The JOBS Act has led to the boom of crowdfunding platforms across many industries, and it seems like it is also poised to change the face of the real estate financing. As Bloomberg pointed out recently, the implementation of the JOBS Act will open up opportunities for real estate crowdfunding start-ups by saving them time and money on the legal process.
Here’s some background: Before the passage of the JOBS Act, real estate financing was mainly available to accredited investors under Regulation D of the Securities Act of 1933. But the JOBS Act, which eases restrictions on investments, will allow more individuals, including non-accredited investors, to invest up to $2,000 a year or 5 percent of their income or net worth in commercial real estate projects.
Currently, these real estate crowdfunding platforms, like Washington, D.C.-based Fundrise for example, have to go through a lengthy approval process by the SEC and local regulators.
President Barack Obama nominated Mary Jo White, a former federal prosecutor, to chair the Securities and Exchange Commission (SEC) earlier today.
White first rose to national prominence in 1993, when she became the U.S. attorney for the Southern District of New York, a position she held until 2002. While there, she oversaw the prosecution of high-profile individuals like mafia boss John Gotti, terrorist Sheik Omar Abdel Rahman, and even Osama Bin Laden. But she is best known for being a tough leader with a knack for punishing white collar crime. “You don’t want to mess with Mary Jo,” the president said when announcing his nomination.
“When it comes to prosecuting white collar criminals, she’s got an outstanding track record,” Douglas Ellenoff, of Ellenoff Grossman and Schole LLP, told Crowdsourcing.org. “She’s really an interesting and credible pick for the president, as it relates to the administration’s – and now the SEC’s – commitment to enforcing violations of securities laws.”
The Congress is expected to support the nomination, though some may question her knowledge of complicated financial laws. Her trips back and forth through the public-to-private-sector revolving door may also raise a few eyebrows: before and after her stint overseeing New York’s Southern District, White practiced law at Debevoise & Plimpton, defending some of the biggest names on Wall Street.
What does White’s selection to head the SEC mean for crowdfunding and the JOBS Act?
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.
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.
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 Acttasks 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.”
Jason Best – All About Crowd Funding – Interview – Goldstein on Gelt
Jason Best and Sherwood Neiss are the owners of Crowdfund Capital Advisors (CCA). Find out what crowdfunding is and how it could help your business on this great show. “Goldstein on Gelt” is a global investment and financial planning radio show designed to educate and entertain its listeners with financial strategies and investment tips. Investment advisor Douglas Goldstein hosts the weekly show and is the director of Profile Investment Services, Ltd., www.profile-financial.com.
For small companies selling consumer products such as makeup or snack food, a partnership with a big multinational company can mean the difference between obscurity and becoming a household name. How does a small brand get a behemoth’s attention?
CircleUp, a crowdfunding website that connects startup consumer brands with investors, wants to be part of the answer. Today, the company announced a partnership with Procter & Gamble (PG) to get companies on CircleUp in front of P&G executives scouting for new brands. It made a similar deal with General Mills (GIS)last year.
Most companies on CircleUp have $1 million to $10 million in yearly sales and are trying to raise about $1 million from wealthy individual investors, says Chief Executive Ryan Caldbeck, a former private-equity investor. Since opening its doors last April, CircleUp has helped eight companies close funding deals. In addition to connecting young companies with investors, CircleUp wants to expose them to multinationals that could lead to partnerships or acquisitions, he says.
Dealflow Media brings us a free webinar on how crowdfunding will play a role in a revolution in early-stage capital formation. Indiegogo’s own Founder & COO Danae Ringelmann as well as Crowdcube’s managing Director Darren Westlake will be speakers.
Take a moment to register for this exciting webinar Tuesday, March 13th @ 2pm (EDT). This webinar will also be recorded, so still take a look even if you missed the date.
Summary: Credibles, a service offered by Slow Money, offers crowdfunding services to small, sustainable food-related businesses. The site offers a redemption service for prepaid crowd funding, donation tracking, and more.
Best Feature: When donors prepay their favorite business, they’re repaid with edible credits, or “Credibles,” which can be redeemed at the business. These credits, worth $1, serve as an incentive for fans and customers to participate. A customer who invested in a food-related business could, for instance, be paid back for their investment in ice cream. Credibles can be given as gifts and transferred for use at partnering businesses.
What To Consider: The service is currently limited to businesses in New York City and California, so businesses in other areas will have to wait before they’re able to use the service.
Ideal User: Credibles is ideal for professionals and business owners in the food and restaurant industry.
Cost: Credibles charges a small service fee when a supporter pays via the “pre-pay” option, though the site does not specify how much.
At this year’s Consumer Electronics Show (CES) a number of companies showed wares developed using the crowdfunding finance model popularized by Kickstarter, Indiegogo, and a variety of other firms. Some of these devices were recently reviewed in another Forbes article and include:
Two watches: the Pebble and ConnectedDevice’s COOKOO,
A minimalist home phone by UrbanHello,
The Turtle Shell line of loudspeakers by Outdoor Technology,
Robots designed to look like the Android mascot by Reality Robotics,
The Shine activity monitor by Misfit Wearables,
HAPIfork, a food intake monitor,
Two 360-degree lenses for the iPhone, made by Kogeto and GoPano,
The Ouya game console,
The Good Night Lamp, a product that defies categorization.
These companies have raised anywhere from $100,000 to about $10 million using crowdsourcing, largely by taking pre-sale orders for upcoming products