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On Wednesday (5/28/2025), the SEC published three new reports that provide the public with information on capital formation, beneficial ownership of qualifying private funds, Reg A, and Crowdfunding. “Today’s reports provide key information on the capital markets,” said Robert Fisher, Acting Chief Economist and Director of the SEC’s Division of Economic and Risk Analysis. “Understanding how capital is being raised and the interaction of ownership concentration with fund outcomes for private funds informs not only the Commission but the public about essential parts of our markets.”
The reports highlights a familiar story: the ones making money in these spaces aren’t always the founders—they’re often the platforms, marketers, and middlemen selling pickaxes and jeans to modern-day capital-raising miners. Reg CF (Crowdfunding) and Reg A campaigns are surging in volume—but not necessarily in outcomes. The capital raised is often modest, the campaigns long and exhausting, and many founders never make it past the finish line.
And listen, I’m all for broadening access to private markets. That’s part of the American story, but most entrepreneurs don’t have the time or opportunities to properly calculate their capital raising options. With broader access comes a new class of grifters: the ones who sell retail founders on the dream of “easy capital” while quietly draining their time, budgets, and optionality.
What these reports really show—between the data and the footnotes—is that the promise of democratized capital often comes with hidden costs that fall directly on the shoulders of inexperienced or under-resourced entrepreneurs.
Reg CF: A Hard Way to Raise a Small Check
Crowdfunding is a great idea in theory, but in practice, it tends to attract the smallest, weakest companies. The median Reg CF issuer had less than $100K in assets and was pre-profit. On top of that, the considerable marketing and success fees can quickly add up to 6 figures. Which might sound okay in theory—until you realize a significant chunk of that gets eaten up by legal fees, marketing spends, platform fees, and ongoing compliance.
It is slog for most founders, and it can be a very expensive education.
Reg A: Looks More Sophisticated, Still Painful
Reg A lets you raise more, but not without headaches. Institutional and sophisticated investors mostly ignore Reg A deals—especially if the business is pre-profit or lacks enterprise fundamentals. So who ends up filling those rounds? Retail investors. That means more marketing, more investor hand-holding, and cap tables that look like junkyard spreadsheets.
And even if you raise the money, you’ve created a fragmented investor base and often spent the better part of a year managing a process that doesn’t make your business stronger.
The Hard Truth Most Don’t Want to Say Out Loud
Founders often turn to these routes because institutional/sophisticated investors have passed or never showed up in the first place. If you're defaulting to these types of structures—CF, Reg A, or cobbling together non-accredited capital—it might be a sign of something more fundamental and you may need to ask yourself why?
- Are you getting bad advice?
- Is your business ready for prime time?
- Or maybe you simply don’t understand how capital markets work (yet)?
And the reality is: that lack of understanding isn’t just theoretical. It can cost you years of wasted time, hundreds of thousands dollars in dead-end expenses, and, worst of all, missed opportunities to actually grow your business.
There are many people who make Reg A and CF work, no doubt and hats off to them. Some founders have the right brand, the right product, and a community to support these strategies. They do execute well in Reg A and CF—but they’re the exception, not the rule. And they usually know exactly why they’re doing it and what they’re giving up in the process.
Further Proof? Even in Hedge Funds, the Pattern Repeats
The SEC’s hedge fund report confirms a parallel reality in the more traditional capital markets. Small, independent funds with limited infrastructure and concentrated management show significantly higher volatility, redemption risk, and operational fragility.
Translation: the smaller the deal team, the shakier the fund, and the more work it takes to just stay alive.
So What’s My Takeaway?
Capital markets reward structure, clarity, traction, and discipline. That’s true whether you’re a founder raising $2M or a fund manager raising $200M. You can’t shortcut the fundamentals—and if you try, you may find yourself working harder for less capital, worse terms, wasted money, and more headaches. Access is amazing, but access without understanding is just a more expensive way to fail. If you aren’t attracting serious investors, there are likely underlying issues. Life is all about risk and reward, so I hope this sheds a little light here for those of you navigating these questions!
Our firm Hybrid Capital is a boutique investment banking firm focused on capital and business strategy. We work closely with Private Equity, Family Offices, and investment firms to help capitalize or exit promising businesses. If you'd like to discuss capital raising, exit planning, or M&A, please send me an email: logan@hybridcapital.net
Securities are offered through Finalis Securities LLC Member FINRA / SIPC. Hybrid Capital is not a registered broker-dealer, and Finalis Securities LLC and Hybrid Capital are separate, unaffiliated entities.
