Colorado Crowdfunding: Investment-Based Crowdfunding Message Board › Colorado Crowdfunding Discussion Forum › The Advent of Investment-Based Crowdfunding
Today is a momentous day in the development of investment-based crowdfunding.
Today, general solicitation and advertising of private placements via the internet becomes legal in the United States for the very first time. Here's a link to an article about it that appeared in this morning's online edition of Investment News -> http://www.investmentnews.com/article/20130923/FREE/130929968?utm_source=indaily-20130923&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=text#. A copy of the article can also be found in our "Files" section under the "More" tab. It's entitled "Private-placement advertising begins quietly."
The new SEC rule which permits this, Rule 506(c) under Regulation D, permits online solicitation and advertising provided that it is directed to, and the securities to be sold are only sold to, "accredited investors". (NOTE: accredited investors are investors which, under the current definition, (A) have earned more than $200,000 per year for the past two years with the great likelihood that they'll earn that amount in the current year (if single) or, if a couple, have earned more than $300,000 per year for the past two years with the great likelihood that they'll earn that amount or more in the current year OR (B) have more than $1,000,000 in net assets, excluding their primary residence).
The one troublesome fact about this new permitted general solicitation and advertising development is that the issuer of the securities (i.e., the company that's selling its stock) must be reasonably sure that only accredited investors are permitted to purchase its shares. Thus, a new solid and credible verification process (to assure accredited investor status) must be put in place before any company can feel comfortable moving forward.
BTW, investment-based crowdfunding is the sub-area within the larger crowdfunding arena that first drew me into the crowdfunding space. To me at least, it is the area within crowdfunding that I'm most excited about and which I believe, over time, has the greatest potential to impact how startups and early stage companies secure capital, both in the United States and around the world. The reason why this area is of particular interest to me is that the skill sets required to successfully navigate this area are the skill sets that I am most practiced in, given my background both in the law and in company finance over the past several decades.
Thus, in October and after this upcoming Wednesday night's Colorado Crowdfunding Meetup (where we will conclude our study of the Kickstarter crowdfunding platform), we're going to turn our attention to investment-based crowdfunding, starting with the new accredited investor investment-based crowdfunding under Rule 506(c). Joining us in October will be Kieran Mccarthy of Colorado Startup Lawyer, who's scheduled to give a presentation on this new development.
Looking forward to seeing you all this upcoming Wednesday evening (to wrap up Kickstarter) and then again on October 23 for our first foray into the investment-based crowdfunding.
Edited by R.P. Burrasca on Sep 24, 2013 8:03 AM