Nov 13 2012
Coming to an Internet Cafe Near You: Crowdfunding
You may have heard about “crowdfunding”, a relatively recent phenomenon currently used by social entrepreneurs and charitable organizations to raise money for various causes. Thanks to the implementation of the JOBS Act in the United States, crowdfunding may soon become a very useful and innovative way for entrepreneurs seeking funding for their for-profit businesses as well. Traditionally, charities and other promoters of social causes reached out through the internet to obtain donations from the general public to support their causes. Sometimes donors get tax deductions for their contributions. This novel use of the internet allowed certain organizations to successfully raise considerable funds.
Earlier this year, there was a potentially revolutionary change to the way entrepreneurs will be able to fund their ventures as a result of the U.S. Congress paving the way for equity crowdfunding. To date, securities regulators in both the U.S. and Canada restrict who can invest in companies, with a mandate to prevent fraud, but crowdfunding would open up investment to a far greater audience. In order for this to occur, regulators from the SEC will have to amend their rules to regulate crowdfunding. Will they do it? I can’t predict at this time, but think it would be of great benefit to venture capitalists and start-up entrepreneurs.
Sources:
Forbes Article: Eight Crowdfunding Sites for Social Entrepreneurs
VentureBeat Article: SEC Uses Jobs Act to Set Up New Roadblocks to Crowdfunding