The Evolution of Online Capital Formation: Insights from Oscar A. Jofre

The journey of Online Capital Formation (OCF) since the signing of the JOBS Act in 2012 represents a seismic shift in democratizing access to capital markets. Initially known as “crowdfunding,” this framework has evolved into a sophisticated ecosystem that accommodates a diverse array of investor types—retail, accredited, institutional, venture capital, governments, strategic investors, and private equity. This evolution reflects the industry’s maturity and its growing importance as a pillar of private capital markets.

From Crowdfunding to Inclusive Financing

The origins of OCF lie in platforms designed to enable retail investors to participate in capital formation. Over the years, this model has expanded significantly, welcoming participation from institutional investors and venture capitalists. This expansion was facilitated by critical regulations under the JOBS Act, including Regulation CF (RegCF), Regulation A+ (RegA+), and Regulation D (RegD). These frameworks have provided structured pathways for companies to raise capital from a broader investor base while ensuring compliance, transparency, and investor protection.

Key Regulatory Milestones

• Increased Funding Limits: Recent updates to the JOBS Act raised funding limits for Regulation A+ to $75 million and Regulation CF to $5 million. These changes have widened the playing field for businesses seeking capital, reflecting the ecosystem’s growth and adaptability.
• Enhanced Transparency and Compliance: Regulations have evolved to balance accessibility with robust compliance requirements, fostering trust among issuers and investors alike.

Kore’s Integral Role in the Ecosystem

As the OCF landscape has matured, platforms like Kore have emerged as critical infrastructure providers. Kore integrates the myriad participants in this ecosystem—broker-dealers, funding platforms, legal professionals, transfer agents, payment processing, compliance, regulatory logic, functional logic, and secondary market operators—into a unified framework that prioritizes efficiency, compliance, and scalability.

Kore’s Unique Value Proposition

1. Technology for Intermediaries:
   • Kore’s solutions are designed to “save effort, generate revenue, and ensure compliance.”
   • They empower Chief Compliance Officers (CCOs) to transition from being perceived as cost centers to invaluable assets, making their organizations more compliant and profitable.
   • Features include audit-proof systems that simplify the complexities of regulatory adherence, ensuring peace of mind for CCOs and managing partners alike.
2. 100% Private Label:
   • Kore offers end-to-end solutions tailored for intermediaries, broker-dealers, and transfer agents. These customizable platforms enable seamless operations without compromising brand identity.
3. Compliance-Driven Technology:
   • Kore’s systems are built to align with SEC regulations, reducing risks for issuers and safeguarding investor interests.
   • This compliance-first approach fosters trust and mitigates potential liabilities.
4. End-to-End Management:
   • From pre-raise planning to post-raise investor relations, Kore’s all-in-one platform ensures a streamlined, transparent, and efficient process.
5. Secondary Market Enablement:
   • Through partnerships with FINRA-registered Alternative Trading Systems (ATS), Kore facilitates liquidity, empowering investors to trade securities with confidence.

The Expanding Opportunity Landscape

The matured OCF ecosystem offers unprecedented opportunities for both issuers and investors, breaking traditional barriers and promoting financial inclusion.

Empowering Stakeholders

• Investors: OCF provides access to diverse investment opportunities, enabling participation in sectors previously reserved for elite institutional players.
• Issuers: Companies can leverage OCF to raise capital cost-effectively while maintaining control and equity.

Strategic Advantages for Key Participants

1. Broker-Dealers:
   • Gain access to standardized, compliance-ready platforms that simplify regulatory responsibilities and expand their service offerings.
2. Funding Platforms:
   • Leverage Kore’s infrastructure to broaden reach, engage a more diverse audience, and enhance operational efficiency.
3. Issuers:
   • Utilize Kore to maintain transparency with investors, ensure accurate record-keeping, and access secondary market liquidity seamlessly.
4. Legal and Financial Professionals:
   • Kore’s tools and integrations streamline compliance and due diligence, enabling professionals to deliver exceptional value to clients.

Future Growth Trajectory

The future of OCF is poised for transformative growth, driven by emerging trends in digital securities, tokenization, and enhanced secondary trading capabilities. These advancements promise to further accelerate adoption, positioning private capital markets as a viable, thriving alternative to traditional public markets.

The Path Forward

• Digital Securities and Tokenization:
  • Tokenized assets are revolutionizing how securities are issued and traded, offering greater transparency and accessibility.
• Enhanced Liquidity:
  • The integration of secondary market mechanisms ensures that investors can exit their positions with confidence, fostering a more dynamic investment environment.
• Global Accessibility:
  • As regulatory frameworks continue to align globally, OCF platforms like Kore are well-positioned to facilitate cross-border investment opportunities.

The evolution of Online Capital Formation is not merely a shift in how capital is raised—it’s a revolution that democratizes access to investment opportunities while fostering transparency and compliance. As this ecosystem matures, platforms like Kore will play an indispensable role in enabling issuers, investors, and intermediaries to thrive in an increasingly complex and competitive market.

By embracing the innovations and opportunities presented by OCF, stakeholders can position themselves at the forefront of this dynamic and transformative industry. The time to act is now—leverage the tools, strategies, and insights available to unlock the full potential of Online Capital Formation.