See an example of the cash flow distributions below.

On top of cash flow distributions over time, the value of the real estate may increase - this is called appreciation. This means that whatever equity you own in the company can also increase in value. Unlike the stock market, investments in real estate are “illiquid” meaning it could be hard to sell your equity.  However, the Company may sell the property or refinance the property, this is typically called a “capital event” and you may receive a special distribution as a result of a capital event. Even though there is no “ready market” for your shares or stock in the Company, you may be able to sell the shares or stock for a profit.  So not only are you receiving cash flow distributions while you own shares or stock in the Company, but you also might profit by selling your equity or as a result of the Company’s capital event.

Debt is what most people are familiar with in real estate. This is a loan - think about a mortgage, except in this case, you are the bank.

An important date to understand for a loan is the maturity date. All loans have a maturity date. The maturity date is the deadline by which the principle of the loan must be paid back in full.

There are two primary types of debt, interest-only loans and amortizing loans.

“Interest-only” loans are just how they sound. The issuing Company will make interest payments (monthly, quarterly, or annually) to you at either a fixed or varying interest rate. These payments are typically JUST interest, and no principal. On the maturity date, the issuing Company will repay all of the principal balance of the loan. These types of loans are typically short-term in nature and common for acquisition and construction loans, key for real estate development projects.

“Amortizing” loans are the opposite, where the issuing company will make payments of both principal and interest, based on a fixed schedule, over the life of the loan. At the end of the amortization schedule the loan will be fully repaid, and no balloon repayment of principal will be due. This is similar to a residential mortgage. These types of loans are typically called “permanent loans” in real estate and are more frequent for properties that are already occupied.

Instead of a structure like in an equity offering, you will simply hold a debt note. A debt note is an agreement between you and the issuer. This agreement means that the issuer is planning to pay back the entire investment, plus additional money.

You are effectively loaning money to the issuer in hopes of getting all of your money back, and extra money in the form of interest. See example below.

Debt Offering Returns Example

Issuer wants to fix and flip a house, so they post an interest-only debt offering on Common Owner asking for $100,000 of investment in debt notes with an 8% interest rate over 12 months. The maturity date on the loan is 12 months out. The issuer offers to make monthly payments of interest to all investors for 12 months. Interest payments for this offering would be calculated with this formula (X*8%)/12, where X is the investment amount.

By the time 12 months have passed, the issuer will have paid all investors the rest of their initial investment, plus an additional 8% with the proceeds. See table below for example investment returns for this offering.

So, if this offering were to be successful and the issuer delivers as planned, then the following would happen.

An investor that invested $1,000 would then receive $6.66 per month for 12 months. Then on the maturity date, the investor would receive a lump sum of $1,000. Their total return would be $1,080.

Investing in a real estate crowdfunding debt note offering is an excellent way to diversify your investment portfolio alongside stocks, crypto, and other investment types.

Investing, including real estate investing, involves a high degree of risk. A lot of smart people lost a lot of money in 2008-2009. Make sure to read all of the disclosures for any investment you are considering and never invest more than you can afford to lose.

Money managers and investment professionals often advise their clients to spread their money across different types of investments. This technique is called diversification in the world of finance. It can help investors mitigate losses.

Whether you already have investments or are just starting, practicing diversification is a great way to reach your long-term financial goals while minimizing risks. In this article, we’ll dig deeper and discuss the definition and benefits of diversification and how you can diversify your portfolio.

What is diversification?

Diversification is an investment strategy that aims to manage and reduce exposure to certain risks that may come up due to market volatility. This technique involves spreading your money through ownership of different types of investment vehicles and assets. Diversification doesn’t address the number of investments you have but the variety of investments in your portfolio.

Let’s look at how street vendors operate. You might notice how some of them tend to sell seemingly unrelated products like umbrellas and sunglasses. It may seem strange at first, especially since no one would buy those two at the same time. But by diversifying their product line and selling those two different items, they can mitigate their chances of losing money on any given day.

They can easily sell the umbrella when it rains and the sunglasses when it’s sunny. They are making money no matter what the weather is. That’s how diversification works. Like these vendors, investors have several different types of investments that carry their advantages and disadvantages. In a diversified portfolio, the investments are all affected by different market conditions - some may rise at the same time that others fall.

Why is investment diversification important?

Let’s say you’ve recently joined Coinbase or Robinhood and started betting big on cryptocurrency. Although investing in this digital asset may give you a massive financial gain, there are times when it faces enormous market swings and crashes. Take a look at bitcoin, for example. The cryptocurrency has faced dramatic ups and downs - even in a short 6-month span between January and June 2021 it had reached highs of over $63,000 and lows under $30,000!

If you only invested in cryptocurrencies and their prices suddenly drop, your portfolio will also experience a significant decline in value. But if you diversify and, say, invest in real estate, only a part of your investment portfolio will be affected. You might even see the rest of your portfolio growing or at least not decline as much since the real estate sector continues to prove resilient despite market crashes and pandemics. With diversification, you can limit your exposure to market volatility and shocks to balance short and long term returns.

