Want to start crowdfinancing? Creating a well-known, reliable and consistent brand is what makes investors want to give you their hard-earned money.
The Jumpstart Our Business Startups (JOBS) Act was signed into law in March 2012. Title III of the act, which legalized equity crowdfunding, could not launch until the SEC issued final rules for the operation of funding portals.Meanwhile, some states decided to get their own jumpstart going. Relying on the intrastate exemption from SEC registration, at least 24 states—led by Kansas and Georgia—have enacted legislation or promulgated regulations that allow unlimited numbers of non-accredited investors (everyone) to participate in small private securities offerings.
Two kinds of intermediaries may conduct Title III equity crowdfunding offerings and transactions: (1) funding portals that are not registered broker-dealers, and (2) offering platforms that are registered broker-dealers. Both kinds must be registered with the Securities and Exchange Commission (SEC).
Angels often provide the first round of “outside” capital—that is, outside of the founders’ employees, family, and friends (the three Fs). Angel capital may be in the form of straight debt, convertible debt, or equity
Smart entrepreneurs, some Title III crowdfunding skeptics say, do not want hundreds or thousands of unsophisticated angel investors mucking up their capitalization tables, annoying founders with questions, suggestions, job applications, and—gulp—complaints.
Title III equity offerings are predominantly C corporation stock, limited liability company (LLC) membership units, convertible debt, and a relatively new structure called a simple agreement for future equity (SAFE). This article covers the fundamentals of each of these securities, and their advantages and drawbacks for investors.
Crowdfunded equity investments are generally illiquid for two reasons: (a) the one-year holding period and (b) the lack of organized secondary markets for Title III shares.
This brief history includes rewards, donation, debt, and equity crowdfunding platforms in the USA, going all the way back to 2003.
Crowdfunding is a method of collecting many small contributions, by means of an online funding platform, to finance or capitalize a popular enterprise. Crowdfunding gained traction in the United States when Brian Camelio, a Boston musician and computer programmer, launched ArtistShare in 2003.
The business plan is one of the documents that issuers must provide to investors in Title III offerings. Here are the ten critical questions a strong business should answer:
On equity crowdfunding portals and platforms, you will have an opportunity to collaborate on deal selection and due diligence with other investors. Like social networks, the portals/platforms will show profiles of the investors who participate in these discussions, so you can assess their expertise and credibility.