Episode 89 brings us Albert Periu, co-head of Capital Markets at Funding Circle, which provides secured loans to small businesses that Banks do not typically serve, while offering speed and transparency fostered by digital technology. The show looks at the borrower and the investor (in effect, the lender) perspective.
Thanks to Title III of the JOBS Act, for the first time in history, creators can let fans in and literally own a piece of the successful projects. True equity crowdfunding for all investors, regardless of income or net worth, was authorized by Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012.
Observations about the Title III (Regulation CF) crowdfunding market, 10 weeks into the launch of this new asset class:
You should like your entrepreneurs to be a bit more seasoned, at least in their chosen space. The statistics don’t lie: most startups fail. Indeed, most VC-backed businesses also fail. Today’s startup scene has jumped the shark.
If you want to buy (or sell) a business, you need to know what the business is worth. Once that is calculated, you need to find out how much the owner (or prospective buyer) thinks it is worth. If you can get those two numbers to line up — itself a discovery process, and an uncertain one at that — you’re going to need a way to finance the actual transaction…
Many of the companies that sell securities via Title III crowdfunding portals, at least in the first year or two, will be early-stage startups with little or no history of profit or even positive cash flow.
“In many cases, issuers can avoid thorny disagreements over valuation by offering hybrid securities known as convertible notes to crowdfunding investors”…
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 of the Jumpstart Our Business Startups (JOBS) Act of 2012 allows all investors, regardless of income or net worth, to invest in startups and growing private companies via funding portals that are registered with the Securities and Exchange Commission.
Title IV of the Jumpstart Our Business Startups (JOBS) Act of 2012 expands the moribund Regulation A exemption by increasing the raise limit from $5 to $50 million. Non-accredited investors could participate in Reg A offerings before 2012, and they still can under Title IV but with certain limits.
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.