The word is now out – Title III equity crowdfunding under the JOBS Act is not going to work very well. The problem? It is going to be way too expensive. Estimates to do an equity raise pursuant to Title III range between $140,000-$250,000 for a million dollar raise.

See these two posts on this topic:

Crowdsourcing a Title III Crowdfunding Cost Model

“Death by Expense” of Crowdfunding?

This is simply too steep for it to make any sense except for companies that have a business purpose other than just raising money to do such an offering (e.g., encouraging patronage by turning patrons into stockholders as well).

But here is something interesting to consider. Years ago state and federal securities regulators constructed something called a Small Company Offering Registration, or a SCOR. If you read the description of a SCOR offering on the Washington State Department of Financial Institution’s website (see here: http://www.dfi.wa.gov/sd/scor.htm), you will notice something somewhat remarkable: it looks even better than a Title III equity crowdfunding. Let me show you how they compare.

Click here to view table.

Will the SCOR come back into popularity now that Title III equity crowdfunding has not turned out as crowdfunding advocates had hoped? It is possible. It will be fun to watch and see. But let’s be honest – there are problems with SCOR offerings, which is the reason they are not very popular. What problems am I referring to? In general just the complexity of an offering that requires you to either register securities with state securities regulators (like a SCOR offering), or go through a difficult and burdensome process (like that described in Title III of the JOBS Act).

The truth is—Congress needs to revisit the crowdfunding provisions of the JOBS Act and simplify those provisions substantially. I am afraid Title III crowdfunding is going to go the way of SCOR—it will be scarcely used, and ultimately forgotten.