While waiting for SEC regulations, crowdfunding leaders focus on investor education

Some crowdfunding industry leaders are using the lull before the fundraising practice is publicly viable to develop educational material for people who may soon be making their first investments.

The Securities and Exchange Commission is currently drafting rules to allow start-ups to sell stakes in their companies to the general public, potentially raising large sums from crowds of small investors.
Until now, selling equity stakes has been limited to so-called accredited investors, people who presumably have the wherewithal and sophistication to know what they are getting into.

Crowdfunding opens the field to the general public, and critics worry the newcomers may not adequately understand the risks involved in sinking money in a untested company.

Enter crowdfunding supporters such as the Crowdfunding Professional Association, a trade group for entrepreneurs, lawyers and investors. The organization is preparing to launch a Global Crowdfunding Education Network, intended to provide online classes and legislative updates for investors and entrepreneurs looking to participate in crowdfunding.
Some individual crowdfunding platforms — sites on which the public will be able to buy stakes in start-ups — offer their own investor education resources, though some consumer organizations fear these resources are too basic to appropriately communicate the risks of crowdfunding investments.

Sites such as Los Angeles-based site crowdfunder.com, have a Web page dedicated to describing legislation, elements of successful marketing campaigns, and other topics. Others — like EarlyShares, a Miami-based crowdfunding platform — have launched larger investor education initiatives.

EarlyShares recently rolled out EarlyShares University, a series of videos and Web pages dedicated to guiding investors and entrepreneurs through the risks, legal implications, and valuation processes for crowdfunding. Specific topics include the JOBS Act, the investment process, due diligence, common stock, risks and returns and diversification. EarlyShares promotes its educational material online as a “free service designed to help investors and business owners take full advantage of crowdfunding.”

The educational resources are intended to introduce the concept of crowdfunding to a new audience, not to promote the platform itself, according to EarlyShares chief executive Heather Schwarz-Lopes, though she noted that it could potentially increase the investor base.

“The more people know, the more comfortable they get with crowdfunding, the more they’ll understand what it is, and the more comfortable they’ll feel investing in these offerings. It’ll increase our investor base,” she said.

For example, in a video entitled “The Investor’s Role”, Schwarz-Lopes explains the difference between crowdfunding and traditional investing.

“Tradtionally, an investor’s role after they have invested in a company is determined by the amount and type of ownership the investor has in that company…Equity crowdfunding thrives on every crowdfunding investor playing a critical role in the success of a company regardless of how small the investor’s ownership may be,” she said in the video.

Some found the information to be lacking. Barbara Roper, director of the investor protect at the Consumer Federation of America, regarded the material on EarlyShares University to be too basic to be of real use to investors.

“[It] was completely devoid of any information that would actually educate an investor about the risks of investing in start-ups or how to analyze these business opportunities,” she wrote in an e-mail.

“All I saw was some boilerplate warnings about the need to read documents carefully — but what documents, looking for what information?”

Investor education is a work in progress, according to Schwarz-Lopes. “The material live now on EarlyShares University is the tip of the iceberg, and we have plenty of informative, in-depth tutorials to come,” she said in response to such criticism.

Schwarz-Lopes noted that until the SEC releases clearer guidelines about how much investment advice a crowdfunding platform can give to its users, the most important takeaway for investors is that “early-stage investing is not a get-rich-quick gimmick.”

She’s also building a rewards program for entrepreneurs and investors who use the educational resources, providing them with points or giftcards.

But skeptics like University of Mississippi School of Law Professor Mercer Bullard, who specializes in securities law, question how meaningful any crowdfunding education can be before the SEC’s regulations are public. As of now, he explained, it’s unclear what form crowdfunding will actually take, and what information about offerings crowdfunding platforms and entrepreneurs will have to provide to investors under the regulations.

“There’s a woeful naivete about the risks of securities regulation,” he said.
Source: washington Post – Mohana Ravindranath


How Crowdfunding Can Supercharge Your Campaign In 2016ForbesThey say that there are about 7.45 billion people living in this world right now. Imagine that if you could get each of these seven-and-a-half billion people to contribute one cent to your project, well, you know what I mean. [...]

How Crowdfunding Has Changed the Startup Game - Singularity HUBSingularity HubThe development of innovative technology — from virtual reality headsets to space exploration to solar-powered roadways — is no longer the province of ...and more » [...]

Crowdfund InsiderWhen It Comes to Retail Crowdfunding, SAFEty FirstCrowdfund InsiderOn September 22nd, Crowdfund Insider published a post summarizing the arguments presented in our new essay entitled “Crowdfunding and the Not-So-Safe SAFE“ (forthcoming in Virginia Law Review Online). [...]

The GuardianCrowdfunding: the new buzzword for academics needing research moneyThe GuardianArchaeologist Dr David Petts, from Durham University, has also used crowdfunding, raising almost £25,000 to fund a project on Lindisfarne, off the Northumberland coast. The dig, in June, led to [...]

“Beyond the Void” Announces New Crowdfunding VenturenewsBTCRTS-MOBA (multiplayer online battle arena) game Beyond the Void has joined forces with crowdfunding platform OpenLedger to build a new funding series for what is being touted as the “world's first MOBA game ICO.” The crow [...]

The Daily DotHey buckaroos, Chuck Tingle and Zoe Quinn are crowdfunding a game on KickstarterThe Daily DotErotic ebook legend Chuck Tingle and game developer Zoe Quinn are almost ready to unleash the biggest tingler of them all. The two have teamed up for a full motion video game vers [...]

Bitcoinist.netVulture Capital Hits Crowdfunding Minimum for 'Listen Carefully'Bitcoinist.netHowever, in light of achieving its minimum crowdfunding goal, Hedley Productions has decided to move up the start date for Listen Carefully's filming from its late 2017 estimate [...]

Crowdfund InsiderFact Sheet: SEC Updates Instrastate Crowdfunding Rules 147 & 504Crowdfund Insidermary-jo-white-at-sec-10-26-16 The Securities and Exchange Commission (SEC) voted to update Rules 147 and 504 today. The regulatory changes will improve the environment for intrastate [...]

Crowdfund InsiderBrief: Switzerland Equity Crowdfunding Platform Bee Invested Launches Campaign For Luxembourg Real Estate ...Crowdfund InsiderEarlier this week, Switzerland-based equity crowdfunding platform Bee Invested announced the launch of its new campaign for a real estate proj [...]

CNNMoneyDorothy's fading red slippers saved by $300000 in crowdfundingCNNMoneyThe ruby red slippers worn by Judy Garland in the beloved 1939 film "The Wizard of Oz" are set to undergo a major conservation effort following a successful crowdfunding campaign. The Smithson [...]

CFB Finance

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |