In April of 2012, President Obama authorized the JOBS Act. (Jumpstart Our Business Startups.)
The Act has several provisions, but one of the main goals is to change existing financial rules restricting private equity investing as well as those related to crowdfunding sites.
Many of these rules were enacted in the 1930s to protect consumers from getting scammed.
However, these same rules are preventing modern day private equity investors from taking advantage of developments like high-speed Internet access, cloud computing and social media–changes that the rest of the financial world have incorporated.
For example, currently you must be an “accredited investor” to be able to invest in most private equity and venture fund opportunities. The income and net worth requirements to become accredited are out of the reach of 80% of Americans.
The Act modifies these restrictions.
Also, at this time US law prevents crowdfunding portals and sites from offering full crowdfunding services for equity investments as they do for reward and charity crowdfunding (the most common types).
Three of the main Titles of the Act were effective immediately (Titles I, V and VI).
Three others (Titles II, III and IV) are waiting on SEC approval which should come later this year. Once that happens, it will be much easier for entrepreneurs and small business owners to get funding from private equity and online investment crowdfunding sites.
How much dough are we taking about?
A research outfit named Massolution said the total crowdfunding market (mostly rewards crowdfunding but it gives us a starting point) raised around $2.7 billion last year, with that number expected to grow to over $5 billion in 2013.
I believe these changes open up many opportunities for small business owners.
It’s not exactly the same as a sales letter. It relies a lot on storytelling and community building, the same tactics good internet marketers use.
Some ideas will work, some won’t. Many crowdfunding campaigns are big stinkers.
And equity crowdfunding is a totally new area (This iteration, anyway. You could say the Green Bay Packers have been at it awhile.)
Most important, it provides entrepreneurs and growth businesses much needed capital in the middle of a tepid economic recovery.
It promises to be a booming area and another way to get rich in America.
Here are examples of real businesses using crowdfunding:
Crowdfunding News and Tips More Businesses Use Crowdfunding To Finance New Products