WASHINGTON (Nov. 18, 2013) — You’ve probably heard of crowdfunding as a way to raise money for civic projects such as public parks and disaster relief, or creative projects like new recording artists and video games.
It’s is a way for people to pool their money to get something done, and soon crowdfunding could change the way people invest in businesses. The Securities and Exchange Commission is considering new rules created under the JOBS Act that would that would allow investors to buy stock in companies over the Internet using a crowdfunding exchange.
According to business development expert Jenny Kassan, CEO of Cutting Edge Capital, there’s a demand for new investment options for non-wealthy investors.
“Lots of people are looking for ways to invest that are more in alignment with their values,” she declared. “Also, people are looking for ways to keep their money more local.”
A 90-day public comment period is underway about the new rules. A final SEC vote is expected in January.
Kassan said the proposed crowdfunding rules would allow smaller businesses and start-ups to bypass more expensive, traditional ways of going public, but she noted that they could still face significant obstacles.
“For example, they’ll need audited or reviewed financials. They’ll need to allow their investors to pull out at the last minute,” she mentioned. “They will have a lot of onerous reporting requirements, so it may be quite difficult for a lot of companies to use.”
Kassan said start-up businesses can also raise money without using an investment bank through a little-known process called a direct public offering. A DPO cuts out the middleman and can save businesses hundreds of thousands of dollars.
Content provided on behalf of Social Venture Network.