We are living in strange times. Nations have shut down, governments have gone power happy with lockdown measures, and economic turmoil is prevalent.
The SEC is looking for solutions, however, with a recent step taken, meant to spur the growth of crowdfunding in the U.S.
One resulting effect from all of this, is a reduction in venture capitalism, as noted by many. A previously alluded, a positive can be found in all of this – equity crowdfunding. With VCs holding their wallets close to the chest, companies looking to generate capital have begun turning to this method.
We recently took a look at how equity crowdfunding works, and why it is appealing to many.
Just look at StartEngine, for example – the U.S. based crowdfunding platform has just completed their most successful quarter, to date, facilitating nearly $25 million invested in SMEs.
The appeal behind such platforms isn’t just a one way street, with interest from investors only. StartEngine notes that in the past month alone, companies interested in hosting capital generation events on their platform have spike by 62%.
Perhaps the addition of, and endorsement from, Kevin O’Leary to the StartEngine team has helped spur this interest, of late.
A Relaxed State
While the growth of StartEngine is a great sign to see, it isn’t enough. The SEC has recognized this, and just announced new steps built around loosening restrictions on crowdfunding regulations. Jay Clayton, Chairman of the SEC, states,
“In the current environment, many established small businesses are facing challenges accessing urgently needed capital in a timely and cost-effective manner…Today's action responds to feedback we have received from our Small Business Capital Formation Advisory Committee and others about the difficulties these companies may face in conducting an offering within a time frame that meets pressing capital needs, while continuing to provide appropriate protections for investors.”
Changes to the rules are numerous, and can be found in full HERE. The following, however, are a few examples of these temporary amendments.
- Financial statement exemptions
- Broader eligibility
- Easier ‘early closing’
While these measures are temporary, they will hopefully have the desired effect, and help those intended.
While this most recent step comes in the midst of the COVID fallout, the SEC made another proposition in recent months, surrounding what is meant to be an ‘accredited investor’. Although not specific to crowdfunding, this move is just another example of the SEC working to ensure accessible, yet safe, investing practices – in others words, their job.
In Other News
Crowdfunding is an interesting concept. Although the practice got off to a slow start, since 2012, popularity is growing. To learn more about some of the top crowdfunding platforms, make sure to peruse the following article, and see which one might be right for you.