The Promise of Equity Crowdfunding

Signpost "Crowd Funding"

By Hunter Farrell

Lately at technology networking events in Los Angeles, it seems like every third company I talk to is developing a new type of crowdfunding platform.  The focus for these companies is the holy grail of crowdfunding:  a model that allows the members of the “crowd” to own an equity stake in the venture they are funding — rather than just to make a donation, as in the Kickstarter model.  Growing interest in equity-based crowdfunding stems from the federal JOBS Act, passed in 2012, which contains provisions aimed at allowing businesses to sell equity stakes and take loans through crowdfunding platforms.  I thought the following article gives a good overview of the relevant legislation and the status of the regulatory process (i.e., SEC rulemaking) necessary for full implementation:  http://under30ceo.com/crowdfunding-the-legal-need-to-know/.  I also saw an interesting article about how various state legislators may be taking equity crowdfunding legislation into their own hands:  http://venturebeat.com/2013/06/21/state-crowdfunding-state-banks-will-moot-the-jobs-act/.

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