Good News on Equity Crowdfunding

A Thought Leader guest post we liked from attorney Chris Harvey:

New Rules for Equity Crowdfunding

Equity Crowdfunding is Not Competing with Venture Capital, But It May Fundamentally Change the Investing Landscape for 87%+ of Americans  Regulation Crowdfunding 2020

While the aftermath of the U.S. Presidential election may have taken our undivided attention last week, there were some big announcements on equity crowdfunding from the Securities and Exchange Commission (“SEC”) that should be mentioned.

Key Takeaways:

  • Regulation Crowdfunding annual limits moved from ~$1 million to $5 million

  • Regulation A annual limits increased from $50 million to $75 million

  • Some other improvements will make it easier to raise via equity crowdfunding

Equity crowdfunding might finally live up to its promise of disrupting early-stage financing. But will it actually compete with venture capital?

As Tyler Tringas framed the issue:

Tyler Tringas

Every venture capitalist knows that the keys to a successful fund portfolio are access and deal flow. The venture capital industry is a zero-sum game built on a heavy-tailed power law distributions. Signal, brand, and exclusivity mean everything to a VC.

Crowdfunding is the opposite. There are inherent network effects in crowdfunding. The more investors that join an equity-crowdfunded offering, the better. What matters to crowdfunded investors is community, transparency, and participation.

The crowd wants businesses that are (1) profitable, (2) small-to-medium sized (SMBs), and...

Read the rest of this article at lawofvc.substack.com...

Thanks for this Guest Post and its graphics to attorney Chris Harvey.

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OC Startup News, OC Startup ResourcesChris Harvey, Equity Crowdfunding, financing, Funding, Guest Post, investors, Startup, VC, Venture CapitalComment