Saturday, April 1, 2017

NC PACES Act Crowdfunding Law and Rules Now in Effect

By Mark Easley

Good news, the NC PACES Act crowdfunding rules have been finalized, and the act is in effect as of today, April 1st 2017. The Secretary of State web site has the rules, forms, instructions and FAQs that startups and small businesses need to start using this new type of intrastate investment crowdfunding financing.
Mark Easley

Businesses ranging from brand new to mature can make use of the new law for financing. North Carolina based startups and small businesses that want to raise money using the NC PACES Act crowdfunding law (referred to as issuers of an investment offering) will follow the registration, reporting, escrow management, record keeping, promotion, and procedure rules of the PACES Act on the Secretary of State website. Once a registered offering is approved by state regulators, issuers can promote equity or debt offerings to raise up to $2M if they have reviewed or audited financials, and up to $1M if they do not. North Carolina accredited investors can invest an unlimited amount, and North Carolina retail unaccredited investors can invest up to $5000 per offering. Issuing companies can promote the offering using the internet including social media, email, a website and other types of advertising provided they follow the content and procedure rules for the PACES Act. The maximum length of time for an offering to be open is 12 months, and businesses may make one PACES Act offering every 12 months.

Local Public Offering

A very important new idea enabled by the NC PACES Act and the new rules is called the Local Public Offering, or LPO. This is a new and innovative idea that has not yet been tried at the Federal Level or in other states. By following the rules for an LPO, the startup or small business can raise up to $250,000 on their own, and they do not need to use a crowdfunding platform or registered broker/dealer. They can put together a simple equity, debt, or revenue share loan offering, set up an escrow account with their bank or lawyer, and then register the offering with the state. Once approved, they can promote the offering to their friends, family, customers, and community to get the funding. The LPO is a very cost effective way for small businesses and startups to do crowdfunding, and achieves a good balance between cost and risk for both issuers and investors.

Investor Protections  

The PACES Act and the rules also have some very important investor protections built in. All offerings are registered with the state, they must declare a target amount to be raised and a minimum amount to be raised, and they must include information about the use of the funds and other business plan details. Money collected for the offering is kept in a registered escrow account and cannot be distributed until the minimum is in escrow. If the minimum is not reached, all money is returned to investors without charges or fees. If the minimum is reached, the money is distributed to the issuer according to the terms of the offering. The PACES Act and rules also require the issuers to make regular reports to investors about the progress of the offering, and once it is funded, the progress of the business.

There are many other details to consider in the rules, and this summary is not legal or investment advice. Consulting with a business law attorney about your offering documents and the crowdfunding rules is a good idea, and for those raising larger amounts a crowdfunding platform will be a good option, as they can take care of many of the details for you.

The good news for today is that intrastate investment crowdfunding is now available in North Carolina. And yes, this is for real, not an April Fools!   

Friday, March 24, 2017

NC PACES Act Team Leader Named a Finalist for WRAL TechWire Awards

Triangle startup advisor and investor Mark Easley Sr. successfully led a 3.5 year effort to get a North Carolina securities law exemption passed which will help finance startups and small businesses in North Carolina.

Mark Easley Sr.
The North Carolina Providing Access to Capital for Entrepreneurs and Small business Act (NC PACES Act) enables a new way to finance startups and small businesses in North Carolina using investment crowdfunding. Any North Carolina based company can raise up to $2M using equity or debt finance offerings from any resident of North Carolina by following the registration, reporting, and procedure rules for the NC PACES Act. North Carolina accredited investors may invest any amount, and non-accredited retail investors may invest up to $5,000 per offering. The NC PACES Act was passed unanimously in the North Carolina General Assembly and signed into law by the Governor in July 2016, and is expected to go into effect after the regulations have been finalized in March 2017.

WRAL TechWire has announced the finalists for the annual TechWire awards. NC PACES Act team leader Mark Easley Sr. was nominated in 2 categories, ‘Most Noteworthy Startup Founder or Investor’ and ‘Most Noteworthy Enterprise Founder or Investor’ for his work on NC PACES.

Now the voting has started. Supporters of the NC PACES Act from the startup and small business communities can vote here, and this must be done by Friday March 31st:

This honor is shared with everyone who worked on and supported the NC PACES Act.

