Why 2016 is the Year of Equity Crowdfunding
United States equity crowdfunding could double the capital raised this year to generate up to $4billion and 2016 will be the Year of Equity Crowdfunding, industry experts predict.
The growth and potential of the sector has been discussed at the 4th Annual Silicon Valley Crowdfunding event, particularly in light of the latest revision of the JOBS Act. The whole debate can be seen on the CrowdFundBeat website.
In fact, 2016 has been dubbed the’ Year of an Equity Gold Rush’, with new methodologies being introduced, including the Title III of the JOBS Act and the maturation of peer-to-peer lending.
From 16 May, most of the new Securities and Exchange Commission (SEC) rules under Title III of the JOBS Act, go live, which will open up non-accredited investors to equity crowdfunding and approves online platforms intending to legally solicit offerings.
Title III fundraising allows issuers to raise up to $1million via equity crowdfunding. For the first time in history, small businesses can trade an equity stake in all future profits in exchange for a valuable influx of funds, without the burden of registering with the SEC.
The new rules allow individuals to invest in start-ups online by purchasing equity securities in crowdfunded companies via SEC-registered crowdfunding portals. They require companies raising money to disclose certain information about their business and securities offering, limit how much individuals can invest based on their income and net worth, and creates a new regulatory framework for the crowdfunding portal intermediaries facilitating crowdfunding transactions.
The two day 4th Annual Silicon Valley Crowdfunding Conference, attended by nearly 300 crowdfunding professionals, platforms, and pundits, discussed various industry issues including the expansion of real estate crowdfunding through online platforms;, various critiques on disclosures, the advantages of Reg D or Reg A+ offerings and a general political debate on what is expected under a new administration.
Sydney Armani, Chief Executive Officer and Publisher of CrowdFund Beat Media Group, tells OPP.Today, “As you know, one of the last provisions of the JOBS Act, namely Title III (unaccredited investor investing) will go live in May 2016, and that may lay a path for more SME opportunities. Regarding real estate crowdfunding, there are high hopes that Regulation A+ will be utilized for larger investments and the pooling of diversified funds.
“One of the key observations is that this is definitely becoming an institutional game. While the initial goals of the JOBS Act were to address SME capital availability and more democratic investing, we have seen the tides move into the applying technology in marketplace platforms where the ‘crowd’ is now inclusive or UHNWs, family offices, small to medium hedge funds, and other institutional players. This will bode well for more capital directed into smaller transactions, as intermediation costs should be reduced with the deployment of technology.
“Firms from Main Street to Wall Street seem to be jumping on board with technology enabled distribution. We will see how larger deals can be fractionalized into tranches not earlier done availing more investors to participate.”
In June 2015 Title IV of the JOBS Act opened the door for main street (non accredited) investors worldwide to invest in private companies having headquarters in the USA or Canada and allows startups and small businesses to raise a maximum of $50million through crowdfunding.
Adrian Bishop is editor of OPP.Today and is a national award-winning editor and journalist with more than 30 years’ experience. He has held several senior editorial roles in the overseas property sector.
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