Posted On: 05/16/2016 7:44:56 AM
Post# of 96892
Starting May 16 , the Securities and Exchange Commission is rolling out a new program that will allow private companies to use crowdfunding to sell securities — up to $1 million over a 12-month period. This was a provision of the 2012 Jumpstart Our Business Startups (or JOBS) Act to assist small companies with capital formation.
Individual investors with less than $100,000 of net worth will be allowed to invest the lesser of $2,000 or 5 percent of their annual income or net worth. Wealthier individuals can invest up to 10 percent. The investment must, however, be through an authorized funding portal. These portals are required to vet the companies and let investors shop among offerings and discuss them online. They can't offer investment advice, make recommendations or solicit purchases.
Their Kickstarter raked it in, but they still turned to VCs for more
Their Kickstarter raked it in, but they still turned to VCs for more
Crowdfunder, one of the first funding portals, didn't waste time in taking advantage of the new rules. It recently announced a VC Index Fund which offers an investment in a portfolio of hundreds of venture-capital backed startups. Crowdfunder chief executive Chance Barrett said his goal was to "allow everyday people to invest online alongside the world's leading venture capitalists, while targeting a fund 10 times more diverse, in the number of investments, than a traditional VC." In other words, the public can become "super VCs."
It remains to be seen if equity crowdfunding achieves the same success as product crowdfunding. The stakes are now higher and the risks of fraud are much greater. But one thing is certain: The balance of power is rapidly shifting — from venture capitalists to entrepreneurs. This is a good thing because it will lead to a greater diversity of startups. And with a bit of luck, there will also be fewer over-priced unicorns and less wasting of investment capital — because the venture capitalists will follow the crowd.
Copyright © 2016, Chicago Tribune
Kickstarter U.S. Securities and Exchange Commission
Individual investors with less than $100,000 of net worth will be allowed to invest the lesser of $2,000 or 5 percent of their annual income or net worth. Wealthier individuals can invest up to 10 percent. The investment must, however, be through an authorized funding portal. These portals are required to vet the companies and let investors shop among offerings and discuss them online. They can't offer investment advice, make recommendations or solicit purchases.
Their Kickstarter raked it in, but they still turned to VCs for more
Their Kickstarter raked it in, but they still turned to VCs for more
Crowdfunder, one of the first funding portals, didn't waste time in taking advantage of the new rules. It recently announced a VC Index Fund which offers an investment in a portfolio of hundreds of venture-capital backed startups. Crowdfunder chief executive Chance Barrett said his goal was to "allow everyday people to invest online alongside the world's leading venture capitalists, while targeting a fund 10 times more diverse, in the number of investments, than a traditional VC." In other words, the public can become "super VCs."
It remains to be seen if equity crowdfunding achieves the same success as product crowdfunding. The stakes are now higher and the risks of fraud are much greater. But one thing is certain: The balance of power is rapidly shifting — from venture capitalists to entrepreneurs. This is a good thing because it will lead to a greater diversity of startups. And with a bit of luck, there will also be fewer over-priced unicorns and less wasting of investment capital — because the venture capitalists will follow the crowd.
Copyright © 2016, Chicago Tribune
Kickstarter U.S. Securities and Exchange Commission
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