{"id":1969,"date":"2014-04-17T10:00:02","date_gmt":"2014-04-17T17:00:02","guid":{"rendered":"https:\/\/berkonomics.com\/?p=1969"},"modified":"2014-04-15T11:55:50","modified_gmt":"2014-04-15T18:55:50","slug":"crowdfunding-a-roar-from-a-young-lion","status":"publish","type":"post","link":"https:\/\/berkonomics.com\/?p=1969","title":{"rendered":"Crowdfunding:  a roar from a young lion"},"content":{"rendered":"<p><em><strong>With help from JJ Richa<\/strong><\/em><\/p>\n<p>Can you imagine having 300 shareholders?\u00a0 With recent legislation and new portals on the Web, it\u2019s entirely possible, perhaps for the first time for small businesses.<\/p>\n<p>Simply stated crowd funding or crowdfunding is the raising of capital in small amounts, from a broad base of investors. Usually the investors are non-accredited, and only invest a small amount.\u00a0 It\u2019s similar to microfinance, but for the most part using equity instead of a low-interest loan.\u00a0 The object behind crowdfunding is to open up more opportunities for capital to flow into businesses to help them grow and create new jobs.\u00a0 Participants can raise funds without having to do a public offering, which is a costly undertaking.<\/p>\n<p>Crowdfunding is not for everyone.\u00a0 Entrepreneurs who can raise funds in more traditional ways from knowledgeable investors should still lean toward doing just that.\u00a0 But there are many businesses that just won\u2019t appeal to professional or knowledgeable investors.\u00a0 Are you an artist with a new record, a new movie idea, a new small product <a href=\"https:\/\/berkonomics.com\/wp-content\/uploads\/2014\/04\/EA-9817.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-thumbnail wp-image-1965\" alt=\"EA-9817\" src=\"https:\/\/berkonomics.com\/wp-content\/uploads\/2014\/04\/EA-9817-150x150.jpg\" width=\"150\" height=\"150\" \/><\/a>to offer?\u00a0 Perhaps you can attract a large number of investors who just want to support your idea, or get discounts for your product.\u00a0 The returns are not as important to them as the joy of participating in your dream.\u00a0 These are the more likely candidate companies and investors.<\/p>\n<p><strong><em><span style=\"color: #993300;\">[Email readers, continue here&#8230;]<\/span>\u00a0<\/em><\/strong> In order to participate, certain exemptions and criteria must be met, some of which are:<\/p>\n<ul>\n<li>No more than $1 million is raised via crowdfunding in any 12 month period; and<\/li>\n<li>No single investor invests more than a specified amount in the offering:\n<ul>\n<li>The greater of $2,000 or 5% of the annual income or net worth of the investor, as applicable, if the investor has annual income or net worth of less than $100,000; or<\/li>\n<li>10% of the annual income or net worth of the investor, as applicable, if either the annual income or net worth of the investor is equal to more than $100,000, capped at a maximum of $100,000 invested.<\/li>\n<li>The offering is conducted through a registered broker or \u201cfunding portal\u201d; and<\/li>\n<li>The issuer complies with certain other requirements. Some of the important ones are:\n<ul>\n<li>Public listing of the name, legal status, address, website, directors, officers, 20% stockholders, and more<\/li>\n<li>Share price and methodology for determining the price<\/li>\n<li>A description of the ownership and capital structure of the issuer and a host of disclosures including a disclosure of various risks to investors<\/li>\n<li>Companies looking to raise $100,000 or less via crowdfunding can provide financials that are merely certified as true by the officers of the company. Companies looking to raise between $100,000 and $500,000 must provide \u201creviewed\u201d financials, which means they have to pay a CPA to check them. Companies looking to raise over $500,000 must provide full-blown audited financial statements, prepared by a CPA. Moreover, every year after a successful crowdfunding offering, issuers must file with the SEC and with investors reports of the results of operations and financial statements of the issuer.<\/li>\n<li>The issuer must clearly disclose any compensation it pays to any person promoting its offerings through a broker or funding portal.<\/li>\n<li>Issuers are not allowed to advertise the terms of the offering, except for notices to direct investors or through the approved intermediary.\u00a0 Hence, all general solicitations for crowdfunding must at all times flow through an SEC-registered intermediary.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>So, what are the advantages of using crowdfunding as your first effort and then going after professional investors?\u00a0 It does prove your business model is attractive to at least some segments of the population, a fact which would be attractive to the later investors.\u00a0 What are the disadvantages?\u00a0 Either too many crowdfunding investors and \/ or any non-accredited investors in early rounds will most likely cause professional investors to pass and find companies without the complexities in structure caused by crowdfunding rounds earlier.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>With help from JJ Richa Can you imagine having 300 shareholders?\u00a0 With recent legislation and new portals on the Web, it\u2019s entirely possible, perhaps for the first time for small businesses. Simply stated crowd funding or crowdfunding is the raising &hellip; <a href=\"https:\/\/berkonomics.com\/?p=1969\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-1969","post","type-post","status-publish","format-standard","hentry","category-raising-money"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/berkonomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1969"}],"version-history":[{"count":0,"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1969\/revisions"}],"wp:attachment":[{"href":"https:\/\/berkonomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/berkonomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/berkonomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}