Crowd Funding An Option For Start-Ups?
Over the years, I’ve known many entrepreneurs whose good ideas, often small
ones, could never get funded. The venture capital system and angel investors areright for some kinds of new businesses, but what about start-up financing for therest of us?
The bill provides a crowd funding exemption from Securities and ExchangeCommission registration of securities offerings, with certain limitations:
A $10,000 limit per investor (or 10 percent of annual income, whichever isless).
A cap on the amount a company can raise of $1 million per offering (and upto $2 million if audited financial statements are provided).
No limit on the number of accredited or unaccredited investors.
Crowd funding is not new, but mostly something we associate with charities and,more recently creative projects. The March of Dimes is a good example of how anearly example of crowd funding helped lead to a vaccine for polio. TheWashington Monument was constructed using donations from individualAmericans.Social media has moved crowd funding to the Internet, where good ideas have abetter chance of meeting people willing to support them. For example, a friend
recently raised $10,000 for a children’s software ap
p on Kickstarter and there aremany more examples on the site and its competitors.Lee Barken, a San Diego CPA whose blog provided inspiration for this post, says
the time is right for crowd sourcing in equity markets, which he defines as “the
process of aggregating small amounts of money from a large number of people in
order to accomplish great things.”