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The Current Status of Crowdfund Investing

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The Current Status of Crowdfund Investing

By Startup Valley (475 words)
Posted in Crowdfunding on July 01, 2014

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Crowdfunding works, and just as importantly, it's here to stay. It gives everyone the opportunity to support the products, businesses, and charities that they want to succeed, and it has helped funnel billions of dollars into startups and small businesses. According to CrowdMapped, crowdfunding projects across the world raised more than $5 billion in 2013 alone. Annual growth of 90 percent isn't an outlier either; crowdfunding grew from $1.5 billion in 2011 to $2.7 billion in 2012, and 2014 is on track to match that growth rate once again.

Moving in the Right Direction

While crowdfunding, under Title II of the JOBS Act, helps venture capitalists and accredited investors connect with new startups, small-time investors benefit even more. Most don't have access to millions of dollars to invest in promising new startups, but equity crowdfunding will allow individuals to invest with smaller amounts such as $500, which makes it manageable for an average family earning a median salary.

Realizing that a golden opportunity is right in front of them to improve the economy, several U.S. representatives from both sides of the aisle began drafting crowdfunding legislation in 2011. By the following March, these bills would be consolidated and renamed the Jumpstart Our Business Startups Act, which was signed into law in April 2012.

Most of the provisions immediately took effect, but Titles III and IV were delayed while the SEC finished working out some regulatory kinks. Last October, the SEC released their proposed Title III rules, which deal with crowdfunding issues, but Title III has yet to receive final approval.

Fortunately, the states are not sitting idly by while the JOBS Act hangs in limbo. Over the past four years, 11 states have passed intrastate crowdfunding laws, which allow small businesses and startups to raise capital within their state limits.

Not Just for Startups

Intrastate crowdfunding is currently the only way for businesses to raise capital through crowdfunding, but it's only legal in 11 states. More than a dozen others are currently debating equity crowdfunding bills, but intrastate crowdfunding will become obsolete for startups the same day that SEC regulators finalize Title III of the JOBS Act.However, small businesses will continue to take full advantage of equity crowdfunding for years to come.

The Future of the JOBS Act

The SEC will likely implement all provisions of the JOBS Act by the end of the year. Startups should begin preparing for a huge flood of new investors. Interested business owners can sign up on StartupValley.com, and they'll be notified once the SEC permits crowdfunding.

Investors can also prepare by taking a look at the wide range of startups already featured on StartupValley. Each company's page offers a brief pitch and other information to help investors choose a company that sparks their interest and aligns with their goals.

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