Wednesday, February 8, 2017

Don't miss your chance to help shape NC crowdfunding rules

This guest post was published by WRAL Tech Wire on Feb 6th. Click here to view the full post on WRAL Tech Wire.

WRAL Tech Wire Editor's note: Investor and entrepreneur Mark Easley, one of the driving forces behind the passage of intrastate crowdfunding legislation, spells out how the law will work in a special blog written exclusively at the the request of WRAL TechWire. He also says that N.C. residents can participate in the shaping of final rules - and urges entrepreneurs as well as interested investors to do so.

MORRISVILLE, N.C. - The long awaited North Carolina intrastate investment crowdfunding act, known as the NC PACES Act, was unanimously passed by the NC Legislature and signed into law by the Governor last summer. This new law allows North Carolina based startups and small businesses to raise either debt or equity financing from North Carolina residents, including both accredited and retail investors.

The law is implemented as what is known as a securities law exemption, which means it carves out some special definitions and rules for this particular type of financial offering, including the financial limits and the process for doing fundraising in this way.

One of the key points about the NC PACES Act crowdfunding exemption is that it allows entrepreneurs to create an investment fundraising campaign which can be promoted via the internet on crowdfunding websites, the company website, and a variety of other online and offline ways provided that the exemption rules on solicitation are followed.

The exemption also allows entrepreneurs to raise up to $2M in financing in any 12 month period if they have reviewed or audited financials from the previous year, or up to $1M if they do not. The crowdfunding campaign can raise up to $5,000 from any North Carolina adult resident, and an unlimited amount from North Carolina accredited investors.

These types of investment crowdfunding campaigns using several federal and state crowdfunding exemptions have become very popular and successful over the last couple of years, so now North Carolina is about ready to join over 30 other states that allow this type of intrastate crowdfunding.

This should be a big boost for our small business and startup communities who will be able to raise money in the form of debt (such as revenue share loans) or equity (such as 506 equity offerings) from their friends, customers, and community to open or expand a business and create jobs right here in NC.

NC rules

There is one more step in the implementation process in which you can participate. These securities law exemptions are regulated by the NC Secretary of State. So any new law like this has some securities related rules attached to it to explain and implement the disclosures, registration, reporting, and investor protection parts of the law.

A ‘Public Comment Period’ allows anyone to make formal comments in writing to the Secretary of State’s office to suggest improvements to the implementation of the exemption. The Public Comment Period for the NC PACES Act will run from Feb 7 to Feb 27 2017.

So if you are an entrepreneur or investor that is potentially interested in the investment crowdfunding option, or want to help those who are, please take a little time in the next week or two to review the PACES Act, the proposed rules, and if you have some ideas, provide some written comments to the Securities Division.

Here’s how you can proceed:

1)   Please see the Secretary of State web page regarding the proposed rules for all the links you will need:
2)   Take a quick look at the NC PACES Act. It is kind of dry legal stuff, but it will tell you what the legislature had in mind:
3)   Take a look at the proposed rules here:
4)   If you have any comments, you can send them in writing by following the instructions (Please note the date is wrong in this publication. Comments are due by 5:00pm on Feb 27th, 2017.)

With your help, NC will benefit from a new, well defined investment crowdfunding exemption for our entrepreneurs.


Thursday, February 2, 2017

NC PACES Act Proposed Rules Have Been Published - Public Comments Due by Feb 27th

The North Carolina Secretary of State's office has published the proposed rules for the NC PACES Act intrastate crowdfunding law. The PACES Act is a securities law exemption which is regulated by the Secretary of State Securities Division. The public comment period for the rules will be from February 7th to February 27th. Please see the Secretary of State Rulemaking page for instructions on how to submit comments and many other useful links on the rulemaking process and the NC PACES Act proposed rules.

Here is the Invitation Letter from Secretary of State Elaine F. Marshall

There will also be a Public Hearing on the proposed rules on February 15th.

Tuesday, January 3, 2017

NC PACES Act Named One of the Top Startup Community Stories of 2016 is our excellent local media site that covers all things startup in the Triangle and around North Carolina. ExitEvent Editor in Chief Laura Baverman has named the passage into law of the NC PACES Act intrastate crowdfunding bill as one of the top Triangle Startup Community stories of 2016. In her year end summary titled "How the Triangle Startup Community Organized in 2016" Laura writes:

Yes to crowdfunding
Laura Baverman
A years long rallying cry to bring intrastate crowdfunding to North Carolina was successful this year, and a lot of the credit went to a group of investors, lawyers and entrepreneurs who held informational events, wrote thought leadership pieces and educated local legislators on this new funding opportunity for small and startup businesses. When rules go into effect next year, entrepreneurs will have another tool for raising capital to grow their businesses.
Watch Governor Pat McCrory's bill signing event here.

