Hartford Business Journal

HARTFORDBUSINESS.COM | OCTOBER 30, 2023 11 Meet the team that can help yours. Great banking teams support great business teams. At Washington Trust, we've helped Connecticut businesses for more than 220 years. Let our team help yours. For more information, call us at 860.200.2440 or visit washtrust.com/ctbusiness. Jeremy Canestri Vice President, Cash Management Edward O. Handy III Chairman and Chief Executive Officer Julia Anne Slom Executive Vice President & Chief Commercial Real Estate Lending Officer Anthony Botelho Executive Vice President & Chief Commercial Lending Officer Kevin Hanrahan Vice President, Commercial Real Estate Thomas D. Pizzo Vice President & Market Leader, Commercial Banking Brett W. Eagleson Vice President, Commercial Real Estate Lee Fernandez Vice President, Commercial Real Estate Member FDIC. financial statements. In its more recent capital-raising rounds, LiquidPiston used Regula- tion A+ crowdfunding, which allows companies to raise up to $75 million in a 12-month period from accredited and non-accredited investors. The higher funding limit comes with increased disclosure require- ments — Reg A+ companies must file an offering statement with the SEC, which includes audited financial statements. LiquidPiston in 2021 conducted its first Reg A+ campaign, raising $16 million; its second funding round, which began in late 2022, raised more than $23 million from over 7,000 investors, Shkolnik said. Milone said campaigns like Liquid- Piston's have raised the bar for this new way of raising capital. VC vs. CF Like any financing option, there are pros and cons to crowdfunding for businesses and investors. The failure rate of any startup is high, experts said, so investors face the inherent risk of losing their bet. Using venture capital funding has its benefits, Shkolnik said, as it's typi- cally backed by professional inves- tors and advisors who can help grow or scale an early-stage company. But venture investors often end up with board seats and an increasing ownership share. "Within a few years, they usually end up controlling both the board and the shares of the company. And that can be very challenging for an entrepreneur," Shkolnik said. With crowdfunding, a company can have thousands of supporters and a base of loyal customers who want to be part of the business, while the founders maintain control. Milone said crowdfunding makes it impossible for all investors to have a seat at the table. "Say 100,000 people gave you $100. If you had every one of those individuals at your table, as a holder of a share, it would become extremely hard to manage as a company that's growing," Milone said. Meanwhile, crowdfunded compa- nies aren't doing initial public offer- ings, nor are they involving dozens of attorneys, so the cost of raising capital is much lower with just a one-time filing fee with the SEC, Venkat said. Crowdfunding also opens the door to younger generations, which may not have accumulated enough wealth to become accredited investors, Milone added. Younger crowdfunders are more likely to want to create a buzz around the technology or company they invest in, through social media or in other ways, Vankat said. They also may become a beta tester of the technology. "So, the companies get two bene- fits: free testers of the product, and free marketing publicity," Vankat said. Paying less interest than a tradi- tional loan is also a perk, but the success rate for startups remains low, experts said. So far, LiquidPiston — which recorded $6.7 million in revenue last year and $5.75 million during the first half of 2023 — has defied those odds. The company recently announced a three-year, $35 million contract to design and develop a 90-plus horse- power heavy-fueled rotary engine for the U.S. Air Force. The lightweight and portable hybrid power system will potentially serve as a "power pack" for a variety of appli- cations, the company said, including unmanned aerial systems propulsion, mobile operating bases and vehicle auxiliary power units. The company, which has grown to 43 employees and recently expanded its Bloomfield headquarters, also has 82 patents issued or pending, Shkolnik said. "This is a technology that is ripe for disruption," he said. LiquidPiston was recently awarded a three-year, $35 million contract to develop a 90-plus horsepower heavy-fueled rotary engine for the U.S. Air Force. PHOTO | CONTRIBUTED

• Cover