Things Entrepreneurs Should Know about Crowdfunding in 2015

By: George Hancock Jr.  |  March 31, 2015

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Huffington Post’s John Tarnoff posted today about things boomers need to know about crowdfunding. The information is useful to boomers but it could be useful to just about anyone. Here are some useful bits of information.

Let’s start with the basics. Crowdfunding websites have become a popular way to get startups funded. The most commonly funded projects are movies and musical projects, but all kinds of projects have been funded. Among them were Miley Cyrus twerk t-shirts and a pie pan shaped like the symbol for pi. Yep, it gets that goofy. Kickstarter and IndieGoGo are well-known crowdfunding sites. At these sites, individuals pledge an amount of money that the entrepreneur asks for. The pledge might be from, say $5 to $1,000. The sponsors receive gifts or “premiums” appropriate to each level of funding. So, you get a cooler gift if you pledge more money (i.e. pledge at a higher level). If the project’s funding goal is not met within the allotted time window, the project does not get funded, and all the pledges are returned to the sponsors.

Now here’s some information for those of you who are already familiar with the investing climate, because the times they are a changin’, as Bobby Dylan said.

The second thing you should know is that crowdfunding is for qualified investors, not just kids who don’t know much about finance. Title II of the JOBS Act, passed in 2012, allows entrepreneurs to advertise their business plans to qualified investors. Websites like AngelList exist to help match entrepreneurs to qualified investors.

Another important detail to know is that the SEC is in the process of defining how investing in startups works under the law. Title III of the JOBS Act is meant to allow everyday citizens to make equity investments in startups. Look for news about this in the fall of 2015, when the SEC plans to clarify the terms in the act.

There is some useful and perhaps even enlightening information about financing in the information age. As we know, globalization, transparency and the internet are changing the way we do things. Investing is one thing we do that’s about to make headlines.  Happy investing!

 

 

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