Read the full post on ExitEvent here

Monday, November 21, 2016

Marketing an Investment Crowdfunding Campaign in North Carolina - Webinar Coming Dec 5th

By Roy Morejon

In 2015, my agency ran an investment crowdfunding campaign for Digitzs, a new payment platform.

Digitzs is a groundbreaking, patent-pending platform and mobile app where merchants get paid next day and can choose their Visa or MasterCard fees (from 0 to 3 percent). The system caters to a trillion dollar marketplace: merchants in the middle who don't swipe cards or use shopping carts. Laura Wagner, founder of Digitzs, recognized that navigating the waters of a fast-growing and ever-changing equity crowdfunding space can be difficult, so she sought the expertise of our team.

Roy Morejon
We teamed up far in advance of the launch of Digitzs’ initial equity raise. The goal was twofold- Digitzs needed to garner support from investors, while also gaining name recognition to prove market viability.

Command Partners was able to offer a full range of services to help make the Digitzs campaign a success, including:

  • Developing a pitch deck used for investor and media outreach throughout the campaign
  • Managing Digitzs social media accounts
  • Handling investor outreach across multiple platforms and coordinating meetings between investors and the Digitzs team
  • Designing and developing landing pages for driving investor, media and general traffic
  • Writing scripts and storyboards for videos specific to investors and the media
  • Creating and distributing press releases to targeted media lists, pitching stories to journalists and securing media coverage
  • Designing web pages, branded headers, press inserts and other graphics

While working with us, Digitzs exceeded their investment goal and went on to get over $8M in commitments.

This was our first equity campaign, which was exciting in and of itself, but it was exciting for another reason: Digitzs marked the beginning of a new era of investment crowdfunding for Command Partners.
The Future of Investment Crowdfunding in NC
On May 16, 2016, the SEC allowed Title III of the JOBS Act to go into effect, making investment crowdfunding legal throughout the country by allowing non-accredited investors to invest in startups and small businesses. Shortly thereafter, on July 22, the NC PACES (Providing Access to Capital for Entrepreneurs and Small Business) Act, was signed into law by Governor Pat McCrory. Now that there are federal and state laws regulating investment crowdfunding, my agency can begin to work with new companies raising capital through investment crowdfunding across North Carolina.

Now is an exciting time for these new investment crowdfunding laws to take place. In 2015, funding from investors for North Carolina companies grew 122 percent, to $1.18B. Here in Charlotte, the startup climate keeps getting better. The Kauffman Index of Startup Activity ranked the Charlotte metro area as the 25th best place for startup activity, up from number 28 in 2014. The rate of new entrepreneurs is also up from 2014, at 0.29% compared to 0.26%. This makes sense given the vibrant startup community within Charlotte.

Consider HQ Charlotte, for example, formerly known as Packard Place. HQ Charlotte at Packard Place caters to entrepreneurs and startups, offering co-working spaces, suites and more within their 90,000 sq. ft. space in the heart of uptown. Additionally, Packard Place is home to six world-class accelerator programs that help launch new companies right here in Charlotte.

With so many great opportunities for startups in North Carolina and here in Charlotte, we’re looking forward to a bright future for investment crowdfunding. If you need help marketing an investment crowdfunding campaign, contact us today.

Learn from Industry Leaders...
A live webinar presented by StartEngine's CEO Ron Miller, Command Partners' CEO Roy Morejon and Smith Anderson Partner Benji Jones. This webinar will focus on the legal, marketing and platform components to raising capital through Regulation A+ and Regulation Crowdfunding, or as we like to call them, small and large Online Public Offerings (OPO).
Topics covered will include:  
  • What is an OPO?
  • What today's OPO landscape looks like - how this differs from rewards based "crowdfunding"? 
  • Regulation A+ and Regulation Crowdfunding - what they are and how they are different
  • How Elio Motors raised almost $17M in capital 
  • What needs to be done to market and promote a campaign - how and when can you market your deal?
  • What are the biggest legal and compliance issues to consider? 
...and more! This is a session you don't want to miss!

