SEC Legalizes Equity Crowdfunding

On Friday there was big news for the US startup community as the SEC voted to adopt the final rules for equity crowdfunding under Title III of the JOBS Act. These rules will allow non-accredited investors to invest in early-stage private companies for the first time. The new rules are expected to take effect early next year. If you are an unaccredited investor, this is the news you’ve been waiting for!

Here’s what you need to know:

• The new rules will allow companies to raise up to $1 million in a 12-month period through a crowdfunding campaign, from unaccredited investors.

• Companies will need to provide their potential investors with financial statements, but some first-time issuers and those seeking less than $500,000 will not be required to have the statements audited

• Companies will be able to advertise their offerings in a variety of ways, including posting them on crowdfunding portals for investors to peruse. (Kickstarter has said that it is not interested in expanding into equity crowdfunding, though Indiegogo is considering it along with many traditional equity crowdfunding platforms like SeedInvest)

This means that a whole new pool of startup investors will be joining the market. It’s yet to be seen what the total impact will be but at a minimum it will certainly increase the number of options startups have had seeking funding. We’ll keep you posted on this story as it evolves.

You can read more on this in the New York Times.