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Glossary

Indication of interest

Definition of an indication of interest in an exempt securities offering, what a response form may collect, why it is non-binding, and how raises measure it.

An indication of interest is a prospective investor's non-binding statement that they might invest in a securities offering that is not yet open for sales. It is what a testing the waters campaign collects. No money changes hands, and neither the person nor the company is committed to anything.

Under which rules

Three SEC rules let a company collect indications of interest from the public before it may sell:

Each allows a written solicitation to include a way to indicate interest, and each lists what the response form may require: a name, address, telephone number, and email address. Each also requires a statement that an indication of interest involves no obligation or commitment of any kind. Payment information, deposits, and card holds do not belong in the form, because no money may be solicited or accepted.

Indication versus reservation

Funding platforms often call an indication of interest a reservation, and some ask for an amount the person might invest. A reservation made before the offering opens is still only an indication: when the offering launches, the person receives the offering documents and makes a new decision to invest. The amount is an estimate, not a commitment, and a company should not present its reservation total as capital raised.

Why it matters to marketing

An indication of interest is the earliest measurable conversion in a raise. The count of indications, the average indicated amount, and the cost per indication are the first honest read on whether the story is landing, well before cost-per-investor can be measured. The share of indications that later become completed investments varies widely from raise to raise, so a list is a forecast input, not a result. See lead-funnel and investor-acquisition.

Further reading

This page is general information about securities rules, not legal advice. What a particular response form may ask and say is a question for the company's securities counsel and its intermediary.

Topics:glossarycrowdfundingregulationmeasurement

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