December 5, 2016  |  1:00 - 2:00 PM EST

Roy Morejon brings over 20 years experience in delivering integrated marketing services for B2B and B2C clients, helping transform companies by increasing online visibility and brand awareness through targeted digital marketing, corporate communications and data-driven search marketing campaigns. He is an expert at digital strategy, analytics, search engine marketing and crowdfunding. As a trusted advisor to dozens of global startups, Roy is a key player in the local Charlotte marketing community, serving as co-founder of the Digital Marketing Association, regional chair for the Business Marketing Association and founder of North Carolina Businesses for Social Responsibility.

Saturday, August 6, 2016

FAQs About the New North Carolina Crowdfunding Law, the NC PACES Act

By Jim Verdonik

I am part of  the NC PACES Act team that provided advice to the State of North Carolina about enacting our new state crowdfunding law called the NC PACES Act. Below is a link to some FAQs I wrote that summarize the resulting North Carolina crowdfunding statute that was enacted in July 2016.
Jim Verdonik

There have also been some proposed changes to SEC Rule 147 which are important to allow more businesses to use state Crowdfunding laws, and these are also summarized in the post.

Click here to see my NC PACES Act FAQs post on my blog.

Jim is an attorney with Ward and Smith PA. You can reach Jim at

Also check out his business related videos at

Jim writes a column about business and law for American Business Journals.

You can purchase his book Crowdfunding Opportunities and Challenges at Amazon.

Friday, July 22, 2016

Governor Signs North Carolina Investment Crowdfunding Bill

By Mark Easley Sr.

The NC PACES Act, “Providing Access to Capital for Entrepreneurs and Small Business”, was signed into law today by Governor Pat McCrory. The bill passed both the NC Senate and NC House by unanimous votes during the short session, and North Carolina now joins over 30 other states that have passed similar laws. The NC PACES Act enables a new way to finance startups and small businesses in our state known as investment crowdfunding.

Kevin Herrington, Mark Easley, Benji Jones, Gov. McCrory, Secretary Skvarla, Senator Barringer
at the signing of the NC PACES Act investment crowdfunding bill.

The creation and passage of the NC PACES Act investment crowdfunding exemption was a team effort by the General Assembly, the NC Secretary of State Securities Division, the NC Commerce Department, the Governor’s office, and our North Carolina startup community and small business supporters. The bill was originally co-authored by former Representative Tom Murry, and the now retired head of the Securities Division David Massey, and was at the time known as the NC JOBS Act. This exemption became a model piece of legislation that was used as the basis for many of the crowdfunding exemptions passed in other states. Many thanks are due to Tom and David for creating this groundbreaking securities law concept which is now helping to finance small businesses and create jobs all over the country. The bill was then brought to the Senate with some enhancements by chief sponsor Senator Tamara Barringer, and became known as the NC PACES Act. We are grateful to Senator Barringer for her hard work and advocacy for the bill.

We would also like to thank all of those in the executive branch who supported and advocated for the bill, including Governor McCrory, Lieutenant Governor Forest, Secretary of State Marshall, Commerce Secretary Skvarla, and their staffs including Mike Arnold, Kevin Harrington, Ashley Jones, John Hardin, and all those who contributed to the effort.

On the legislative side we would like to thank the other chief sponsors of the bill including Senator Gunn and Senator Hise, and Representative Shepard and Representative Hastings and their staffs. In addition, NC Congressman Patrick McHenry, who created the federal JOBS Act, also supported our efforts.

The North Carolina startup and small business communities are supporters of the bill. We would like to thank the following supporters:

Joan Siefert-Rose – CEO of CED and staff
Larry Robbins – Founder and partner at Wyrick Robbins
Joseph Nixon – NC Biotech Center
Bill Warner – Entredot Small Business Accelerator
Jim Roberts - Wilmington startup community leader
Dan Roselli - Charlotte startup community leader
Chris Heivly and Dave Neal – Startup Factory
Jason Widen – HQ Raleigh
Adam Kline – American Underground
John Austin – Groundwork Labs
Lister Delgado – IdeaFund Partners
Wade Fulghum and Lewis Sheets – NC State Entrepreneurship Initiative
Brooks Raiford – NC Technology Association
John Demers – Film and TV production community leader
The NC Chamber

We would also like to thank the local press that provided balanced coverage of the bill and its importance to North Carolina small business over the last several legislative sessions: Rick Smith of WRALTechwire, Laura Baverman of, Lauren Ohnesorge of Triangle Business Journal, and Mark Binker of WRAL.

