Crowdfunding has been popular among artists and musicians for years, first with Kickstarter, then Indigogo. Startups began to see what these folks were doing, and figured they could fund their ventures the same way. And now Congress has given its blessing.
Bloomberg Businessweek reported on October 23 that Congress voted to allow startups to fund their ventures through crowdsourcing, by selling stock to small investors.
Once the law was passed, the SEC issued a proposal on the amount people could invest and what kinds of information companies needed to divulge to investors. The proposal limits people with an annual income and net worth of less than $100,000 to invest no more than 5% of their yearly income. People with higher incomes would be allowed to invest up to 10%. Companies would need to provide prospective investors their business plan, financial condition, and a list of officers, directors, and those who own at least 20% of the company. Final rules are expected to be approved next year.
If you’re considering crowdfunding, there are many different options. Inc. magazine created a flowchart visualization that lists the options and helps people decide which best meets their needs.
If you have questions about if crowdfunding might be a good choice for you, I’d be happy to talk with you. Give me a call at864-836-3136.