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Are You Ready for Wisconsin Equity Crowdfunding?

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet. Let's explore what this means in Wisconsin.

Wisconsin State Capitol

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet. To participate in the crowdfunding effort, you first need to determine if you are eligible. That eligibility is not detailed in the Wisconsin law, but rather in Rule 147 of the Federal securities laws. Rule 147 describes the conditions a company must meet to be exempt from Federal securities laws, and thereby eligible for intrastate offerings.

Eligibility Requirement

  1. The company must be organized under the laws of the state in which it is making the offering (that means no Delaware or Nevada incorporations for Wisconsin based companies).

  2. It must be doing business in the state, which is defined as: a) generating 80% of its gross revenue in the state; b) having 80% of its assets located in the state; and c) deploying 80% of the proceeds of the offering within the state.[1]

  3. Moving beyond Rule 147, Wisconsin also requires the company’s principal office and majority of its full-time employees be located in the state.

If you are eligible for intrastate crowdfunding, the next step is to engage your advisory team. Your advisors should include (in order of engaging) an investment banking firm that is registered as a broker-dealer, a securities attorney, a Wisconsin-based funding portal operator, and members of your internal team. The investment banking firm should have experience raising money for early-stage companies and should be comfortable with the details involved in crowdfunding. They will help with the preparation of the offering materials, structuring the investment, and discussions with interested investors. They can also recommend the appropriate attorney and portal. Your attorney should be conversant on crowdfunding and able to answer questions on your first call. If they aren’t, then you chose the wrong attorney. They will prepare all of the appropriate filings and make sure your disclosure documents adequately describe all pertinent information and risks. Next, choose the portal operator. Make sure they are a Wisconsin-based company and can-do intrastate offerings. Also ask them how they will drive traffic to your offering and their own site.

Finally, pick the members of your internal team who will work on the offering. That team should, at a minimum, represent marketing and finance functions.

What You Need to Know About Disclosures

As part of the offering, the company must file a disclosure statement with Wisconsin Department of Financial Institutions (WDFI) describing the company, its business plan, intended use of the proceeds and a number of other items. When reading this requirement, it seems very manageable but be careful. By undertaking a crowdfunding offering you are basically doing a mini public offering. The information requirements in a public offering are extensive for many reasons, the primary two being: 1) full disclosure to investors, and 2) avoidance of lawsuits. If you talk to any experienced securities attorney who is knowledgeable about crowdfunding, they will advise you to be very detailed in your disclosures, to be accurate and conservative, and to fully disclose all known and possible risks. There will be many crowdfunding investors that don’t fully understand what they are getting into when they invest, and they can cause trouble if everything doesn’t go as they expect. Exercise caution by giving full and detailed disclosures.

[1] See this link for further explanation of Rule 147.


About Waypoint Private Capital

Waypoint Private Capital is an investment banking firm that educates and advises middle-market, privately held companies through critical stages of their business' life cycle. Waypoint helps business owners and entrepreneurs sell companies, buy companies, raise equity and debt capital for growth and recapitalization, and plan for a successful exit from the business.

To learn more visit or call us at 608.515.3354 or 918.633.2647 and speak with a Waypoint Private Capital expert.

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Steve Sprindis is co-founder and managing director of Waypoint Private Capital. © 2014 Waypoint Private Capital, Inc. All Rights Reserved.

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