Crowdfunding: A New Alternative for Raising Capital

By: Peter J. White

Crowdfunding is the term used for the method of soliciting contributions for a particular venture or project by soliciting money from a large number of individuals. While the concept of crowdfunding has been around for quite some time, the ability to crowdfund on the internet has allowed crowdfunding to raise over five billion dollars for charitable and creative ventures. Popular crowdfunding websites such has Go Fund Me (charities) and Kickstarter (movies, games, recordings) do not provide for investment in return for equity ownership. Contributions made on those crowdfunding sites are either made by the contributor as charitable donations or in return for the right of the contributor to pre-order the product being created. Federal securities regulations and state Blue Sky Laws limited the ability of crowdfunding to be used by entrepreneurs to raise large contributions of money in exchange for equity in the offering entity. A federal law, the Jumpstart Our Business Start-Ups (JOBS) Act, enacted in 2012 was intended to simplify the SEC filings required to allow a company to raise funds by crowdfunding and make investment available to less affluent investors. While waiting for the SEC to finalize the crowdfunding rules of the JOBS Act, the State of Wisconsin adopted its own crowdfunding regulations.

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