Summary: If you’ve ever run a small business, then you know the financial effort it requires to stay afloat. That’s where crowdfunding can give entrepreneurs a helping hand. Simply put, crowdfunding is the practice of funding a business or cause by raising small amounts of money from a large number of people typically via the internet. By leveraging the power of social media and crowdfunding websites such as Kickstarter, Go Fund Me, and Angel List entrepreneurs scan expand the pool of investors from which they raise capital beyond the traditional venture capitalists and angel investors. So, for example, if you have an idea for a product, let’s say an app that scans the ingredients in your fridge and gives you recipe ideas, then you can go to a crowdfunding website and pitch your idea. Promote it and hope that people will be interested enough to invest and help you get the funds you need. You can promise investors free access to the app or other special deals. IPOs vs. Crowdfunding Let’s imagine that you have a $100 to $1,000 and would like to invest them. Should you invest in an IPO or invest in a crowdfunding deal? The answer isn’t that simple. In the United States, the Securities and Exchange Commission (SEC) restricts investments in companies before an IPO to only Accredited or Sophisticated investors. The reason is understandable: most of these investments come with a risk, and people don’t have the necessary financial background to make educated decisions. So, only individuals making more than $200k a year for at least two years or having a net worth of a least $1 million can invest in companies before they go public. Things have changed. Back in 2012, President Obama signed the Jump-Start Our Business Start-Ups Act (or the JOBS Act) which allows small businesses to advertise shares for sale to anyone, regardless of their income. The Act was pretty straightforward, but it took the SEC more than four years to put it into practice. They were concerned about protecting people from scammers, bad investment ideas or their poor judgment. The new rule allows people to invest between $2,000 and $100,000 a year in crowdfunding projects. So, if you’ve ever dreamt of playing real life “Shark” like in the hit show “Shark Tank,” you now have the opportunity to do it, but with some limitations. http://ianbalina.com/hacking-venture-... Website: http://ianbalina.com Instagram: https://www.instagram.com/diaryofamad... Twitter: https://twitter.com/diaryofamademan Snapchat: https://www.snapchat.com/add/diaryofa...
