Breaking down Title III – what you need to know
The proposed Colorado Crowdfunding Act would open up the potential pool of investors that start-ups can approach for funding.
By law, only accredited investors can buy stock in a private company today, and such investors must make at least $200,000 annually and have a $1 million net worth.
The bill allows any Colorado resident to invest up to $5,000 in a company without the need for accreditation.
“The challenge right now with a Colorado company trying to raise money is if they want to get outside investors, wealthy investors or venture capitalists, they have to go through such a labyrinth of securities laws and lawyers,” said bill sponsor Rep. Dan Pabon, D-Denver, during a press conference Wednesday. “The overwhelming cost and burden is on that particular business.”
Pabon’s bill would require the company and investor to be based in the state and that 80 percent of the proceeds of investment is spent here. House Bill 1246, introduced Tuesday, limits it to companies raising $1 million — or $2 million if they provide audited financial statements.
December 4, 2014 – FundWok has announced the official launch of their exciting new platform that uniquely infuses crowdfunding with the premise of online social community. After two months of private beta testing, FundWok is now available to the public.
The platform is uniquely different from traditional crowdfunding websites in a few ways. FundWok gives funders the ability to choose how much money they want to contribute while letting them choose which conditions they’d like to set, all without any commitments. FundWok serves as a meeting place for exciting ideas and initiatives where established professionals or individuals can make a difference however they would like. Essentially, anyone can fund any project they are interested in.
Unlike other crowdfunding websites, FundWok doesn’t just allow funding for creative projects. Instead, funders can pledge donations for initiatives, ideas, and goals. Another big difference between FundWok and traditional crowdfunding websites is that FundWok doesn’t require a lengthy marketing script to describe their project. Users can simply start searching for the funds that are already being offered through the platform.
Whether someone wants to start a fund for marketing a business, buying someone flowers, or adopting a pet, FundWok makes it simple for users to start a fund. Users can fund as little as $5 to as many projects or ideas as they would like. Once applicants have showed interest in the funds, funders and applicants can start communicating to get to know each other’s needs. Applicants have an opportunity to explain to the funder in 200 words or less why they want and need the funds. Then, the funder is able to select which applicant he or she would like to receive the funds.
FundWok’s team is excited to announce the launch of the new platform. Sonia Lin, Founder of FundWok recently said, “With FundWok, the sky’s the limit. There is no limits to how many projects can be funded. Any type of project can be funded. Companies and individuals can merge here to really make a difference.” Through the website’s social platform, funders and applicants can start and find the funds they need to make their dreams come true.
After two months of beta testing, the new platform is up and running. At this time, individuals and professionals can start and apply to funds. Further information about the new FundWok platform can be found online atwww.fundwok.com .
FundWok is an innovative online social community where resources are located and shared effectively. It serves as a hub for great ideas and initiatives that are encouraged and supported.
On January 5, 2015, the 25-day quiet period concluded regarding the Lending Club IPO, one of the leading marketplace lenders in the U.S. This means that those responsible for underwriting the securities may start publishing their analysis of the company starting today. The underwriters include many top banks, including Morgan Stanley, Goldman Sachs, Credit Suisse, Citigroup, BMO Capital and Wells Fargo.
The Lending Club offering was well received by the market, including a spike of approximately 65% over its initial offering price of $15, which was already at the high end of its expected share price. The stock has traded as high as $29.29, with an end-of-day closing high of $27.90. The stock opened today at $24.15, and any insight that can be gleaned from the underwriters is expected to have an impact on the stock.
Although Lending Club is one of the leading marketplace-lending platforms, its IPO and ensuing stock market growth provides validation to an area of alternative finance that many see as a niche industry. An online marketplace-lending intermediary such as Lending Club has many advantages over traditional banks. They are able to utilize technology in order to both reduce operational costs and inefficiencies as well as more proficiently connect the supply and demand of the lending market through automated processes.
The firm originally operated exclusively in the peer-to-peer lending space, but has subsequently expanded to include small businesses as the recipient of loans funded through marketplace lending. The market for these loans continues to grow, especially as borrowers are unable to secure loans from banks, which have a limited ability to lend under increased regulatory restrictions. In its SEC filings, Lending Club reported that since its inception in 2007, it has origination in excess of $6 billion in loans, with $1.2 billion of this in the third quarter of 2014.
With the success of Lending Club’s IPO represented by the market’s positive response to the company, marketplace lending has taken another step forward to become a more established, viable form of alternative finance lending. Lending Club is not alone in this industry, with many, well-known marketplace-lending competitors also seeing an increasing numbers of borrowers. This coupled with investor enthusiasm showing few signs of abating, this new, technologically-adept form of linking borrowers and investors with attractive rates appears to have well-positioned itself to see an increased position in the debt markets.
Washington, DC – U.S. Senators Michael Bennet (D-CO) and Jeff Merkley (D-OR) called on the Securities and Exchange Commission (SEC) to finalize its crowdfunding rules that will allow small businesses and start-ups to raise capital online and through social media.
Bennet and Merkley were lead sponsors along with former Republican Massachusetts Senator Scott Brown on the bipartisan CROWDFUND Act, which was passed on April 5, 2012 as part of the JOBS Act, which allows small businesses to raise start-up capital on the internet.
In a letter to SEC Chair Mary Jo White, the senators wrote, “The law directed the SEC to promulgate the necessary rules within 270 days of the enactment of the Act. The proposed rules, however, were not published for public comment until over 500 days later, on October 13, 2013. The comment period for the proposed rules closed on February 14, 2014. Despite the fact that finalizing the rules has been a stated Commission priority for all of 2014, the rules governing this crucial new source of financing have still not been finalized.”
Entrepreneur Andy Krafsur raised money for Spira Footwear by reaching out to friends and family. But that was a dozen years ago. After the economy tanked, the common tactic became a lot more difficult.
“The pool of people that you can go to has shrunken significantly,” Krafsur says, “and everybody goes to those same people.”
Then Krafsur found a crowdfunding website that helped his cash flow enormously. The Securities and Exchange Commission is about to approve rules allowing small businesses to reach out to investors through these kinds of crowdfunding networks.
But the rules are already generating controversy. Continue reading “Crowdfunding Can Help Build Business, But At What Cost?”
A bill that is submitted to the U.S. House by one or more representatives must gain the support of a committee before it moves to the full house for a vote. On average, less than 1% of all bills that are submitted for consideration actually reach the President’s desk for signature. Amazingly, equity and debt crowdfunding was one of those bills. Even though what was signed into law was not perfect, it is a workable solution and Congress should be congratulated for seeing the opportunity in crowdfunding for American entrepreneurship.
In the proposed rules, the SEC ran a cost benefit analysis of the crowdfunding legislation. (You can see our take on it in this VentureBeat piece: It might cost you $39K to crowdfund $100K under the SEC’s new rules). These costs were the impetus for a legislative fix on Capitol Hill — and that bill has entered into committee.