So what crowdfunding?
According to Wikipedia — the crowd-powered reference site:
“…the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet, to support efforts initiated by other people or organizations.”
Now while charities and the music industry have long championed the use crowdfunding — companies like Kickstarter have brought more public attention to the movement. So while crowdfunding allows for publicly-funded projects, services, startups and disaster relief — there is no real monetary benefit for the “investor.”
You see, investment-based crowdfunding is not possible in the United States. More specifically, in the US, a company can not raise funding online by selling equity ownership.
But thanks to the efforts of Congress — specifically Congressman Patrick McHenry (R-NC), the H.R. 2930: Entrepreneur Access To Capital Act allows companies to sell equity ownership. H.R. 2930 will allow companies to raise up to $1 million in funding. Additionally, investors of business crowdfunding will be allowed a maximum investment of 10% of their annual income.
Obviously, all crowdfunding investments will be regulated by the SEC. So it is fair to say that investors will have to use a SEC approved crowdfunding platform. Carlo D’Itri, cofounder & General Counsel of Crowdfunder.com says this:
“The Senate bill lets crowdfunding platforms operate without registering as a broker-dealer as long as they remain subject to SEC oversight, join a self-regulatory agency, and comply with “such other requirements under this title as the Commission determines appropriate…” This last part leaves SEC regulation of platforms pretty open-ended, so the rulemaking process will be crucial to ensure crowdfunding platforms can effectively help small businesses raise capital.”
So the bill is now on President Obama’s desk — I am hoping that the Predident signs the bill into law and we can work out the details along the way. I mean the ultimate goal is for great ideas to get funded with the least amount of fraud to the investor.
What are your thoughts on the matter?