Equity Crowdfunding is an alternative form of startup capital that lets you raise funds from the public in exchange for unlisted shares (equity) in the business. Unlisted shares aren't listed or bought or sold on an official public stock exchange, but sold online through an equity crowdfunding portal that has been approved by the SEC (FINRA). An alternative to giving investors shares is to offer them a convertible note.
Enacted on April 5, 2012, the Jumpstart Our Business Startups (JOBS) Act created the United States' equity crowdfunding industry. At first, only accredited investors were allowed to invest. By June 2015, another part of the JOBS Act, Title IV (Regulation A+), went into effect.
In 2015, the SEC adopted Regulation Crowdfunding to implement the requirements of Title III which permitted eligible companies to raise capital using Regulation Crowdfunding beginning May 16, 2016.
Investing through equity crowdfunding can give the investor a greater degree of personal satisfaction than investing in a blue-chip or large-cap company. Equity crowdfunding may offer more avenues for such targeted investments than publicly traded companies.
For those of you seeking investors for your startup, consider alternative financing sources like equity crowdfunding. Please review Equity Crowdfunding Simplified, my newest e-book targeting startup founders, that explains what equity crowdfunding is, how it works, legal requirements, filing requirements, classes of investors, investor rules, advertising limitations, pro's and con's, tips for launching a successful equity crowdfunding campaign and much more.
Courtesy of a YouTube video titled, "Equity Crowdfunding Simplified" by Tommy Toy, ImaginativePRO
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