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Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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Accredited Investors Have First Access to Equity Crowdfunding

Equity crowdfunding is the latest potentially lucrative venture that is open to accredited investors but, for now, off limits to retail investors.

| BY Donald Liebenson

Equity crowdfunding is the latest potentially lucrative venture that is open to accredited investors but, for now, off limits to retail investors.

In what Forbes called “an historic day for entrepreneurship in the U.S.,” Title II of the JOBS Act went into effect in late September. Prior to passage, it was against the law for private startups to publicly advertise the fact that they were raising investment. “For the first time in nearly 80 years, “ Forbes noted, “private startups and small businesses can raise investment funding publicly-using sites like Facebook or Twitter to help spread the word, and taking in investment online via equity crowdfunding sites…. Early stage investing in the U.S. has stepped squarely into the digital age and has become more public, kicking off one of the largest new capital markets in our time for online investing via equity crowdfunding.”

Presently, only accredited investors can invest in generally solicited companies. Accredited investors have a net worth of $1 million, excluding the value of their primary residence, according to rules established by the U.S. Securities and Exchange Commission. Alternatively, accredited investors have had an income of more than $200,000 in the past two most recent years. Spouses with a joint income of more than $300,000 over the same period also qualify. The SEC deems investors at these wealth levels as qualified to understand - and also withstand - the risks of investing in private offerings.

For the general public, crowdfunding comes from individuals donating money to a cause or creative project without expectation of a financial return. Not that there aren’t perks. Those who donated to the “Veronica Mars” movie, for example, depending on the level of their contribution, could expect to receive gifts ranging from autographed pictures to answering machine phone messages recorded by cast members or having a character in the movie named for them.

Equity funding allows accredited investors to buy shares in entrepreneurial ventures. Under the new law, a company may sell up to $1 million in securities in any 12-month period to an unlimited number of investors via a crowdfunding platform approved by the SEC,

Among the information startups are required to make available to the SEC, to the platform through which they raise funds, and to potential accredited investors are the name, legal status and addresses of the business, along with the names of directors, officers and key shareholder, a business plan and description of the business, tax returns and other financial information, a description of the purpose and intended use of the funds, and annual reports and financial statements.

Startups that violate any rules and regulations will be prohibited from equity fundraising for a year.

About the Author

Donald Liebenson

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.