Today marks an important day in history as the SEC passed Title 3 allowing main street investors (aka citizens earning an income of less than $100,000 a year) to invest in small businesses and startups.
Under the new rules, people with annual income or net worth less than $100,000 will be allowed to invest a maximum of 5 percent of their yearly income or net worth, or $2,000 if that is greater. Those with higher incomes can invest up to 10 percent. An individual can’t invest a total of more than $100,000 in all crowdfunding offerings during a 12-month period. Investors generally couldn’t resell their crowdfunding securities for one year.
For their part, companies will be allowed to raise a maximum of $1 million a year from individual investors without registering with the SEC. Companies will have to provide information to investors about their business plan and how they will use the money they raise, as well as a list of their officers, directors and those who own at least 20 percent of the company.
With revolutionary news like this many people are both excited and concerned that high-risk businesses that couldn’t receive funding from accredited investors will attract the mom and pop investors.
However, there has been a long time debate of investing in Silicon Valley startups vs. Las Vegas casinos. Accredited investors can invest in startups vs. main street investors (mom and pop) can go to Las Vegas and lose everything against the house regardless their income.
A lot of focus has been moved to equity crowdfunding now so it’s important to do diligence on the different platforms, if you’re planning on investing.
There are tons of options currently in basically every niche market imaginable:
So an important note is all these companies have just received the news from the SEC today. I’m 100% sure that companies in the equity crowdfunding space (i.e. Angel List, CircleUp ect.) have been preparing the news today for a while. There will be some awesome new features launching on these products to draw attention in 2016.
In the nature of data dumps, here’s a detailed list of the top 100 crowdfunding platforms in order of their traffic via CrowdfundingPR:
Many people in the industry are extremely excited about the announcement, and I am ready to see how the top platforms are going to start attracting non-accredited investors.
I know that peer to peer lending platforms like Prosper and Lending Club allowed non-accredited investors and were the pioneers of the main street investor ecosystem. I imagine this news is bittersweet for them, BUT they now have the chance to snatch up breakout companies quickly as the market starts to explode.
In summary, Crowdfunding has changed drastically today.
The floodgates have just been opened and there is going to be some super cool innovations around the crowdfunding space in 2016.
Do your diligence and have fun investing in startups and small businesses!