Want to raise money for your new product, company, or creative project?
A hot new option, crowdfunding, has all kinds of people — entrepreneurs, small-business owners, inventors, investors, artists, speculators and crooks — excited.
For many years, entrepreneurs and aspiring small-business owners had only two options when seeking investors.
They could beg financing from a small group of those closest to them, what’s referred to as friends, family, and fools. Or if they had a truly promising concept, they might be lucky enough to raise money from angel investors or venture capitalists.
But one thing they couldn’t do was to spread a wide net to people who thought they had a good idea and wanted to help get their vision off the ground.
Historically, to protect unsophisticated people from losing money in highly risky start-ups or from being scammed by con artists hyping the next big thing, U.S. securities laws prohibited private companies from raising money from more than 35 non-accredited investors, i.e. people with significant personal wealth.
These laws seemed to work to protect the public until the dot-com era. Then many people suddenly got very rich from investments in early stage Internet companies.
Because of the accredited investor rule, it seemed as if only the wealthy were allowed to get in on the gold rush. The laws also limited the amount of money available to new ventures.
So, in 2012, Congress passed the Jumpstart Our Business Startups (JOBS) Act. Among other things, the law allows start-ups to …