On May 16, 2016 — Monday — securities-based crowdfunding goes live in the United States. This means that any American entrepreneur can go out and raise up to $1 million from friends, family, and social network for their startup or small business. However, this isn’t your typical rewards-based crowdfunding. Entrepreneurs (aka issuers as they are known in this new world of securities-based crowdfunding) are selling the “promise of a future return” in their business, and that makes this is a highly regulated activity.
Rather than talk about the benefits (access to capital, product/market validation, sales, jobs, etc.), we really need to be preparing entrepreneurs to understand the process, their role, how to execute a securities-based campaign, and how to stay compliant with the law.
If you are an entrepreneur and wondering what tasks you need to follow in order to solicit funds and be compliant, here is a start:
However, most of the tech providers offer a suite of solutions depending on your needs. The greater the need, the more you will pay. Our advice to you is to spend adequate time learning not just about the platforms but also about all the other components you will need not just to launch your campaign but to be compliant with the law. Then decide which tech plugins you will use and what they will cost you. Keep in mind, you are fundraising. This is usually a continual activity. The earlier you train yourself on best practices and leverage the tools to assist in being successful, the more likely you are to be successful down the road.
*In full disclosure my firm authored/created these education materials
Sherwood Neiss is a partner at Crowdfund Capital Advisors. Neiss helped lead the U.S. fight to legalize debt and equity based crowdfunding, coauthored Crowdfund Investing for Dummies, and cofounded Crowdfund Capital Advisors, where he provides strategy and technology services to those seeking to benefit from crowdfund investing. Neiss and Jason Best are credited as the fathers of Title III of the JOBS Act. After attending the bill-signing ceremony at the White House, they formed Crowdfund Capital Advisors to study what is happening in crowdfunding, analyze results, report trends, and follow opportunities. They are active investors in the crowd finance space.