Crowdfunding: Hold or Fold

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While Crowdfunding legislation may have only just come to fruition in May, there are already reworks and adjustments on the way. That being said, the question of whether or not to get in the game comes to mind. To answer that, one must first look at the rules and regulations currently in place versus what’s coming in the imminent future. So, let’s figure out whether to hold, fold or go all in!

The current crowdfunding set up is new; it’s shiny, it’s financially progressive and it’s ready to be used! Or is it? At the moment, I would beg to differ. While, yes, it does increase the opportunity for companies to raise funds for their products without having to hunt around for a small pool of investors with a lot to invest, it does put a limit on just how much can be crowdfunded on both sides of the equation. As far as the companies go, the crowdfunding is capped at $1 million; while on the investor side, the cap is at $2,000.  Additionally, as it stands right now, companies are only allowed to have 500 investors be a part of their crowdfund; that means every single one of them has to invest their full crowdfunding $2,000 into that particular fund and as you know, diversity is an investor’s best friend. So, while crowdfunding does currently “work” in the US, and as big of a proponent of it as we are, I would think that it would be best to hold in the current climate.

Now, as for what’s coming, there are a particular pair of bills recently passed by the House FSC: the “Fix Crowdfunding Act” (how aptly named) and the “Supporting America’s Innovators Act”. Once these two bills pass, the Crowdfunding atmosphere will open up quite a bit. To quote Entrepreneur.com  “One will remove some of the more onerous public reporting requirements for startups; the other will allow unaccredited investors to pool their investments in what are called Special Purposes Vehicles.”

These are good improvements, but for now, it seems wise to hold, or perhaps dabble to get a feel for it while you wait for even better iterations of regulation crowdfunding in the US.

Read more:  “The Crowdfunding Landscape Is Evolving: Should Entrepreneurs Be Worried?” Entrepreneur 8/9/16

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Social Media Strategist, REIFA

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