Who Let the Dog Out: On New Crowdfunding Rules and Why It Is Time for Us to Wise Up
If equity crowdfunding had the same alert system color code as Homeland Security, it would have jumped from green to orange on October 23rd, 2013.
For that was the date on which the Securities and Exchange Commission (SEC) finally issued their delayed by 15 months proposal (Title III of the JOBS act) enabling entrepreneurs to solicit funds from the general public over the internet in exchange for equity.
Who can blame you if you haven’t had a chance to study the full 580 page document, but there are a couple of key points to be aware of.
For those who are seeking funds, there are at least two significant impositions: the capital that can be raised from the general public will be limited to $1 million a year; and businesses with a capital round of over $500,000 will have to present annual reports and audits.
But the truly revolutionary changes are expected on the investment side. For the first time in 80 years, the regulation will allow everyone to invest into privately held companies – an opportunity permitted currently only to those with an annual income of $200,000 or a liquid net worth of at least $1 million.