Takeaway

Although diversification can turn your investment returns into a smoother ride and expose you to more return opportunities, it doesn’t ensure any gains or losses. But by diversifying your investment portfolio with different asset classes, you can protect it against the volatility or sensitivity of certain market swings, ultimately lowering your risk.

Make sure to check out our projects page for real estate projects to diversify with!

Disclaimer

This is not financial or investing advice, rather it is intended to provide general and conceptual information relating to common investment strategies.

Common Owner is a website that facilitates investments in private businesses and real estate development projects through online crowdfunding.

From 1933 until 2017 these types of investments were severely restricted by complicated federal policy. These restrictions  made it so that, in most cases, only people in the top 10% of incomes could freely invest in most businesses or real estate projects.

Recently, changes in policy have allowed anyone to invest in businesses and real estate projects.

Common Owner enables businesses and real estate projects to offer business ownership to the general public in exchange for funding. We allow online investment opportunities open to anyone through equity and debt crowdfunding. Some investment opportunities will be limited to the top 10% of incomes.

The goal is to build personal and community wealth, however returns are not guaranteed as investing is risky.

Issuers

Have you ever wanted to open a cafe or pub, or fix up an apartment building to take that next big step in real estate, but didn't have the money? Those are the situations where Common Owner can help you raise funding.

We understand multiple subsidies including tax credits and grants, and enable you to execute with the required funding for your project or business.

You can login and submit a project here.

Investors

If you like to use Robinhood, Coinbase or other investment apps then you will be familiar with Common Owner. You can invest directly in real estate projects and small local businesses through the Common Owner website app.

To start investing just sign up at commonowner.com and check out some projects.

If you are interested in staying up to date on new projects subscribe below and follow or message us on Instagram, Facebook, or LinkedIn.

If you are a small business or entrepreneur thinking about raising money from investors, one of the hardest parts is knowing how much your ownership is worth. Fortunately, changes that the SEC put into effect on March 15th, 2021 should help small businesses and entrepreneurs know how much a share of their ownership is worth if they plan to raise money through Regulation crowdfunding. You can now do this through Common Owner, a website that facilitates investments in private businesses and real estate development projects through online crowdfunding.

Most businesses are anxious about giving up too much for too little investment. Alternatively, not offering enough can make it very challenging to attract investors. These valuation challenges are particularly difficult for “start-up” businesses (including breweries, cafes and restaurants) whose anticipated performance is inherently based on significant assumptions.

These concerns lead many entrepreneurs to avoid capital raising altogether. After all, why offer ownership interests if you don’t know how much they are worth? Instead, many business owners seek out small business association loans, home equity loans, or bank loans to generate capital for their business.

Fortunately, the SEC has recognized this challenge. One of several significant rule changes put into effect allows business owners to “Test the Waters.” Testing the Waters entails putting out a proposed offering online to get feedback from potential investors without the commitment to move forward and sell interests in their company. When a large company like ACV Auctions “goes public” it solicits feedback from institutional investors and market makers to inform the proper valuation. This new crowdfunding rule change gives much smaller businesses the opportunity to receive similar feedback prior to moving forward with a crowdfunding offering.

Common Owner will help businesses list their own “Testing the Waters” offering to gauge investment interest and inform valuations. If you have considered raising money for your business, but have been reluctant due to the complexity or unknown investor interest, contact us today at team@commonowner.com or click here to get started. Our team is happy to guide you through the process.

This post is part of a series on the SEC’s changes to the Exempt Offering Framework, particularly Regulation Crowdfunding. If you are interested in the other ways these rule changes can help you raise money for your business, subscribe here.

Our team consists of real estate professionals, economic development professionals, entrepreneurs, web developers, designers, small business owners and historic preservationists out of Buffalo, NY.

With substantial experience in commercial real estate development and technology we are well-equipped to bring vetted investment opportunities to you, through online crowdfunding.

Community, family, friends, pets, the outdoors, real estate, small business growth, economic empowerment, the opportunity to build wealth no matter how much money you start with - these are our passions. These are what drive us to make Common Owner a platform that provides crowdfunding opportunities for everyone.

We hope that we can help you achieve your goals, whether you own a small business, develop real estate, or are looking to build personal wealth.

This is who we are.

Hometown: Syracuse, NY

Degree(s): B.S. in Computer Science, Minor in Web Development

Favorite professional moment to-date: Winning a contract that doubled the size of a small company in Buffalo, NY.

Why crowdfunding?
I believe crowdfunding is an excellent win-win process, when implemented the right way. The average person gets to actively build wealth while projects and businesses get necessary capital they need to achieve their goals.

Favorite Western New York food:
Chicken wings. Bar Bill, Kelly’s Korner, Gabriel’s Gate to name a few places with great wings.

Hometown: Buffalo, NY

Degree(s): J.D. , M.U.P. - Doctor of Law, Master of Urban Planning

Favorite professional moment to-date: Closing the $10 million Shea's Seneca construction financing. It was my first major closing as an attorney.

