Game Changer for Investors: SEC Permits Crowdfunding for Equity in Startups

Nov 2, 2015 4:15 PM ET

Game Changer for Investors: SEC Permits Crowdfunding for Equity in Startups

 

Crowdfunding has proven to be an innovative model for fundraising. It allows all sorts of new projects easy access to capital that historically, has been very hard to come by for untested efforts. Now, the practice is being extended to the act of investing itself. I’m John Howell for 3BL Media.

In a game changer, the Securities and Exchange Commission has just issued new rules that will allow ordinary investors to make equity investments in startup businesses raising capital through crowdfunding. Under current rules, only “accredited investors,” those whose net worth is greater than $1 million or who earn $200,000 a year, are permitted to participate in crowdfunding. That’s all changed now. The new rules allow anyone to invest $2,000 or five percent of their annual income or net worth, in small-scale fundraising projects of $1 million. Investors whose income and net worth are both more than $100,000 can invest up to 10 percent. For startups, this relaxing of qualifications offers access to a huge pool of potential dollars from ordinary investors.

Look for a flood of cash from Main Street to flow toward new, innovative businesses that are looking for that initial capital to start up.  

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