How does Small Change work?
Small Change is a real estate investment crowdfunding platform. Now that’s quite a mouthful, but simply put it means this – we match investors with developers raising funds for transformative real estate projects, to make better cities everywhere.
We do this by using some securities regulations which are known as Regulation Crowdfunding (Reg CF) and Regulation D (Reg D), also known as 506(c), sometimes independently, and sometimes together as “side-by-side” offerings. These regulations prescribe how we can help raise funds for developers and the rules we must follow.
We can also use Regulation A (Reg A) which lets developers raise up to $50 million.
What does it cost to raise funds on Small Change?
Our fee structure for Reg CF offerings is as follows:
- $2,500 onboarding fee +
- 5% of first $1 million raised
- 4% of second $1 million raised
- 3% of anything raised thereafter
(Flat fees are charged for Reg D/506(c) offerings since Small Change is not a broker-dealer and we are not permitted to charge a fee based on funds raised.)
Our goal is to list your offering quickly and seamlessly.
- We’ll help to prepare a compliant disclosure packet
- We’ll provide legal templates for your disclosure documents, LLC agreement, investor agreements and more, all crafted to fit the regulations seamlessly
- We’ll acquire SEC access codes to list your offering
- We’ll register all paperwork as required with the SEC
- We’ll set up a bank account ready to accept investor funds
- We’ll create your online campaign page
- We’ll guide you through creating appropriate marketing materials
- We’ll ensure that financial reviews and bad actor reports are completed as required
All investors invest through our fully electronic process, with investment agreements created digitally. They complete required disclosures on risk and more on our platform, all of which information is stored in our database. At the end of the offering we’ll provide you with a list of investors, all of their contact information and investment agreements, and wire you the funds.
In other words, we’ll guide you through the nuts and bolts of listing an offering, seamlessly.
Some additional costs you should count on are bad actor and financial reports, a requirement of Reg CF, and of course, marketing.
Is my project ready to list on Small Change?
We assess a number of criteria which include:
- That your project fits our mission and scores at least 60% on our Change Index;
- That you (or your team) has relevant real estate development experience;
- That you have a well developed business plan;
- That your offering goal is at least $100,000; and
- That you have a network of friends, family and neighbors who care about your project and will likely invest.
We’re looking for developers who have a great project idea and have the skills and tenacity to complete it.
Want to get started? Start the process here.
If your project is not a fit, we’d love to hear from you again, whether you develop your project further or move onto another one.
What if my project is in an Opportunity Zone?
Opportunity Zone or not, we need to assess your project based on a variety of criteria – whether it fits our mission and whether the business plan makes sense and whether your project will be ready to break ground soon. If you’ve already reviewed the criteria listed in “Is my project ready to list on Small Change”, you can start the process to raise funds here.
What if I’m a first time developer?
If you believe you have a great project but don’t have the requisite developer experience, you’ll need to add an experienced developer to your team.
When should I incorporate my company?
Take note. Our disclosure packet is a suite of templates that are built around a Delaware operating agreement. We’re going to provide this to you free. If you incorporate in another state, or with a different operating agreement, you’ll have more work and additional costs. You’ll need to update our templates to match your operating agreement and we don’t recommend this.
So wait to incorporate until we’ve had a discussion or two.
What marketing materials will I need prepare?
You’ll need to provide lots of great visual materials to illustrate your offering online.
Make a video. We’ll provide a template storyboard. Take 50 fabulous photos of your project and the neighborhood. Make sure they are landscape format and at least 1MB each. And send us a high quality photo of you.
How long will it take for my offering to go live?
This really depends on you more than us. Expect the process to take a minimum of 4 – 6 weeks from first submission to going live. If you are super organized, it could take less time.
How long will it take to raise funds?
That depends on how much capital you are raising, on what you are offering investors and most importantly, your commitment to reaching out to your network.
Your network is critical to a successful raise.
Industry data suggests that approximately 80% of funds are invested by people you know, their family and people they know.
I’m ready to get started …
If you’re ready to get started now, follow this link to our onboarding process and we’ll guide you through raising funds, from end to end.”
When should I apply for a background check?
Are there any annual reporting requirements?
You’ll need to file at least one Form C-AR, the official SEC annual report required. It looks like a slightly reduced Form C, the disclosure for your offering and its purpose is to provide an update on your project. This must be filed with the SEC no later than 120 days after the previous year’s fiscal end.
Generally, companies simply need to update disclosure previously provided in the Form C. And you can terminate this annual reporting requirement if with a Form C-TR filing if:
- you become a public reporting company;
- you’ve made a Form C-AR filing already and have less than 300 investors;
- you’ve filed 3 Form C-ARs previously and have total assets that do not exceed $10,000,000;
- you liquidate or dissolve your business in accordance with state law.