Anyone who has started a business knows how difficult it can be to raise money. Bank loans are difficult to obtain for small businesses and startups, and angel investors are hard to come by. Sure, family and friends help, but for those who can’t enlist enough of that, access to capital is extremely limited. Not to mention, even family and friends investments are regulated by securities laws, and if such investments are not documented correctly, future investors may be scared off.
Enter crowdfunding, raising money (presumably online) by collecting small amounts from a large number of individuals. Funding platforms like Kickstarter.com and Indiegogo.com have gained popularity in recent years as a way to raise money from the “crowd.” Kickstarter.com, for example, which focuses on funding creative projects for rewards, claims that over $1.5 billion has been pledged by more than 8 million people for more than 80,000 projects since its launch in April 2009. While revolutionary in its use of online media and potential to reach a mass audience, however, crowdfunding—especially investment crowdfunding—raises the old question of unregistered and nonexempt securities offerings. The Jumpstart Our Business Startups Act (the JOBS Act) promised to change that. In our next post, we will discuss how.
This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.
About the Author
So-Eun Lee – So-Eun Lee is an associate attorney in the New York office of The R. Shawn McBride Law Office, P.L.L.C. She concentrates her practice on business law. So-Eun can be contacted at: (347) 921-0173 or [email protected]. Her profile is available on www.mcbrideattorneys.com.
Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C. which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: 407-517-0064; [email protected], or www.mcbrideattorneys.com.
 Kickstarter, Kickstarter Basics, https://www.kickstarter.com/help/faq/kickstarter%20basics (last visited Mar 20, 2015).