Activation requires Transparency

Delivered June 19, 2026 @ 5:00pm ET

Weather in Bloomington, IN - Sunny, 27⁰ C / 81⁰ F.

Happy Juneteenth. Juneteenth celebrates a huge step toward realizing the ideals upon which the nation was founded → “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

Table of Contents

• Product Announcement Next Week

• RegCF Activation Requires Transparency

My name is Gerry Hays, Founder & CEO of Doriot® (pronounced “Doe-ree-oh”), named after French-born American U.S. General Georges Doriot, the father of Venture Capital. I’m also an author (First Time Founders’s Equity Bible), inventor (U.S. patents for ads on t-shirts, coat checking, and VentureStaking - pending), and 21-year professor of venture capital and entrepreneurial finance at Indiana University.

Democratize Venture is my platform to explore the venture markets and share the insights, strategies, and frameworks I bring into the classroom. It’s also a way for me to share principles of prosperity — because at the end of the day, venture is a pathway to prosperity.

Product Announcement Next Week

I’m excited to share the next iteration of one of our education products next week.

I know, I know, the last thing people want is more education. But it is my firm belief that the economy is shifting away from labor and increasingly rewarding owners and capital allocators. This is a far more complicated terrain, but the upside of ownership as a wealth creation mechanism cannot be denied. If not for yourself, then for your children and grandchildren, understanding how capital works is becoming a necessity rather than a luxury.

RegCF Activation Requires Transparency

Last week, I talked about Regulation Crowdfunding needing an “Activation Layer” to bridge interested investors into actual investing. Education, confidence, tools, and guidance are all necessary if we want more people participating in venture investing. But activation alone is not enough. The second ingredient is trust. And trust requires transparency.

Let me provide a recent example.

I’m not going to name the company because that is not the point. I receive their newsletter and recently noticed they were raising capital through a RegCF offering. Naturally, I clicked through to evaluate the opportunity.

The presentation was polished. There were growth claims, market opportunity claims, customer metrics, attractive graphics, and all of the things one would expect from a modern startup fundraising campaign. The company was offering shares at $7.35 per share and investors could receive additional “bonus shares” based on how much they invested. Invest more money and receive more shares.

As I reviewed the offering, I found myself focusing on what was being emphasized: the share price and the bonus shares. What was missing was the information I actually cared about—ownership.

This is one of the biggest misconceptions in venture investing. A share price is not a valuation. A valuation is not ownership. And ownership is ultimately what investors are buying.

If I purchase a share for $7.35, I still need to understand what that share represents. Is it 0.0001% of the company? Is it 0.01% of the company? Does it vote? Does it sit behind preferred stock? Is it subject to future dilution? Does it participate equally in an acquisition? Without understanding ownership, the share price itself is almost meaningless.

So I downloaded the Form C.

My first objective was simple: determine how many shares were outstanding and calculate what percentage of the company investors were actually buying. Surprisingly, I could not easily answer that question. I attempted to reconstruct the capitalization structure using the disclosed share price, offering amount, and share counts that had been provided. The math appeared to suggest that the founders were selling nearly ninety percent of the company.

That immediately struck me as absurd.

No rational founder is selling ninety percent of their company in a Regulation Crowdfunding round. Something was clearly missing from the picture.

So I kept reading.

What I eventually discovered was that investors were purchasing Class B shares that would be held through a Special Purpose Vehicle (SPV). The filing further disclosed that the Class B shares carried no voting rights. In other words, investors were purchasing a passive economic interest.

At that point, my questions multiplied.

If investors are purchasing non-voting Class B shares, where are the voting rights? Are there Class A shares? If so, how many exist and who owns them? Are they held by founders? Are there preferred shares outstanding? Are there SAFEs, convertible notes, warrants, or other securities that could dilute investors in the future? What claims on future cash flows exist ahead of the Class B shareholders? What does the fully diluted capitalization table actually look like?

These are not obscure questions. These are the first questions any venture capitalist asks before making an investment.

In fact, I would argue that the quality of the business opportunity is secondary to understanding the capitalization structure. I don't care how exciting the product is. I don't care how large the market is. I don't care how compelling the growth story sounds. If I cannot understand the capitalization table, I cannot value the opportunity.

The deal may be economically attractive. The deal may be economically terrible. Without understanding ownership, I have no way of knowing.

No venture capitalist in the world invests without confirming every claim to equity on the capitalization table. No sophisticated angel investor writes a check without understanding ownership, governance, control rights, dilution risk, and liquidation preferences. Yet retail investors are routinely expected to make decisions based on share prices, bonus shares, marketing materials, and simplified narratives about future growth.

That is not democratization. That is oversimplification.

For RegCF founders - and to some degree the platforms themselves - transparency creates trust and capital follows trust. This is not an SEC issue. This is a business issue. The objective should not be merely satisfying disclosure requirements. The objective should be helping investors understand what they are buying.

Every offering should clearly disclose the capitalization structure, ownership percentages, voting rights, liquidation preferences, option pools, SAFEs, convertible securities, and fully diluted ownership. Not because regulators require it, but because investors deserve it.

I continue to view Regulation Crowdfunding as Internet 1.0. The early internet created access, but it lacked sophistication. Eventually better infrastructure emerged, better user experiences emerged, and better trust mechanisms emerged. The same thing will happen here.

The current model of raising money from the general public while reducing the conversation to share prices and bonus shares is ultimately an obsolete model. In its worst form, it creates an environment where marketing receives more attention than ownership and where investors are encouraged to focus on opportunity before understanding economics.

That is backwards.

The future of Regulation Crowdfunding will not be built solely on activation. It will be built on activation, trust, and, ultimately, liquidity (but that’s for a different post). The next generation of venture investing infrastructure will allow investors to understand exactly what they are buying, who owns what, how control is structured, where they sit in the capital stack, and what outcomes are required for them to generate returns.

When trust increases, participation increases. When participation increases, capital formation improves. And when capital formation improves, Regulation Crowdfunding may finally begin to achieve the vision that inspired it in the first place.

Retail investors are not stupid. They deserve real financials. They deserve real capitalization tables. They deserve to know who owns what. And they deserve to understand exactly what they are buying before they invest.

Have a great weekend -gerry