Crowdfunding 101: ‘Reg-D’ vs. ‘Rewards’

Elisse B. Walter Chairman of SECSmall U.S. investors can donate money to a startup on a crowdfunding site such as Kickstarter, but they won’t get a stake in the company in exchange.

Despite changes in federal law, Americans can’t yet legally put money into a startup in an “equity crowdfunding,” an investment method that is open to ”accredited investors” only.

The Jumpstart Our Business Startups Act, enacted and signed into law in April last year, was meant to enable this. It eased accounting and disclosure requirements on smaller companies to help them go public, aiming to spur growth and create jobs.

The idea was that eventually, investors of every kind would be able to find startups or small businesses that they want to back online, hammer out deal terms and complete the transaction, all digitally.

Under the new leadership of Chairman Elisse B. Walter, the Securities and Exchange Commission is overdue in delivering the rules that will make it possible for startups to attain crowdfunding for equity from “ordinary Americans” (to borrow a phrase from President Obama).

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