Financing your business growth is a common topic on this blog. We've touched on crowdsourced funding here before. What follows is an excellent, detailed explanation by attorney James Saksa at Fox Rothschild of the new terms of the JOBS Act and how it's going to impact funding under $50 million.
Some advantages of the JOBS Act include permitting up to 2,000 non-employee shareholders without requring "going public" and all its expensive accounting and reporting, the opportunity to add up to $1M in "crowdsourced" funding without triggering SEC regulation of the company, and some protections on how much an investor is allowed to lose if the gamble doesn't work out.
The ability to solicit capital for ideas that are solid, workable ideas but don't have the sturm und drang to rocket to instant success and a 50x return on inventment (what VC would like to see) has the potential to strengthen smaller businesses. Attorney Saksa estimated that most crowdfunding offerings would be for $100,000 or less, despite the $1M cap. This is a huge opportunity for small business owners who need a boost to get a prototype or a marketing channel going.
Attorney Saksa reccomends that investors looking for crowdfunding opportunities consider themselves angel investors, not stock purchasers. The risk of loss is high and liquidity is low, so regardless of what the new guidelines say you are "allowed" to lose, don't invest money you can't live without!
To combat fraud, brokers and portals selling crowdsourcing opportunities will need to be registered with the SEC and submit to regulations because they are selling securities.
Some advantages of the JOBS Act include permitting up to 2,000 non-employee shareholders without requring "going public" and all its expensive accounting and reporting, the opportunity to add up to $1M in "crowdsourced" funding without triggering SEC regulation of the company, and some protections on how much an investor is allowed to lose if the gamble doesn't work out.
The ability to solicit capital for ideas that are solid, workable ideas but don't have the sturm und drang to rocket to instant success and a 50x return on inventment (what VC would like to see) has the potential to strengthen smaller businesses. Attorney Saksa estimated that most crowdfunding offerings would be for $100,000 or less, despite the $1M cap. This is a huge opportunity for small business owners who need a boost to get a prototype or a marketing channel going.
Attorney Saksa reccomends that investors looking for crowdfunding opportunities consider themselves angel investors, not stock purchasers. The risk of loss is high and liquidity is low, so regardless of what the new guidelines say you are "allowed" to lose, don't invest money you can't live without!
To combat fraud, brokers and portals selling crowdsourcing opportunities will need to be registered with the SEC and submit to regulations because they are selling securities.
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