HOW TO FUND NEW BUSINESS VENTURES? 1.Bootstrap Capital (Your Own Money) 2.Investors (Other People’s Money) Debt Instruments Equity Instruments
USING OTHER PEOPLE’S MONEY REQUIRES “SECURITIES” (A Highly Regulated Industry) 1.Registered Securities 2.Securities Exempt From Registration Regulation D Securities Rule 504, 505, 506 Exemptions Limitation on # of Investors NO PUBLIC SOLICITATION
MEANWHILE, ON THE INTERNET People start raising capital for projects Social Media makes it possible to Raise money from Many People Each making small contributions CROWDFUNDING WAS BORN 2008 “Create-a-Fund” launched 2009 Musicians, filmmakers, inventors popularize Crowdfunding
BUSINESS NOTICES BuyaBeerCompany.com2010 The goal -- $300,000,000 -- Pabst Brewing Company Pledgers could follow the fundraising on the BuyaBeerCompany website. If $300 million in pledges were received the “pledgers” would receive a “crowdsourced certificate of ownership,” and beer of a value equal to the amount pledged. SIX MONTHS 5 MILLION INVESTORS $200 MILLION
GOVERNMENT NOTICES JOBS Act of 2012 (“Jumpstart Our Business Startups” Act) Title 3 “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act” CROWDFUNDING
CROWDFUNDING ACT Allows exemption from registration if: 1.Limitation on total investment of $1M/12 months 2.If investor has annual income or net worth less than $100,000 – limit of $2k or 5% of income or net worth (increased to 10% if more than $100,000) 3.Through a registered broker-dealer or a funding portal that complies with requirements.