As scheduled, President Obama has signed the JOBS Act this Thursday, April 5th. The Act contains provisions that make investment crowdfunding legal in the United States. The crowdsourcing world better be in the mood for some celebration because this is big!
Crowdfunding, you may be popular, but you're famous today...
As reported when the law was only a piece of paper upon the man's desk, here's another quick rundown of what this will mean for America:
- Start-ups and entreprenuers in America will be able to raise capital by offering equity, loans, and revenue share agreements through crowdfunding portals overseen by the SEC.
- This new method of funding, opening businesses to a great number of more investors, may spur job growth, as start-ups employ people to work in their businesses.
- More start-ups can translate into more innovation. This world could use a few more Google's, Facebook's, Twitter's, and Crowdrise's.
The Senate's Amendments:
- Crowdfund investing may occur only through SEC approved crowdfunding platforms.
- Business would be able to raise no more than $1 million per year through approved crowdfunding platforms. Additionally, crowdfund investors will be limited in their investments based on their income, leaving some investors unable to invest more than $2,000 via crowdfunding.
To get deeper into the legislation issue, we asked Carlo D'Itri, cofounder & General Counsel of Crowdfunder.com for more information on the bill:
The Senate crowdfunding bill (S. 2190 or CROWDFUND Act) that just passed both chambers of Congress will affect small businesses by requiring more specific disclosures than would've been mandated by H.R. 2930. It's also likely that upcoming SEC regulations will add to the cost of crowdfunding. The consequence: companies seeking to raise smaller sums may not find crowdfunding economically feasible.
The Senate bill lets crowdfunding platforms operate without registering as a broker-dealer as long as they remain subject to SEC oversight, join a self-regulatory agency, and comply with "such other requirements under this title as the Commission determines appropriate..." This last part leaves SEC regulation of platforms pretty open-ended, so the rulemaking process will be crucial to ensure crowdfunding platforms can effectively help small businesses raise capital.
To learn more about the crowdfunding landscape and the current state of crowdfunding, get your hands on the data we have compiled on the last few years.
Also, watch a video of Obama signing the bill and talking about the Act.
If you want to read the bill in its entirety, click here.
We'd love to hear your thoughts on investment crowdfunding becoming legal and the SEC overseeing crowdfunding websites. What will it all look like? Leave us a comment...