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Opening Up Crowdfunding as a Mechanism for Equity Investment

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Opening Up Crowdfunding as a Mechanism for Equity Investment
Michel Bauwins, April 14, 2011

If you remember my earlier “Next Kondratieff wave” hypothesis, which posits that a next wave requires an integrated and wholesale re-orientation of the productive system, then this news fits the bill: The Wall Street Journal reports on upcoming SEC (U.S.) „financial-regulatory‟ reform: “Federal securities regulators are weighing demands to make it easier for fast-growing companies to use social networks such as Facebook and Twitter to raise money by tapping thousands of investors for very small amounts of shares. The Securities and Exchange Commission is looking at adapting its rules to encourage Internet-age techniques for small companies raising capital. The issue is part of a wider review by the agency into whether to ease decades-old constraints on share issues by closely held companies. The use of “crowd-funding” techniques has spread in recent years from artists looking to fund creative works to entrepreneurs trying to expand their firms. In a typical example, a company looking to raise $100,000 would use an Internet site to invite investors to buy as much as $100 of shares each. If all goes well, small companies can raise cash relatively cheaply, while investors get a stake in an innovative business with limited downside risk. The SEC is now considering calls to relax its rules to make it easier for companies to use crowd-funding without having to undergo the full panoply of disclosure and other legal requirements required by the securities laws for share issues.”

Summary The Securities and Exchange Commission is looking at adapting its rules to encourage Internet-age techniques for small companies raising capital.Federal securities regulators are weighing demands to make it easier for fast-growing companies to use social networks such as Facebook and Twitter to raise money by tapping thousands of investors for very small amounts of shares.

Description The use of “crowd-funding” techniques has spread in recent years from artists looking to fund creative works to entrepreneurs trying to expand their firms.If all goes well, small companies can raise cash relatively cheaply, while investors get a stake in an innovative business with limited downside risk. The SEC is now considering calls to relax its rules to make it easier for companies to use crowd-funding without having to undergo the full panoply of disclosure and other legal requirements required by the securities laws for share issues.”

Tags: Crowdfunding, Crowdsourcing, mechanism, p2p

Posted by Tonya Van Dijk

Apr 14, 2011 02:37 pm GMT Viewed 2615 times

Author: Michel Bauwins Source

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Les Butchart Jun 21, 2011 04:05 pm GMT

Crowd-funding of small investments (up to $100,000) would be a huge boon to small business growth, yet there is very, very little conversation about this ... at a time when the US economy, and small business growth, in particular, is experiencing a dramatic slowdown. What's up? Why is the business news media barely covering this? Who is lobbying for it or promoting it? I wandered into this site to see if I could find anyone pushing for this SEC ruling? Any ideas or leads? Thanks, Les Butchart

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