Get Ready for Equity Crowdfunding

Screen Shot 2013-03-01 at 8.00.42 AMquity crowdfunding under the JOBS Act (Jumpstart Our Business Startups) is not yet legal but reward, donation, and perk-based crowdfunding (think Kickstarter, Indiegogo, RocketHub) have been very active over the past couple of years.

Raising money as a donation to a cause by offering a reward in the form of a special event or early access to a product is both a common and legal form of crowdfunding. The Pebble watch campaign raised over $10 million dollars but that was an anomaly in terms of dollars raised.  The watch was the reward and the funders financed its production.

In contrast, the “reward” under equity crowdfunding will be an ownership interest in the business. Equity shares will be issued instead of a watch or a donation and the person will become a shareholder.  Under equity crowdfunding, there will be limits on the amount that the average person can invest. However, satisfying the income thresholds for accredited investors – the lowest of which is $250,000 – will not be required.

Read more at the Return on Change blog

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