By Maria Halkias, Texas has become the latest state to allow small businesses and startups to raise money within its borders from mom-and-pop investors.
The Texas Securities Board on Wednesday approved rules that govern intrastate crowdfunding that eliminate wealth and income
requirements for investors.
The vote was confirmed by Texas Securities Board spokesman Bob Elder, who said the rules will probably be in effect in November.
The number of people who can now invest some of their savings in new Texas businesses has just ballooned to include the 20 million adult residents in Texas. Not everyone believes this is a good thing. Some critics said fees associated with raising funds may be high. Others worry that investors won’t do their homework.
The process will still be monitored by the Texas Securities Board. It will be done online through crowdfunding portals. Texas companies raising money will be required to disclose financial information to their investors and abide by other regulations. There are also caps on how much money a company can raise.
Texas is by far the biggest state to open up this new source of funding for startups and small businesses.
Other states that have adopted crowdfunding rules are Alabama, Georgia, Idaho, Indiana, Kansas, Maine, Maryland, Michigan, Nebraska, Tennessee, Washington and Wisconsin.
Any adult Texas resident will be able to invest up to $5,000 in a Texas business, regardless of the individual’s income.
Federal accredited investor standards require $1 million in assets, not including their home, and an annual income of more than $200,000.