Last but not least, I want to send very special thanks to our small but dedicated NC PACES Act team that voluntarily worked hard to make this happen, and to give back to the community and state. None of this could have happened without the dedication and hard work of this team:

Benji Jones – Partner at Smith Anderson
Jim Verdonik – Partner at Ward and Smith
Brooks Malone – Partner at Hughes Pittman Gupton CPAs
Steve Reaser – Small businessman
Nick Bhargava – Co-founder of real estate crowdfunding site Groundfloor
Mital M. Patel – Attorney at Wyrick Robbins

When we work as a team, good things happen. Thanks to all for your efforts.

Best regards,
Mark Easley Sr.
NC PACES Act Team leader,
Startup and small business advisor, and crowdfunding advocate

Additional coverage including video of today's signing ceremony:

Signing Event Video on YouTube
Secretary of State Announcement Newsletter

Friday, July 8, 2016

Press Coverage of the Passage of the NC PACES Act

The passage of the NC PACES Act investment crowdfunding exemption bill has been in the news in our local press in the Triangle. The Governor is expected to sign the bill shortly.

WRAL Techwire has a post on NC Secretary of State Praises Crowdfunding Bill, and another one on NC's Crowdfunding Law: What it means, an Attorney's View.

Triangle Business Journal reports NC PACES is Headed to the Governor's Desk.

The News and Observer has a post on NC Crowdfunding Law would provide a new way for companies to raise capital.

Wednesday, June 29, 2016

We Made It! NC PACES Act to Become Law

By Benji Jones

The NC PACES Act: “Providing Access to Capital for Entrepreneurs and Small Business” has been passed by the NC House by a vote of 114 to 0, the NC Senate by a vote of 49 to 0, and is now headed to Governor McCrory for his signature.  After 3.5 years in the making, intrastate investment crowdfunding is finally coming to North Carolina!  
Senator Tamara Barringer
Senator Tamara Barringer, co-sponsor of the bill, states: “The NC PACES Act has passed the North Carolina House and Senate unanimously, paving the way for small businesses to raise much needed capital, providing jobs and opportunities for North Carolinians.”

What does this mean? 

A North Carolina business will be able to raise up to $1 million in any 12-month period (or up to $2 million with audited or reviewed financial statements) from investors who are North Carolina residents.  There are no wealth or income limitations on who can invest; however, investors who are not “accredited” may only invest $5,000 in a particular venture in any 12-month period.

Companies will be permitted to promote the offering publicly, after filing a notice (as well as substantive disclosures) with the Securities Division of the North Carolina Secretary of State.  A fee of $150 will also be charged.  Companies are required to communicate in writing the business plan, financials, use of funds, and risks of the offering. Investors are required to certify in writing at the time of sale that they understand the risks of purchasing unregistered securities and that they may lose their entire investment.

Companies may (but are not required to) use a professional crowdfunding intermediary that meets the requirements established by NC PACES and related rules.  They are required to establish an escrow to hold funds prior to closing.

Benji Jones
Companies that issue securities under NC PACES will be obligated to provide quarterly reports to investors discussing management compensation, operating results, and financial condition, etc.

When can we start?

Companies can start gathering materials, preparing disclosures, and consulting advisors now.  However, you will not be able to formally pursue investors under NC PACES until the Securities Division of the North Carolina Secretary of State’s office adopts specific rules to implement the provisions of the Act.  The Secretary of State’s office has played a critical role in formulating this exemption and, although the law gives it a 12-month period to act, hopefully, it will give implementation of these rules highest priority. 

There are some details to iron out so stay tuned here for more updates.   

The content contained on this blog does not provide, and should not be relied upon as, legal advice. It does not convey an offer to represent you or an attorney-client relationship. All uses of the content contained in this blog, other than for personal use, are prohibited.

Benji Jones is a partner at the Smith Anderson law firm with extensive experience in representing companies in exempt and non-exempt securities offerings.  Feel free to reach out directly to the author with questions or comments.