The 2012 Jumpstart Our Business Startups (JOBS) Act introduced a promising growth opportunity for private business – equity crowdfunding. Equity crowdfunding allows companies to solicit small amounts of money from the general public to achieve specific goals. In theory, this would allow private companies a wider pool of investors with fewer restrictions. However, the SEC has been entangled in fleshing out the final regulations, and its proposal recently received significant negative feedback during the 90-day comment period. Many organizations are now waiting for the SEC to issue its final crowdfunding regulations before soliciting investors from the general public.
The Weaver newsletter article Equity Crowdfunding Could Affect Private Business Values further explains why there has not yet been an explosion of equity crowdfunding, discussing:
- The basics of crowdfunding
- Private equity crowdfunding: a new breed of online solicitation
- A rough start for equity crowdfunding, including extensive deliberations and negative feedback
- Possible positive and negative effects on the value of a business
- Other business value implications
- The future hinging on the SEC’s final regulations
Private equity crowdfunding is a natural by-product of the internet age, but the SEC is still trying to flesh out the concept. If its final regulations are too complicated and the costs are too high, the JOBS Act may not achieve its goal of providing attainable growth opportunities for private firms. But if the SEC can create a workable infrastructure, private equity crowdfunding could spread like wildfire.
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