Restricted by outdated rules and laws, the startup world presented an incredibly difficult barrier of entry when it came time to raise capital. However, everything is about to change thanks to equity crowdfunding.
A few short years ago, crowdfunding sites like Kickstarter and Indiegogo became a new way for entrepreneurs to fund their ideas. Ignoring the traditional avenues for raising capital and accredited investors, crowdfunding allowed a business to accept money from thousands of individuals on the internet. Only issue, those contributing the dollars to help fund the ideas were left with nothing more than gimmicky prizes like hats and t-shirts.
Up until recently, startups and existing companies could not offer equity in return for capital through crowdfunding, it would have been illegal. A capital-equity transaction must adhere to the SEC’s regulatory framework. Now enters equity crowdfunding. On October 30, 2015, it was announced that the Securities and Exchange Commission would adopt rules permitting companies to offer and sell securities through crowdfunding.
“There is a great deal of enthusiasm in the marketplace for crowdfunding, and I believe these rules and proposed amendments provide smaller companies with innovative ways to raise capital and give investors the protections they need,” said SEC Chair Mary Jo White. “With these rules, the Commission has completed all of the major rule making mandated under the JOBS Act.”
The Jumpstart Our Business Startups (JOBS) Act was signed into law by President Barack Obama on April 5, 2012 requiring the SEC to write rules and issues studies on capital formation, disclosure and registration requirements.
Is equity crowdfunding a viable venture? Judging from the success of crowdfunding alone, it would be safe to say that as an entrepreneur in need of capital, you should be very excited for what is to come. And since 2011, the UK has proved equity crowdfunding to be a growing viable venture.
More than 300 businesses have raised in excess of £140m ($203,000,000+) through the largest platforms. The sector has been growing exponentially every year since it was created in 2011. – Forbes
We have witnessed significant expansion of crowdfunding within recent years. With this expansion, the need for relevant regulations that allow equity transactions was bound to happen sooner than later.
Cost-effective access to capital for companies of all sizes plays a critical role in our national economy, and companies seeking access to capital should not be hindered by unnecessary or overly burdensome regulations. We look forward to hearing the public’s views as we write rules that both facilitate capital formation and promote investor protection. – SEC
If you’re interested in learning more about equity crowdfunding, take a look at some of these websites who have offers already being funded:
www.equitynet.com | www.microventures.com | www.crowdfunder.com | www.angel.co | www.earlyshares.com | www.crowdcube.com | www.fundable.com | www.seedrs.com | www.circleup.com | www.crowdfunder.com | www.wefunder.com | www.onevest.com | www.startupvalley.com | www.startengine.com