How to Understand the New World of Crowdfunding

By Lisa Kahn Grossman | Philadelphia Business Journal
|  Monday, Nov 25, 2013  |  Updated 12:02 PM EDT
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Understanding the New World of Crowdfunding

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Crowdfunding presents a tremendous opportunity for private companies to raise capital by collecting small contributions from a large number of investors.

Although crowdfunding has been around in some shape or form for centuries – praenumeration is considered an early form of this business model – it has just started to become regulated. The SEC and FINRA recently issued proposed rules, but there are still unknowns as to how it will play out, and there will certainly be more debate and regulation to come.

1. Crowdfunding seems like a great way for entrepreneurs to fund new projects, but I would like more specifics about the law. What parts of the JOBS Act relate to crowdfunding?

The Jumpstart Our Business Startups (JOBS) Act addresses access to capital in a number of ways. Title II and Title III relate to crowdfunding.

The regulations on Title II have been finalized and released. Title II of the JOBS Act lifts an 80-year-old ban on public solicitation for private offerings exempt from securities registration. In short, it allows private companies to publicly solicit and advertise to potential investors. Read more about this story on PBJ.com

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