Big things are happening in the private equity world. The JOBS Act, signed into law in April 2012, eased restrictions on small companies looking to raise capital. For accredited investors right now, and soon (we hope) with non-accredited investors, these changes are creating a new pool of exciting opportunities.
Empowering Startup Investors
One of the more significant revisions to securities regulation allows accredited investors to stake as little as $1,000 and non-accredited investors as little as $100 into startup companies through what is referred to as equity crowdfunding.
So what is equity crowdfunding? If you’re familiar with crowdfunding sites such as Kickstarter, it’s similar to those reward-based portals. But instead of rewards like T-shirts and tickets, backers receive actual shares in the business.
If the company becomes profitable, these shares would entitle you to the company’s future cash distributions. Or if the company goes on to be acquired or does an initial public offering (IPO), early investors would see their shares go up dramatically as the startup’s market value climbs.
Crowdfunding for accredited investors officially kicked off on September 23, 2013. The SEC has not finalized the regulations for non-accredited equity crowdfunding. The regulations are expected to be finalized before the end of 2014.
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