Why crowdfunding: Crowdfunding is one of the last chances to reduce wealth inequality and to save capitalism, where everyday people have been excluded from many wealth-building opportunities and equity crowdfunding provides a potential opportunity to change. I have great hope that equity crowdfunding will provide an opportunity to rebuild our cities, where for too long our existing real estate finance system has destroyed our walkable, mixed-use commercial districts in many cities.

Hometown: Barnstead, NH

Degree(s): History (BA) and Anthropology (BA)

Favorite professional moment to-date: My preservation consulting firm reached $100 million in historic tax credits earned for our clients, generating over a quarter-billion dollars in construction activity.

Why crowdfunding? Real estate development is broken: Small scale projects can’t access investor networks that established developers have and struggle to get support from lenders, while community members are left out completely when projects happen in their neighborhoods. Crowdfunding can address that.

Favorite Western NY Food: Buffalo-style pizza, hands down. There are great wings all over the country, it's just that nowhere in Buffalo makes bad wings, but as regional pizzas go, Chicago Deep Dish is a weird spaghetti sauce pie and New York is a greased up thick tortilla, with Buffalo-style splitting the difference in the best ways.

Hometown: Buffalo, NY

Degree(s): B.S. in Computer Science: Software Engineering

Favorite professional moment to-date: I helped support a platform that brought opportunity and help to the  food service industry and hungry customers through the pandemic

Why crowdfunding? I believe in a free market and our platform will allow anyone to invest and be a part of the action. It has the potential for all involved to benefit, from local projects being funded and a vision realized to investors having a growing interest in it.

Favorite Western New York food: My favorite WNY food has got to be the pizza and wings. I don’t think I’ve ever gone more than a week without having either--it’s a staple in my diet. One of my favorite places in my area to order from on bills Sunday is Picasso’s Pizza on Union Road.

Hometown: Buffalo, NY

Degree(s): Environmental Design (BA)

Favorite professional moment to-date: Working with OMA on the Albright-Knox Art Gallery expansion and rehabilitation

Why crowdfunding? Crowdfunding enables people to be active participants with projects in their own communities in ways that were previously unavailable to ensure that neighborhood redevelopment truly benefits those around it.

At 5:30 on Friday you’ll find me: Going for a long, rambling drive along Lake Erie in my 1971 Road Runner with my partner and our two doggos.

Hometown: Syracuse, NY

Degree(s): MBA, Financial Economics (BS)

Favorite professional moment to-date: Upon completing my MBA I was the recipient of the Magnus Award for Greatness, which recognizes a student who demonstrates greatness in academic performance, leadership, innovation and generosity of spirit.

Why crowdfunding? Crowdfunding is the first step toward a more democratized system of planning and development. When the average citizen can financially participate in the development of their locality, we can build communities that are truly for everyone.

Favorite Western New York food: There is nothing quite like hitting the Lloyd Taco truck at 3:00 a.m. on (Josh) Allen Street.

Hometown: Buffalo, NY

Degree(s): B.A.Sc., Computer Information Systems: Systems Management

Favorite professional moment to-date: Received Quarterly Recognition Award for building an automation to aid in the processing of the Payroll Protection Program loans.

Why crowdfunding? I believe crowdfunding will enable community engagement with small businesses and redevelopment projects, while also providing economic and environmental benefits to all community members.

Favorite Western New York food: Pizza.I might have been referred to as a pizza connoisseur once or twice in my life. Jay's Artisan Pizza hands down is the best Neapolitan pizza this side of the Mediterranean Sea.

Hometown: Buffalo, NY

Degree(s): Animation & Illustration (BA) Fredonia State University

Favorite professional moment to-date: Winning best in show at American Advertising Federation Buffalo 2020 with my team's 3d animation, "Bring Home the Dome." We beat out all the larger agencies with a single spot versus full creative campaigns that normally win.

Why crowdfunding? Crowdfunding is a very inclusive way to fund a project or business. It can be a very effective method to strengthen a business or project's awareness and engagement with the local community.

Best Western New York hiking spot: The best Western New York hiking spot would have to be a section of the gorge known as "Devil's Hole." It is a fairly short drive away and provides some intimate views of the Niagara River along the trail.

Hometown: Batavia, New York

Degree(s): BA of Economics and Political Science, SUNY Fredonia; Juris Doctor, Albany Law School of Union University

Favorite professional moment to-date: Preparing and winning a successful motion for summary judgment that won a six-figure judgment for my client.

Why crowdfunding?  It presents a unique opportunity to help individuals who may not otherwise have the opportunity or access to invest in projects, and create a more equitable access to capital.  Thus, not only helping people to build wealth, but giving rise to the possibility of helping distressed neighborhoods.

Night owl or early bird? Early bird.  I’ve got a routine that helps kick start my mornings.

