Reaping the Rewards of Crowdfunding

April 10, 2013 – In The News

Crowdfunding allows small and start-up businesses to raise small amounts of capital from a large number of investors, most often through websites such as Kickstarter and Indiegogo. To date, raising capital online has presented serious regulatory and compliance challenges for businesses, but the Jumpstart Our Business Startups (JOBS) Act passed last year amends the Securities and Exchange Act of 1933 by creating a new exemption for crowdfunding. When the SEC finishes its rulemaking process companies will be able to raise up to $1 million in a crowdfunded offering conducted through an SEC-registered funding portal or broker-dealer.

Kickstarter, Indiegogo, GoFundMe, and other crowdfunding sites have been around for years, helping companies and individuals raise millions of dollars to produce movies, build prototypes, pay medical bills or tuition, and fund a host of various other activities, says Michael Harrington.That type of crowdfunding is different from the equity crowdfunding recently enabled by the JOBS Act. But even the “old” type of crowdfunding has proven valuable to many businesses.