A new law just made equity crowdfunding a whole lot easier.
It’s been four years since President Obama signed the JOBS ACT, which encouraged funding to small businesses.
Starting Monday, these companies are allowed to raise up to $1 million from regular investors over a rolling, 12-month period. Previously, only accredited, higher-wealth individuals were allowed to directly take part in the crowdfunding process.
Companies are only allowed to raise this money through regulatory-approved platforms and registered brokerdealers, such as OurCrowd, SeedInvest, AngelList and EquityCrowdfunder.
The law also limits investors who make under $100,000 to invest only 5% of their annual income. If the investor’s income is $100,000 or more, they can invest 10% of their income on an annual basis.
Crowdfunding is still in the “taking off” phase. According to the Wall Street Journal, over 40 companies had signed up before the kick off date to participate as portals.
Kickstarter, the largest rewards-based crowdfunding site, said in the press release that it doesn’t plan to expand into securities offerings. “Our mission is to help bring creative projects to life,” a Kickstarter spokesman said. “Not all creative ideas are meant to be investment vehicles.”
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