While this year was a lot of things, the Securities and Exchange Commission bestowed upon the investing world a change in the definition of accredited investor.  Some commentators indicated that the amendment leaves much to be desired, however, this blog post will briefly detail that expansion. To understand where we are now, we must understand where we came from.

What was the old definition of an accredited investor?

The previous definition left an accredited investor to be an individual who earned more than $200,000 annually for the past two years or more than $300,000 combined with their spouse. It also included people who had an individual or combined net worth of more than $1 million, excluding the value of their home.

The theory behind such a limited definition of an accredited investor is to protect individuals from the risks involved with investing in private companies.The thought was that if someone does not meet that criteria then they are not as savvy as a high net worth individual.

What is the new definition of an accredited investor?

Recently, the SEC expanded the definition of accredited investor to include individuals, businesses, and governmental bodies that satisfy certain requirements other than income or net worth.

Individuals

Professionals can qualify as an accredited investor based on…

“certain professional certifications, designations or credentials issued by an accredited educational institution.”

Additionally, holders in good standing of the Series 7, Series 65, or Series 82 licenses are considered to be qualified. The Series 7 license qualifies a candidate “for the solicitation, purchase, and/or sale of all securities products, including corporate securities, municipal securities, municipal fund securities, options, direct participation programs, investment company products, and variable contracts.” The Series 65 exam is designed to qualify candidates as investment adviser representatives and covers topics necessary for adviser representatives to understand to provide investment advice to retail advisory clients. The Series 82 license qualifies candidates seeking to affect the sales of private securities offerings.A holder must have an active license to be considered an accredited investor.

A potential investor may also invest in a private fund as an accredited investor so long as the potential investor is a “knowledgeable employee” of the fund. A knowledgeable employee is any natural person who is an “Executive Officer, director, trustee, general partner, advisory board member, or person serving in a similar capacity” of a private fund. In short, the amendment allows the general partner, CEO, etc. of the issuer to be an "accredited investor" for the limited purposes of investing in the securities being offered.

The inclusion of knowledgeable employees will permit these employees to invest in the private fund without the fund itself losing accredited investor status when the fund has assets of $5 million or less. Under Rule 501(a)(8), private funds with assets of $5 million or less may qualify as accredited investors if all of the fund’s equity owners are accredited investors.

Additionally, for those potential investors who are married, the spouses can now pool their resources together for the purposes of qualifying as an accredited investor.

Businesses

The expansion of the definition permits family offices with at least $5 million in assets under management and their family clients to fall within the definition of accredited investor.  The definition of a family office is a company that has no clients other than family clients that is wholly owned by family clients and is exclusively controlled by family members or family entities and does not hold itself out to the public as an investment adviser.

The amendment opened up accredited investing to a slew of business entities.  Limited liability companies with $5 million in assets, SEC and state-registered investment advisers and rural business investment companies may qualify.  Qualification varies based on entities and it is recommended that entities seeking qualification consult with a securities attorney.

Currently, the SEC does not believe that sole proprietorships should be distinguished from other registered investment advisers for purposes of determining accredited investor status.

Governmental Bodies

With the amendment expanding who and what can be an accredited investor, the SEC permits government entities to act as accredited investors.  What is included in a government body are

Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that own “investments,” as defined in Rule 2a51-1(b) of the Investment Company Act, in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered.

These rules are set forth in Rule 501(a) (1-12), mostly (1), (3), and (10).

On November 2nd, 2020 the SEC voted 3-2 to approve long-awaited rule changes to the exempt offering framework in the securities regulations. This includes significant changes to Regulation Crowdfunding designed to make online crowdfunding more attractive to both investors and issuers.

Most Notable Changes:

● You can raise more money through regulation Crowdfunding than you could previously.
● You are now allowed to gauge interest before setting up an offering by “testing the
waters.”
● Investors are allowed to invest more money each year.

Here is the backstory:

● When someone is offering people the opportunity to invest in their business, they are selling a security. They are called an issuer.

● Under the securities laws, issuers must either register these securities on a stock exchange (i.e. an IPO) or find an exemption from registration. Otherwise, they are breaking the law. You should not send someone a budget and pitch deck or business plan and ask them to invest, you may be breaking the law without realizing it.

● There are several exemptions to the securities laws, however, potential issuers are
discouraged by complexity, costs, or the lack of a network (many exemptions effectively require a “pre-existing relationship” with wealthy individuals).

● This traditional exemption framework resulted in over 90% of small businesses being self-funded on the personal credit of the entrepreneur (i.e. second mortgage, credit card, etc.). However, for many entrepreneurs this is not an option.

● Recognizing that these legal barriers reduced access to capital for many entrepreneurs, especially those without wealthy friends, Congress passed the JOBS Act of 2013. This led the SEC to adopt Rule 506(c) and Regulation Crowdfunding, which allowed issuers to legally sell securities to strangers online, as long as they followed certain rules.

● In March of 2020, the SEC released proposed changes to further improve the accessibility and functionality of exempt offerings, while still offering sufficient investor protection. On November 2nd 2020, the SEC officially voted to adopt Final Rules to accomplish that goal, referred to below as the new rules.

