Use in Investment Crowdfunding

In addition to its use in political campaigns, ''testing the waters'' is also a concept used in investment crowdfunding under U.S. securities law. Platforms like RaiseSpark, Wefunder, and StartEngine allow early-stage companies to gauge investor interest in a potential Regulation CF (Reg CF) or Regulation A+ (Reg A+) offering before officially launching their capital raise. This form of TTW enables founders to: * Share their business concept with potential investors * Collect non-binding indications of interest * Build momentum and refine messaging before filing full securities documentation Platforms like these provide compliant landing pages, branded forms, and marketing funnels that help founders gather pre-launch leads and measure traction. This data is often used to inform campaign strategy, fine-tune investor messaging, or determine whether to proceed with a full raise. While the TTW phase doesn't involve actual investments, once a certain level of interest is reached or filings are made, the issuer must follow SEC rules and register the offering. This mirrors the threshold used in political testing the waters, where early activity eventually triggers official registration and regulatory obligations. In the United States, the phrase testing the waters is used to describe someone who is exploring the feasibility of becoming a candidate for political office. It can also be used more generally as an

idiom An idiom is a phrase or expression that largely or exclusively carries a Literal and figurative language, figurative or non-literal meaning (linguistic), meaning, rather than making any literal sense. Categorized as formulaic speech, formulaic ...

meaning to estimate the success of something by trying it out a little bit. "Testing the waters" activities are to be paid for with candidate-permissible funds. Once an individual begins to campaign or decides to become a candidate, funds that were raised or spent to "test the waters" apply to the $5,000 threshold for qualifying as a candidate. This is because there is a

federal law Federal law is the body of law created by the federal government of a country. A federal government is formed when a country has a central government as well as regional governments, such as subnational states or provinces, each with constituti ...

that once an individual raises or spends $5,000 for a campaign, they are required to register as a federal candidate. Once that threshold is exceeded, the individual must register with the

Federal Election Commission The Federal Election Commission (FEC) is an independent agency of the United States government that enforces U.S. campaign finance laws and oversees U.S. federal elections. Created in 1974 through amendments to the Federal Election Campaign ...

(FEC; for candidates for the

United States House of Representatives The United States House of Representatives is a chamber of the Bicameralism, bicameral United States Congress; it is the lower house, with the U.S. Senate being the upper house. Together, the House and Senate have the authority under Artic ...

) or the

Secretary of the Senate The secretary of the United States Senate is an officer of the United States Senate. The secretary supervises an extensive array of offices and services to expedite the day-to-day operations of that body. The office is somewhat analogous to that o ...

(candidates for the

United States Senate The United States Senate is a chamber of the Bicameralism, bicameral United States Congress; it is the upper house, with the United States House of Representatives, U.S. House of Representatives being the lower house. Together, the Senate and ...

), and begin to file reports (including in the first report all activity that occurred prior to reaching the $5,000 threshold). Once an individual registers as a federal candidate, election restrictions apply, including $2,700 on contributions. Also, once registered as a candidate, individuals cannot coordinate with

political action committee In the United States, a political action committee (PAC) is a tax-exempt 527 organization that pools campaign contributions from members and donates those funds to campaigns for or against candidates, ballot initiatives, or legislation. The l ...

s (PACs) or

super PAC Independent expenditure-only political action committees, better known as super PACs, are a type of political action committee (PAC) in the United States. Unlike traditional PACs, super PACs are legally allowed to fundraise unlimited amounts of m ...

s under campaign finance law.

References

{{Reflist Politics