The Year of New JOBS: How a 2015 Law May Make Crowdfunding Easier

by Kaitlin Coons 

Crowdfunding platforms spurred rapid growth in the startup sphere when they were introduced in the last decade.  President Obama recently expressed a desire to encourage commercial growth through creating looser securities rules for startups financed via crowdfunding.  The Securities and Exchange Commission plans to make a decision on the new rules this October.  If you’re thinking about funding your new business through crowdfunding, here are some thoughts you should consider.

Crowdfunding Basics

Investors are enabled to participate in a hands-on role in the formation of new companies simply by browsing the web.  Crowdfunding platforms, like Kickstarter, may be rewards-based providing products or services to its investors based on the amount of the investment.  Alternatively, crowdfunding platforms maybe equity-based where companies offer a portion of the company in exchange for up front financing.

The JOBS Act: Title III

If it becomes effective, the JOBS Act will allow companies to side-step a variety of securities laws by raising capital through a funding portal that meets certain requirements.  The law will involve certain registration components as well as a funding cap.  Nonetheless, this title would make it much easier for unaccredited investors to participate in crowdfunding. 

If you have questions about the legal or financial implications of the JOBS Act on your crowdfunding project, contact one of our attorneys to set up a free consultation.