While these final rules changed several exempt offering types, this blog post will focus exclusively on the changes to Regulation Crowdfunding. Regulation Crowdfunding allows anyone, no matter their income or net worth, to invest in offerings through a registered Funding Portal, like Common Owner CF LLC.

The most substantial changes to Regulation Crowdfunding are to the offering and investment limits.

Offering Limits

From its adoption in 2015 until now (i.e. under the old rules), issuers were limited to raising $1 million per year (adjusted to $1.07 million for inflation) in Regulation Crowdfunding offerings per year. The amendments adopted in November 2020 raise the maximum offering amount per issuer (including affiliates) from $1.07 million per year to $5 million per year.

Investment Limits

Under the old rules, investors who had an annual income or net worth of less than $107,000 in Regulation Crowdfunding offerings were limited to investing either a $2,200 floor or 5% of the lesser of their income or net worth (whichever was greater). For example, an investor with a net worth of negative $50,000 (due to liabilities like student loans) and annual income of $70,000 would be limited to a negative amount, but could still invest the $2,200 under the old rules. If they had a net worth of positive $50,000 and an annual income of $80,000 they would be limited to $2,500 (5% of $50,000).

Under the old rules for those with an income or net worth of greater than $107,000, they could invest 10% of the lesser of their income or net worth. For example, someone with an annual income of $150,000 and a net worth of $200,000 could invest $15,000 per year. This limitation included accredited investors, which for individuals means over $200,000 in single income, or $300,000 in joint married income or $1 million net worth.

The new rules significantly change these limits and requirements.

First, accredited investors can now invest unlimited amounts in Regulation Crowdfunding offerings (as they can in most other offerings). Non-accredited investors can now invest the greater of the applicable percentage (5% or 10%) of their income or net worth, rather than the lesser of their income or net worth.
In the first example above, with the negative $50,000 net worth and $70,000 annual income, that person could now invest $3,500 per year instead of the $2,200 floor. In the second example, that person could now invest $20,000 rather than $15,000.

Unlike certain other exempt offerings, Issuers in Regulation Crowdfunding offerings are not required to verify that investors are accredited unless the issuer has a reason to believe the investor’s representation that they are accredited is false.

Eligibility for Regulation Crowdfunding

While many companies can be Regulation Crowdfunding issuers, under the old rules investment companies were prohibited from conducting Regulation Crowdfunding offerings. This means an entity created to invest in one or more other underlying or portfolio companies could not conduct a Regulation Crowdfunding offering. This has caused issues for many entrepreneurs, where having a large number of investors directly in an “operating company” can create administrative and financing challenges.

In response to this issue the amendments adopted by the SEC will allow for the creation of “Crowdfunding Vehicles,” through a new rule under the Investment Company Act.

A Crowdfunding Vehicle is a company that acts exclusively as an investment conduit for an underlying crowdfunding issuer. A crowdfunding vehicle is very limited in its permitted activities (acquiring, holding, and disposing of crowdfunding issuer securities) and the type of compensation it can receive. The crowdfunding vehicle and crowdfunding issuer are technically “co-issuers” under Regulation Crowdfunding and they will jointly file a Form C with the SEC. If there is a liquidity event (i.e. a sale) of the crowdfunding issuer, it is required to redeem or offer to repurchase the securities owned by the crowdfunding vehicle. The crowdfunding issuer must bear the costs of the crowdfunding vehicle. The crowdfunding vehicle can engage a third party (such as a funding portal) to handle the burden of communicating with investors regarding votes and for other administrative matters.

Financial Statements

In response to COVID-19, the SEC adopted temporary amendments to the Financial Statement requirements for issuers in Regulation Crowdfunding Offerings, which among other changes, exempted issuers raising up to $250,000 from the requirement for reviewed financial statements. Reviewed financial statements can be a significant additional expense for small businesses.
The new rules extend the temporary rule an additional 18 months so they apply to offerings initiated prior to August 29, 2022. Such issuers will still need to provide financial statements and certain tax return information, but this information will not need to be reviewed by an independent CPA.

Notably, if the issuer has reviewed or audited financial statements (for other
reasons) they must be provided and issuers taking advantage of this extended provision must include a prominent disclosure notifying investors that the financials were not reviewed by an independent CPA.

Offerings between $535,000 up to $5 million will continue to require audited financial statements.

Test the Waters

Under the old rules, issuers conducting Regulation Crowdfunding Offerings were not allowed to discuss the offering with potential investors prior to its commencement. The new rules include a “testing the waters” provision, which allows issuers to discuss their regulation Crowdfunding offering before it is open for investment, however these communications must state:

1. No money or other consideration is being solicited, and if sent, will not be accepted;
2. No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through an intermediary’s platform; and
3. a prospective purchaser’s indication of interest is non-binding.
   

