A New Era begins for Equity Crowdfunding under Title III of the JOBS Act

By Sydney Armani, CrowdFund Beat CEO & Publisher

On May 16, the Securities and Exchange Commission’s (SEC) crowdfunding rules under Title III of the JOBS Act go into effect, allowing early stage and growth companies, which may be unable or unwilling to raise capital from institutional or private investors, to gain access to another source of capital.

images (15)

“Title III of the JOBS Act was originally meant to be a game changer for growth companies, adding another way businesses could raise capital in today’s marketplace,” said Alex Castelli, partner and leader of the National Liquidity and Capital Formation Advisory Group at CohnReznick, a top accounting, tax, and advisory firm serving the middle market. “But the SEC has put forth requirements and complexities that might make it extremely challenging for companies to truly consider these opportunities.”

“Whether it is in the public markets, through private equity or venture capital or from individual investors, a solid balance must be maintained between fueling the needs of growth oriented businesses, and investors eager to support the next generation of innovation while maintaining an appropriate level of oversight to protect investors.”

  • The key components of the rules that investors must understand and how they can ensure compliance.
  • The advantages crowdfunding offers, such a decrease in cost of capital, or a wider and more efficient distribution through selling securities through the internet.
  • The challenges that crowdfunding may bring, especially to a private company not accustomed to sharing operational and financial information publicly and as transparently.
  • Understanding the regulations and requirements required, such as utilizing funding portals or registered broker dealers and will have certain disclosure requirements to investors.
  • Inherent risks that come with crowdfunding as a method to raise capital and the appropriate amount of diligence necessary before committing funds.

5 Tips for Everyday Investors Participating in Equity Crowdfunding

Equity Crowdfunding under Title III of the JOBS Act is coming to fruition next week.  Many questions remain and a steep learning curve is inevitable for both investors and entrepreneurs.  Under the new guidelines anyone can participate in equity crowdfunding instead of just accredited investors who meet sufficient levels of wealth. Now anyone can become a startup investor.

Amro Albanna, CEO of ieCrowd, a startup with six years of experience and over 17 Million dollars already raised, has tips to help the everyday investor make smart decisions if they decide to jump in and participate in equity crowdfunding.  ieCrowd will launch its own Title III raise shortly – they currently have two products coming to market – Kite natural mosquito repellant that blocks mosquito CO2 receptors from detecting human blood and the Nuuma air pollution sensor to create a digital nose in smartphones.

“On May 16th and beyond, a large number of startup companies are going to try to raise money using equity crowdfunding,” said Albanna. “Having been in this business for several years now, I can offer the following attributes the everyday investor should look for as they choose a company to fund.”

1.     Already raised capital. Most of these companies are going to be raising money for the first time.  If you can find one that has already been in business for a while and raised capital, you can rest assured they have already learned some of the hard lessons of starting a business.

2.     Has a Board of Directors. Typically most startups begin as a one or two person show.  Single entrepreneurs can have a one track mind and it isn’t always moving in the right direction. Companies with a solid Board of Directors can demonstrate that professionals have done their due diligence and are on board to help with strategic direction.

3.     Knows how to deal with investors. There is going to be a steep learning curve with equity crowdfunding, both for entrepreneurs and investors.  Any company that already has investors knows how to keep them informed and meet their expectations.

4.     Diversifies its offerings. Investors can diversify by investing in several different companies, or by investing in one company that has products and interests in several different markets.  Initially the risk for equity crowdfunding is fairly high but the best bet for success is diversification.

5.     Has an exit plan. A startup that already has plans for an IPO or a purchase has more potential for a successful exit where everyone makes money.

About:

Sydney Armani

sydneyarmani.jpgSydney Armani is a long time silicon valley entrepreneur, with more than twenty ​five ​years experience in Valley’s community acting in both an entrepreneurial and investing capacity. Sydney’s vision for starting and successfully managing innovative companies, like Hello Net ​A ​Mobile telephony appliance services​ on ​Minitel and Videotex​​ A online a first generation of touch Screen tablets. His international experience in trade and International banking takes him around the world, projects with OPIC Overseas Private Investment Corporation for free trade with business engagement in Europe and UAE’s Dubai.
A creative person at heart, he’s working on building CrowdFunding platform Live Crowdfunding demo pitch contest building bridge for new generation of Startup’s in the Crowdfunding industry.
He has been an active speaker and moderator at conferences and plenary sessions on Real Estate crowd​ finance, capital markets, secondary liquidity, disruption in banking and a host of other topics. He has lectured at major universities such as Georgetown and ​Hult International business School​, while authoring articles for or being interviewed by INC Magazine, Housing Wire, Forbes, Fortune, The Economist, amongst others.
​S​ydney is publisher of CrowdFundBeat.com, an online daily crowdfunding news site in US​, Canada​ and UK​​. He is also the organizer of the annual Silicon Valley Meets Crowdfunders conference in Palo Alto, CA​ & CrowdFunding USA at National Press Club in DC​.

 

 

Tags: , , , , , , , , ,

HEADLINE NEWS

The VergeDonald Trump's terrible crowdfunding site was a microcosm of his political careerThe VergeAnd from the beginning, the site had Trump's populist edge. Zanker boasted that “the reign of Kickstarter's Brooklyn hipsters is over,” referring to Kickstarter's New [...]

Social media, crowdfunding skirmishes encapsulate Endy debateThe Herald JournalAfter that, a campaign with the same goals and the same organizer appeared on a separate crowdfunding site, FundRazr.com. This campaign also drew negative attention on social media, and after a few hours th [...]

FortuneCrowdfunding: Women Better at Raising Money Than Men Are ...FortuneA new study has found that women are generally better than men at crowdfunding.Women are better at crowdfunding than men, shows study | The ...The Independentall 3 news articles » [...]

ForbesCrowdfunding's Death Has Been Greatly Exaggerated - Creators Ship, Especially In ChinaForbesBased on recent media reports, it looks like crowdfunding is now in the "disillusionment" phase of the famous Gartner hype cycle, after peaking a few years back. I will arg [...]

Wired.co.ukAfter budget cuts, museums are crowdfunding to preserve historyWired.co.ukIn 2015, the Smithsonian National Air and Space Museum in Washington, D.C. launched its very first crowdfunding campaign to 'Reboot the Suit'. The idea was to raise much-need funds to conser [...]

How Women Trounce Men When Raising Seed Crowdfunding CapitalForbesMale entrepreneurs may account for the majority of business owners raising finance on crowdfunding platforms in the UK, but their female counterparts are far more likely to get the support they seek, new research shows. [...]

ReutersStudy says women are better at crowdfunding - ReutersReutersWomen around the world are less likely than men to tap the crowd online for money to fund their businesses and projects, but when they do they are likely to.and more » [...]

YourStory.comA crowdfunding portal ensuring total authenticity of cases, MeHelp lets you donate confidentlyYourStory.comIn March this year, Samiya Hafeez, a 22-year-old woman from Hyderabad, was arrested for running a fake crowdfunding campaign through which she collected almost Rs 22 [...]

Yahoo SportsCan crowdfunding save women's college hockey? - Yahoo SportsYahoo SportsNorth Dakota cut its women's hockey program in March, in one of the saddest and most stunning decisions to rock the sport at the collegiate level. “When you ...and more » [...]

MashableAtaribox crowdfunding plan is a giant, flapping red flagMashable"To limit risk taking, this product will initially be launched within the framework of a crowdfunding campaign," the note — translated from French — reads. It may not have been uttered by a PR mouthpiece [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

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 |