Crowdfunding …The Simple Truths

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Crowdfunding …The Simple Truths

Basically, it is raising capital for entrepreneurial endeavors from lots of different people.  The money can come in the form of:

  • Donation – Gift of cash, generally used by not-for profit ventures
  • Rewards-based – Dollars are given in exchange for a product or service
  • Debt – Money is loaned and repaid with interest
  • Equity – Money is exchanged for an ownership interest

So where is all of this coming from?  The Jumpstart Our Business Startups (JOBS) Act enacted in April 2012, was an attempt to loosen some of the restrictions on entrepreneurs who needed to raise cash without all of the time and money required for an initial public offering (IPO).

The Securities and Exchange Commission (SEC) unanimously passed Title II crowdfunding rules in September 2013.  This act allowed entrepreneurs, brokers, and venture capital companies to offer a general solicitation to accredited investors for funding – as long as there is a reasonable attempt to verify that investors are accredited and appropriate company information is provided to the investors.

October 23rd, 2013 the SEC released proposed rules for Title III crowdfunding which allows for unaccredited investors to participate in a general online solicitation. This concept also provides guidelines that impose caps on the amount that can be invested during certain timeframes.  The comment period for Title lll ended in February, 2014.  We are now waiting to hear from the SEC what the final rules will look like for this.

In Indiana, Indiegogo and LocalStake are recognized as leaders in this field.  They have the processes in place to help you manage your crowdfunding campaign.

This is certainly not an attempt by me to offer legal advice.  It is simply my attempt to talk about crowdfunding without all of the “Regulations, Sections, Rules and exemptions” that are continuously referenced in any conversation regarding crowdfunding.

Susan Davis

Susan B. Davis is the Regional Director of the Hoosier Heartland ISBDC and manages the program for a twelve county region. Having held that position since 1991, the program provides counseling and assistance for existing and start-up businesses. It also provides training programs for the small business community and a referral resource network consisting of area professionals to assist businesses. The center supports and encourages entrepreneurial activity at the Purdue Research Park and Inventrek. Susan coordinated the Greater Lafayette Venture Club for Greater Lafayette Commerce. Susan also served as the Vice President of Greater Lafayette Progress, Inc., in promoting workforce development and support for existing business and industry. She has owned and operated two businesses. She received her M.S. in Guidance in May 1979, with a minor in Business Administration from Radford University (formerly Radford College) in Virginia. She holds a B.A. in Biology from the State University College at Potsdam in New York. Susan has served on local and State committees and Boards including: HELEN Magazine, SFI Systems Lafayette Community Advisory Council, Physicians Homecare, Inc. Advisory Board, Association of Women Business Owners, Latino Coalition, Indiana Main Street, Downtown Business Association, Greater Lafayette Commerce, United Way of Greater Lafayette and Tippecanoe County, Service Concepts
Susan Davis can be reached at sdavis@isbdc.org.
Posted in: Business Planning, Financial

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