Several equity crowdfunding portals are poised to enable non-accredited equity crowdfunding investment for startup companies

May 16, 2016 marks the beginning of a new era in equity financing of startups. Effective that date, the SEC’s JOBS Act Title III, also known as Regulation Crowdfunding, becomes effective, establishing a new alternative for raising equity capital: equity crowdfunding for non-accredited investors.

Equity crowdfunding allows startups to quickly raise capital, while founders retain control of their companies.

There are several equity crowdfunding startups such as Crowdfunder, Wefunder, and The Angel Company that will thrive under this regulation to help both investors and issuers take advantage of the regulations.

In 2015 CNBC stated that $662 million had been raised by accredited investors in the first quarter alone. That amount is quickly growing. Regulation Crowdfunding will increase this market drastically by allowing non-accredited investors to join.

crowdfunding

A number of countries, including New Zealand, Italy, Sweden and the United Kingdom, have recently legalized equity crowdfunding, and crowdfunding is replacing a substantial amount of the traditional angel and venture capital funding in the UK.  Some expect that the new SEC regulations will have a similar effect in the US.

Non-accredited investors will be attracted to their new ability to directly invest in startups, receiving equity instead of trivial, one-time rewards. Non-accredited investors will become more excited about the companies in which they can become genuine stakeholders, and can take part in the startup funding market with a potential for spectacular returns.

There are many companies jockeying for lead position to take advantage in the new SEC regulations, some of these companies include:

  • EquityNet
  • Crowdfunder
  • MicroVentures
  • The Angel Company’s
  • Funded
  • StartupValley
  • Wefunder
  • EarlyShares

equity crowdfunding

Highlights from the SEC Regulation Crowdfunding Fact Sheet
  • Permit a company to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period;
  • Permit individual investors, over a 12-month period, to invest in the aggregate across all crowdfunding offerings up to:
    • If either their annual income or net worth is less than $100,000, than the greater of:
      • $2,000 or
      • 5 percent of the lesser of their annual income or net worth.
    • If both their annual income and net worth are equal to or more than $100,000, 10 percent of the lesser of their annual income or net worth; and
  • During the 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.