By Eric Corl for thenextweb.com
Crowdfunding is the process of raising capital by offering rewards to ‘backers’ by pre-selling your product or offering equity in exchange.
While the latter is not yet legal in the United States, the JOBS Act, which was signed into law in April 2012, mandates that the SEC makes it legal by January 1st of 2013. There will inevitably be delays as the SEC works to implement a new framework to support this legislation, but it would be wise for entrepreneurs to start comparing equity crowdfunding with their alternative options now.
Let’s take a look at what equity crowdfunding looks like when compared to the traditional capital raising process. What I think you’ll find is that it is a great solution for the majority of entrepreneurs, especially those who have limited access to investment capital due to not being in the right industry, location or networks.
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by Chris Newmarker for finance-commerce.com
The U.S. Securities and Exchange Commission appears to be in no hurry when it comes to creating a framework for a business to assemble a bunch of small donations from numerous donors over the Internet – a practice called “crowdfunding” that is already widely employed by nonprofits and artists.
Jeffrey Robbins, an entrepreneurial law expert at Messerli & Kramer, recently returned to the Twin Cities from the annual Securities Regulation Institute near San Diego.
Generally, SEC staff at the gathering will promote soon-to-be-released rules from the agency, Robbins said. Not so with crowdfunding, even though the 2012 Jumpstart Our Business Startups Act tasks the SEC with setting up mechanisms for businesses to raise up to $1 million annually from the practice.
For now the SEC is “reminding issuers that any offers or sales of securities purporting to rely on the crowdfunding exemption would be unlawful under the federal securities laws.”
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By Kyle Stock for Entrepreneur.com
To make the leap from theory to reality, crowdfunding will require the core elements of entrepreneurial spirit: a tolerance for risk and an urgency to execute on a great idea.
Sadly, both of those qualities are in short supply in Washington, D.C.
While the U.S. government slid under its New Year deadline to avert the fiscal cliff, it blew right past its milestone calling for a comprehensive set of rules to control crowdfunding, where small firms sellequity stakes without having to go through the expensive registration traditionally required by regulators.
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By Tanya Prive for Forbes
In April 2012, President Obama signed the JOBS (Jumpstart Our Business Startups) Act, aiming to revitalize opportunities for entrepreneurs, startups, and small businesses; e.g. America’s main job creators. Briefly, main benefits of the JOBS Act as it is now are as follows.
The JOBS Act will enable entrepreneurs, start-ups, and small businesses to raise funds and gather investors through equity crowdfunding. It will reopen American Capital Markets to Emerging Growth Companies (Companies with total annual gross revenues of less than $1 billion). It also lifts the ban on general solicitation/advertising; allowing entrepreneurs, start-ups, and small businesses to advertise for new investors, and assures that these businesses will have the necessary time and flexibility needed to grow.
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By Natalie Burg For Forbes
If you’re familiar with the concept of crowdfunding, there’s a good chance that it first came across your radar as the way in which your nephew’s band raised money to record a new album, or your coworker’s daughter funded her recent documentary film. In exchange for donations to help get those projects off the ground, those artists likely used Kickstarter or Indiegogo to offer incentives, such as a free download of the finished project or tickets to a live concert.
What does the funding of those projects have to do with your small business or startup idea? Thanks to the recent JOBS Act (short for Jumpstart Our Business Startups), it could have everything to do with the way you raise capital in the future.
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By AMY CORTESE for NY Times
RYAN CALDBECK was stumped. A director at a private equity firm, he was taking part in a panel discussion at a consumer goods conference last summer in New York when an entrepreneur raised his hand with a question: Where could a young company with just a few million dollars in sales go for money to grow?
Mr. Caldbeck and his peers on the panel fumbled for a response. The fact is, most private equity investors and venture capitalists won’t touch a consumer products company until it has surpassed $10 million in sales — anything else is too small to bother with.
The best advice the panel could offer was for the entrepreneur to tap his credit cards.
“The purpose of the panel was to help entrepreneurs raise money, but we had no answers,” Mr. Caldbeck remembers. “That’s when I knew that there is a big issue here.”
By GUEST CONTRIBUTOR for Ecopreneurist.com
DECEMBER 17, 2012
The Securities and Exchange Commission (SEC) chair, Mary Schapiro, recently announced her resignation from the position, but prior to doing so; put the brakes on removing the ban on general solicitation and advertising for issuers of certain offerings. While not directly related to crowdfunding, this provision of the JOBS Act is potentially one of the most important and necessary components to eventually provide the much awaited crowdfunding regulations.
The SEC was charged to form regulations by July 4th 2012 and clearly blew through that deadline. However, for startups that are looking to utilize crowdfunding to raise early stage capital, there are a few considerations that need to be kept in mind in light of these recent developments:
Don’t Give up Hope
Crowdfunding regulations were anticipated much earlier, but as with anything that requires changing of timeless regulations, it was bound to take longer than the optimists had estimated. The spirit of the legislation still holds to support startups and small business, and some of the members of the new guard at the SEC are believed to be strong supporters of crowdfunding. What appeared to be new delays may actually turn out to be a blessing in disguise by accelerating the pathway to implementation of equity crowdfunding.
As an innovative means of raising funds, equity crowdfunding has emerged as an alternative solution for start-up and early stage businesses. Businesses looking for cashflow may not often think beyond the traditional types of funding. Bank loans, overdrafts, invoice financing and all manner of other solutions available from banks are naturally a first point of call for SMEs, and finding the right solution can ensure a business has the finance it needs for anything from day-to-day cashflow, to expansion or growth.
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The piece originally appeared in The Washingtion Post
News of a leadership change at the Securities and Exchange Commission has some experts concerned that entrepreneurs may have to wait even longer for highly anticipated yet already delayed crowdfunding rules.
SEC chairman Mary L. Schapiro announced Monday that she will step down next month, and President Obama plans to elevate Elisse Walter, one of the agency’s Democratic commissioners, to fill the position. Walter can serve through December 2013, by which timethe president must nominate a permanent successor, who must then be approved by the Senate.
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