The recent passage of Title II of the JOBS Act removed the 80-year ban on general solicitation for private companies and opened up a number of powerful, new fundraising channels for startups. However, despite these historic changes, very few entrepreneurs truly understand the new options for raising capital online. The decision of raising capital publicly versus privately ultimately depends on your specific company's situation, but the outline below should help you choose the right path.

Advantages of Public Fundraising:

1. Invite your customers to become shareholders

Arguably the most disruptive aspect of general solicitation is the ability for founders to invite their customers to become shareholders in their business. Until recently, broadly inviting customers to invest in your company was illegal. Customers are often the most logical potential investors for your company since they already find your product or service valuable. These loyal customers can quickly also become your biggest brand ambassadors once they feel that they have a vested interest in your success.
Example: Public fundraising empowered Patch of Land to raise capital from its customer base online.

2. Promote your round through social media and online advertising

Public fundraising also allows startups to leverage social media and online advertising to promote a capital raise. Companies which have built a following on Facebook, Twitter or Linkedin can leverage these communities to raise capital. In addition to social media, startups can also use online advertising to target potential investors. For example, a healthcare startup could use advertising on LinkedIn to specifically target doctors as potential investors.
Example: Public fundraising allowed Scoot Networks to have Fred Wilson tweet about its campaign to his 300,000 followers.

3. Announce your fundraise in the press

Private fundraises can only be shared with those who you have a pre-existing relationship with. The problem is that most likely there are hundreds of individuals, funds and family offices who have significant expertise and connections in your space, but simply have not yet heard about your company and/or have no clue you are fundraising. By publicly announcing in the media that your company is raising capital, you might attract investors from unexpected places.
Example: Public fundraising enabled Virtuix to broadly promote its $3 million seed round and attract significant investor attention.

Disadvantages of Public Fundraising:

1. Accreditation of investors

Any company that raises capital publicly must verify the accreditation of each of the investors in their round. More specifically, each investor must provide evidence that they meet the income or net worth requirements. By contrast, with private fundraises, investors can simply self-certify that they are an accredited investor.
If you are using a leading equity crowdfunding platform to conduct a public fundraise, the platform will most likely streamline the accreditation process on your behalf. Nonetheless, this verification step can add additional friction to the closing process, particularly with offline investors who also need to be verified as accredited.

2. Confidential information

Many entrepreneurs fear revealing too much of their private company information to the public. Although it depends on the situation, these concerns typically tend to be overblown. The best equity crowdfunding platforms use permission-based data rooms which let you control who sees what information during your campaign. If this still doesn't assuage your privacy concerns then public fundraising probably isn't the right choice for you.

3. Fear of adverse signaling

This is likely the most common unspoken reason why most companies shy away from public fundraising. Many early-stage fundraising rounds occur at a time when a company is strapped for cash and nervous about market perceptions. Founders sometimes worry that announcing a fundraise will make them appear desperate or that a failed fundraising campaign might dilute their brand. These concerns are typically overblown and can be mitigated with careful messaging by the company.
Overall, the public versus private fundraising decision ultimately depends on your round dynamics and the nature of a your business. Regardless, founders would be well advised to take the time to fully understand both alternatives prior to launching their next fundraise.