Last year I wrote about online crowdfunding, and how it could give startups another way to not just raise
capital but also take their stories public. There was much excitement here in the NY tech community and nationally about the potential of this new money-raising method at the time.
There were also concerns, and that is perhaps why the SEC has dragged its feet in defining rules for how it all would work. The JOBS Act was signed into law some time ago, but the SEC's inaction has left many startups and crowdfunding platforms like NY-based Return on Change (RoC) in a holding pattern.
Social-media based crowd funding took a small but important step forward last week, as reported in the WSJ, by finally allowing startups to solicit funds via online advertising. However, at least for now, only so-called accredited investors (AKA the certifiably wealthy) can participate.
I first learned about this when I saw a flurry of emails on thre NY Tech meetup mailing list. I also saw a note from RoC which said that Thankster.com, another NY tech company, was the first startup to go live on the site.
I know Thankster as it was founded and is led by my brother Paul (here I must insert a shameless plug that the site offers a great way to order, personalize and send real cards).
I asked Paul what the latest SEC move on crowdfunding means to him and his company; he said: "This rule change should be a great boon to our
crowdfunding efforts, because it means we can cast a wider net and reach out
more broadly to those who might be interested in being part of our story and
our growth. We always have great personal responses from users, partners,
and others we share our vision with, and now it will be easier to share our
prosperity as well." Well said, bro!
What about the fine print? I asked Jeffrey Koeppel, a crowdfunding lawyer, and he said:
"The change in the rule does not
guarantee a free ride. Companies must now take 'reasonable steps to ensure" that the investors are 'accredited.' This is a change from the old rule that basically let investors self certify." He also pointed me to his blog on the topic.
Still, it is exciting news and I hope that the SEC opens crowdfunding up to the general public soon.
Bob, how does this affect Kickstarter?
Hey Joe, thanks for reading and commenting. In answer to your question, it doesn’t really effect KickStarter, just the sites that use equity crowdfunding. KickStarter rewards investors with perks other than equity.