Crowdfunding sites brace for main street investors
Pending U.S. Securities and Exchange Commission rules may make it easier for sites like RocketHub and RockThePost to help fledgling companies sell stocks, but some worry about the cost.
Spurred by pending changes in securities regulations, New York crowd funding sites are gearing up to a make it as easy as possible for ordinary folk to buy a stake in a startup.
These sites are writing new software and working with young companies looking to raise capital by selling shares. They are also figuring out how to interact with people who may never have heard of the Dow Jones industrial average, let alone purchased a share of stock. Some view the task with an almost missionary fervor.
“What I am excited about is allowing anyone to do what accredited investors do,” said Alon Hillel-Tuch, co-founder of RocketHub, a site that crowd funds donations to creative and charitable projects but also plans to help companies sell stock. “[We are] democratizing access to capital.”
But sites are also worried that the U.S. Securities and Exchange Commission’s proposed rules for “equity crowd funding”—585 pages of dense directives—are not only too costly for startups but will put small crowd funding platforms at a major disadvantage compared to larger sites and broker dealers.
“This space will only work if it’s relatively frictionless, if the [rules generate] good actors, good [equity] issues and good portals,” said said Mr. Hillel-Tuch. “We’re concerned they went overboard on friction that could make the space economically unfeasible for smaller portals.”