Further, these materials are subject to the anti-fraud provisions of the securities laws. Issuers must include these “testing the waters” materials with the Form C filed with the SEC (which remain publicly available). Once the Form C is filed and the offering commences, all offering communications must comply with Regulation Crowdfunding (including Rule 204 advertising restrictions). The SEC believes these changes will allow investors “to have input into the structuring of the offering and convey to the issuer the types of information about which they are most interested.”

Effectively, this will help early-stage issuers value their companies so they do not give away too much equity or fail to have a successful raise because they were too aggressive.

Regulation Crowdfunding Communications

Under the old rules (which are notably still in effect until around year end), issuers relying on Regulation Crowdfunding were not allowed to orally discuss the offering with prospective investors, as all communications were required to go through the crowdfunding platform.

The new rules will allow issuers to orally discuss the offerings, as long as the advertising requirements of Rule 204 (which specifically sets forth what issuers are allowed to communicate about the offering) are met, except for the need to provide a link to the platform (which is excluded).

Additionally, the Issuer now may provide (1) A brief description of the planned use of
proceeds of the offering; and (2) Information on the issuer’s progress toward meeting its funding goals. Lastly, if the Regulation Crowdfunding Issuer is conducting a ‘concurrent offering’ under another exemption (like Rule 506(c)), the Issuer can provide information about the Regulation Crowdfunding offering in the offering documents for that concurrent offering (however, a link to the Regulation Crowdfunding offering must be provided).

It is impossible to know what kind of impact the new rules will ultimately have on the utilization of Regulation Crowdfunding, which has lagged behind other types of exempt offerings to this point. However, the amendments are carefully crafted to address certain pain points that have emerged in the equity crowdfunding space in recent years.

For example, many issuers were conducting “concurrent” Regulation Crowdfunding and Rule 506(c) offerings so that accredited investors could invest more than the $107,000 maximum. The elimination of limits on accredited investors in Regulation Crowdfunding offerings significantly reduces this need. Similarly, many potential issuers were deterred by the administrative complexity and perceived financial
challenges from having a large number of crowdfunded investors through two simultaneous offerings. The crowdfunding vehicle amendment is designed to address these challenges, while maintaining protections for investors.

The thoughtful and careful amendments should increase the issuance of equity offerings available to non-accredited investors, democratizing the ownership of small businesses and real estate. Hopefully this will lead to a broader understanding and acceptance of the equity crowdfunding space, resulting in more successful offerings. Crucially, the SEC has managed to do this while maintaining a high degree of investor protections.

If you have any questions about equity (or debt) crowdfunding, feel free to reach out to us at info@commonowner.com or (716) 249-4223.

After a long vetting process, Common Owner is now officially registered with the Financial Industry Regulatory Authority (or “FINRA”) to post Regulation Crowdfunding (“Reg CF”) offerings!

We are the only company in New York State, outside of New York City, that is able to legally facilitate Reg CF offerings.

What does FINRA Registration mean in the context of a Funding Portal?

Whether you're thinking of doing a Reg CF raise, researching funding portals, or may be considering starting a crowdfunding portal yourself, you're likely to have come across FINRA, the Financial Industry Regulatory Authority.

Some questions you may have had:

How is FINRA different from the SEC?

First and foremost, the U.S. Securities and Exchange Commission is a government agency, while FINRA is an independent, non-governmental, private corporation with regulatory authority. The SEC is responsible for enforcing federal securities laws, regulating the securities industry, studying the market and proposing new rules and regulations, while FINRA is focused primarily on investment vehicles (brokerage firms, exchange markets like the New York Stock Exchange, funding portals like Common Owner, etc.) and enforcing the rules and regulations therein created by the SEC.

FINRA is the primary gatekeeper for being able to work in those markets. It administers qualifying exams (the Series 7 exam for "General Securities Representative Qualification Examination", for instance) and for enforcing the rules, with the ability to levy fines, order restitution, as well as suspending, expelling, and barring individuals and firms from securities business. For criminal activity (such as fraud or insider trading), those are referred back to the SEC for prosecution.

Why are some online capital raising websites not registered with FINRA?

Websites that simply list or promote certain exempt offerings on behalf of issuers, including Rule 506(c), Reg A, or intrastate offerings do not need to be registered with the SEC of FINRA. The issuers will need to file paperwork with the SEC or state agencies prior to and during the offering and will need to follow the rules of the exemption (i.e. accredited investors only).

Companies that facilitate Reg CF offerings through an online platform are called “Funding Portals.” Funding Portals are regulated intermediaries, like broker-dealers, that help to facilitate the offering. However, unlike a Broker-Dealer, they do not handle investor funds (everything is handled via third-party escrow). Also, unlike the listing services discussed above Funding Portals cannot promote or endorse a specific offering. Funding Portals need to be registered with the SEC and become members of FINRA, subjecting them to an explicit set of rules regarding business operations, financing, and especially record-keeping procedures.

