At Long Last, SEC Provides Final Equity Crowdfunding Rules
Summary
That, in effect, was the message the U.S. Securities and Exchange Commission sent today, voting to give retail investors the right to buy shares in tiny private startups through so-called crowdfunding mechanisms.The new crowdfunding rules, approved today by SEC commissioners 3 to 1, now make clear what has been somewhat murky: How tiny startups will be able to offer, not just small thank-you gifts to contributors like seeds or T-shirts, but equity to crowdsourced investors.But the SEC has been slow and deliberate—maddeningly so, to its critics—in making changes or creating more specific regulations, wanting to balance the needs of cash-hungry startups against the protection of so-called mom-and-pop investors who might see their life savings wiped out by bad bets.The founders of San Francisco-based Indiegogo originally wanted to help startups offer shares to their supporters, but there were no regulations in place to permit that when the company was founded in 2008 by Rubin, Danae Ringelmann, and Eric Schell, who were fellow MBA students at UC Berkeley’s Haas School of Business.All of us at Indiegogo are excited that the SEC is formally expanding the way in which everyone will be able participate in the entrepreneurial ecosystem through the amazing power of crowdfunding.” While the federal equity crowdfunding rules were being formulated, some states fashioned their own work-arounds.
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