As one of the pioneers in the industry, Indiegogo was pleased with the SEC's recently released rules proposal for Regulation Crowdfunding, as dictated by the JOBS Act of 2012. The long-awaited rules, which were a year and a half in the making, lay the ground rules for investment crowdfunding. This will expand the crowdfunding industry, which will already raise more than $5 billion for start-ups, causes and creative projects this year alone, according to Massolution, a market research firm.
In a major shift, the preliminary rules allow small businesses to raise up to $1 million a year in equity financing from unaccredited investors without the expense of a traditional public offering. Companies can use these rules simultaneously alongside private placements to raise larger amounts.
That's a victory, and it can alter the way entrepreneurs raise money to launch and grow their businesses. Until now, companies could only raise investment money privately from accredited investors—high net-worth individuals.
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The change will democratize start-up and small-business financing, and it will create an equal-opportunity playing field where entrepreneurs can test and validate their concepts.
I'm excited for three reasons. First, I believe making fundraising more efficient and fair will fuel our economy. Second, the way the rules are being written shows that the SEC is embracing the collaborative ethos of crowdfunding. For example, much of the proposal's 585 pages discuss the comments sent in by the public. And it explicitly solicits additional input from the public.
Just as important, the rules strike a good balance—at least, within the limits imposed by the law itself—between offering clear protective restraints and empowering platforms to innovate and develop best practices. Indiegogo has proved that risks can be mitigated through an open platform that supports free communication and maintains constant vigilance through fraud-detection algorithms and automated processes.
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