The regulators expect that accredited investors understand the risks of a given offering and are able to absorb the losses if the company conducting the offering does not work out. However, Reg CF is open to anyone, meaning people with minimal investment experience in private offerings can partake, with certain restrictions. Regulation Crowdfunding places additional burdens on Funding Portals to help protect these non-accredited investors who may not be able to comprehend the risks or absorb the losses from a bad investment.

The SEC and FINRA are more hands-on with Funding Portals to ensure they perform proper and thorough due diligence on an offering before it is posted to prevent fraudulent behavior. This puts the responsibility of identifying and reducing fraud on the portal rather than on the investors. So far, this approach has been successful, with very few cases of fraud reported regarding offerings conducted through a Funding Portal.

What does the Reg CF application entail?

The application is a two-stage multi-month process that includes traditional business documents, as well as an in-depth look into the company's (as well as its directors) financials and records. This includes (but is not limited to):

• Basic business formation documents (articles of incorporation, business plan, etc.)
• Fingerprints for all directors and associated persons (including subcontractors involved in the day-to-day operation)
• Bank statements for: the company's initial capitalization, all other capital contributions (as well as bank statements from directors before and after capital contribution), and evidence of capitalization (voided checks, digital deposits).
• Funding Portal operational materials.
• Operational website that can be reviewed and tested (including emails and messaging through the website) that complies with all regulatory requirements.

What does the application review look like?

Once the basics are out of the way (business documents, fingerprints, and financials) FINRA will conduct a detailed review of your operational materials, and website. This includes:

• The policies and procedures for the company
• The structure, functions, and content of your website
• A breakdown of your on-boarding process
• Sample of communications from the website to issuers and investors
• Functionality of required components for funding portal
• Breakdown of digital and physical record keeping practices, including WORM (write once, read many) compliant storage solutions.

After FINRA has reviewed these materials, they will provide feedback and schedule an interview. The interview covers:

• Any questions FINRA has generally not covered in business documents
• Any questions not yet resolved via e-mail or that require further breakdown
• A demonstration of the website functionality, preferably running through a project on-boarding process
• Discussion with their compliance team about acceptable (and problematic) forms of marketing.

After the interview and any last changes required are made, FINRA will make a decision regarding the application. After successful registration, there are continual check-ins throughout the life of the funding portal to ensure it maintains integrity for the safety of its investors. This also includes storage of some documents and records into perpetuity or for up to five years depending on the document type.

Overall, the comprehensive and in-depth review of Funding Portal applicants should lead to more responsible Funding Portals and issuers using Reg CF. This is particularly important in an industry where people with minimal investing experience can get involved in private securities offerings. While this may mean fewer Funding Portals go to market than one might expect considering the excitement around the industry and potential for disruption, it means those that do should be better prepared to create a safe and compliant environment for investors.

Regulation Crowdfunding, when first authorized by Congress as part of the JOBS Act of 2013, inspired much fanfare and high expectations, for its intended ability to give entrepreneurs new opportunities to source capital. However, the resulting final regulations curtailed these exciting regulatory changes. Now, new regulatory revisions proposed by the SEC, could dramatically change the efficacy and efficiency of crowdfunding nationwide.

The JOBS Act excited many investors and business owners in its promise to simplify the complex and expensive process for legally raising capital in the United States. The idea of early stage companies being allowed to raise money from anyone, not just high-net worth individuals, using the internet, was expected to be revolutionary. There was already strong interest in and traffic on “donation crowdfunding” sites, like Kickstarter, so selling stocks and originating loans on the internet (previously not allowed) was rightfully expected to improve access to capital formation, allowing private companies to reach investors typically only participating in publicly traded stocks.

However, by the time the regulations were finalized by the SEC in 2016, serious doubt had emerged regarding its utility. Between 2013 and 2016, other offering exemptions like Rule 506(c) and Regulation A+ had facilitated equity formation online, albeit, with different investor restrictions. The final Crowdfunding rules contained a series of limitations, rightfully intended to protect investors, but ultimately stifling the market for crowdfunding portals. This included investment and offering limits, significant compliance requirements, and a restriction on using special purpose vehicles for crowdfunding.

These doubts were ultimately correct. Between 2016 and 2019, only 51 Regulation Crowdfunding issuers had raised at least $1 million, with an average successful raise amount of $213,678 and a median successful raise amount of $106,900. In 2019, a meager $62 million was raised, compared to $66 billion in Rule 506(c), and almost $1.5 trillion in Rule 506(b). In 2019, IndiGoGo, one of the top names in “Rewards based” Crowdfunding, shut down its Regulation Crowdfunding Portal.

Recognizing the significant shortcomings in Regulation Crowdfunding, the House of Representatives passed the ‘Fix Crowdfunding Act’ in 2016 by a 194-14 margin, however, it never reached a vote in the Senate.

Now,  the SEC is proposing to use its regulatory authority to overhaul the exempt offering framework, proposing to make many of the changes proposed in the Act. The SEC has released a proposed rule and requested feedback and will likely release a final rule this summer.

