Startups can now raise up to $50 million by selling stock online to anyone, opening the door for Internet-based equity crowdfunding platforms to begin operation.
The Securities and Exchange Commission voted unanimously on Wednesday to adopt rules that permit startups to raise money from the vast majority of Americans, including provisions that allow for deals to be made over the Internet.
Previously, only individuals with more than $1 million in net worth or income of at least $200,000 for each of the last two years — so called “accredited investors” — could easily invest in startups. Some websites already offer the chance to invest in startups online, but prospective investors had to be accredited and subject to more stringent regulations.
“This is overwhelmingly good news, as it opens up a new path for small private companies to raise money directly from their communities, customers, and followers, and a new way for members of the general public to invest in startups, local companies, and new kinds of investment without being ‘accredited investors,'” said David Pricco, editor of CrowdExpert.com in an email to Mashable.
Just how many people might be interested in dropping money on a startup is the subject of some debate, but the World Bank projects that the worldwide equity crowdfunding market will hit $93 billion by 2025. Crowdfunding investment platforms are now active in countries around the world.
Read the whole story by Jason Abbruzzese on Mashable.