The proposed changes respond to many of the issuers holding back the equity crowdfunding markets:

1. Using Special Purpose Vehicles - Regulation Crowdfunding currently requires investors to invest directly into an operating company, which causes a host of issues. For high-growth startups, it crowds the cap table, turning off venture capitalists and angel investors. For real estate projects, this makes it more difficult to separate different attributes of an investment, especially for projects earning tax credits or utilizing other subsidies. The SEC has proposed to allow for the creation of special purpose vehicles, called “Crowdfunding Vehicles” that can hold securities in an underlying company and offer securities to investors in a crowdfunding raise. The proposed rule require that the Company and the Crowdfunding Vehicle to be “co-issuers” in the offering, the vehicle would not be allowed to borrow money, and the vehicle can only hold a one to one ratio of the same number, type and rights of its securities in the issuer to the securities it offers.
2. Test the Waters -  Securities offerings are very challenging for small and medium sized companies where valuation is unclear. They risk giving up too much of their business by selling stock, or try to be aggressive with their valuation and their offering fails. Also, they may not know which exemption is most appropriate. While issuers can choose a “range” for their offering, this general uncertainty and the uncertainty of the success of their offering is problematic. The SEC is proposing to allow issuers to “test the waters” with their offering before going “live.” Based on feedback and interest, the issuer can adjust the offering and choose the most suitable exemption, to defray costs and improve the likelihood of success. Unfortunately,while such actions in public markets are sometimes helpful, industry insights from Regulation A offerings seemingly indicate that such expressions of interest are unreliable to date in crowdfunded exempt offering broadly.
3. Offering Limitations - Regulation Crowdfunding capped the per raise limit at $1,000,000 per year (1,070,000 inflation adjusted). This limits the amount of capital issuers can range, discouraging use of the exemption among high quality businesses. The SEC has proposed increasing this cap to $5,000,000.
4. Non-accredited Investor Limits - Regulation Crowdfunding caps non-accredited investors to investing either (1) $2,200 or (2) the lesser of 5% of their income or net worth, unless each is over $107,000, in which case it is 10% of the greater of either. Notably, this is across all crowdfunded offerings for the year. This eliminates many prospective investors, including the many with significant student loan debt from participating at a meaningful level. The SEC has proposed to change this to 5% of the greater of the net worth or income of the investor (until $107,000, when it still increases to 10%).
5. Accredited Investor Limits - Under Regulation Crowdfunding, the maximum amount that any investor is allowed to invest in a year is $107,000, regardless of their accredited status. Under other exemptions, accredited investors can typically invest unlimited amounts. However, based on SEC analysis, roughly 40% of all investors in Regulation Crowdfunding Offerings are accredited. The SEC has proposed removing this cap, which could push a significant amount of Rule 506(c) traffic to Regulation Crowdfunding.

These changes, in the aggregate, have the potential to transform the Crowdfunding industry by making more projects viable to use Regulation Crowdfunding, presenting more specialized investment opportunities, and improving the likelihood of success for those offerings. This is especially true in the real estate industry or in tax equity markets, where projects are potentially more likely to generate cash flow or a prompt return of capital instead of the “long hold” associated with a high-growth startup. These types of investment opportunities may be more appealing or comfortable to everyday or less experienced investors.

Common Owner is a Buffalo-based company providing an exempt offering listing solution and working to become a registered “Funding Portal” with the SEC and FINRA. Common Owner focuses on neighborhood-oriented retail businesses and sustainable real estate development, especially focusing investment opportunities supporting historic rehabilitation and building walkable communities.

"...The place-based nature of the Opportunity Zones program makes it ideally suited to be paired with the Historic Tax Credit. The HTC is a 40+ year old tax policy that encourages private sector investment in the rehabilitation and re-use of historic buildings." - Jimmy Atkinson | OpportunityDB

Jimmy Atkinson interviews Rich Rogers of Common Owner to talk through the following points about combining Historic Tax Credits and Opportunity Zones:

• A primer on the Historic Tax Credits program — what it is, how it came into existence, and how it differs from the Opportunity Zones program.
• The number of HTC-eligible buildings in the United States (hint: it’s a lot!) — and an estimate of how many are located in opportunity zones.
• Twinning Historic Tax Credits with Opportunity Zones, and how developers can stack the two programs when raising capital.
• How the requirement of a taxpayer to reduce his basis in the HTC project equal to the amount of tax credits that are generated may be nullified by a market value basis step-up in year 10 of an opportunity zone fund sale or disposition.
• How vitally important the Historic Tax Credits program is in certain secondary markets like Rich’s hometown of Buffalo.
• The 506(c) Funding Portal that Rich is developing at Common Owner, and how it will be used to connect investors with developers.
• The different types of offerings that Rich thinks OZ funds will make — Regulation A vs. CF vs. D 506(b) and D 506(c).
• How the government shutdown is affecting the release of the final IRS regulations on Opportunity Zones, and which issues in particular Rich is anxious to see clarity on as it pertains to twinning the HTC with the Opportunity Zones incentive.