Will Crowdfunding Help Startups?
As most know, the JOBS Act passed by Congress in April provides a number of regulatory changes designed to facilitate capital formation for start-ups and early stage companies. One of the most significant provisions is a revised exemption from registration for relatively small (up to $1 million) offerings, typically sold to friends and family and other non-accredited investors. ThomsonReuters’ PEHUB recently published an excellent summary of some of the key advantages/disadvantages entailed in this financing strategy.
Crowdfunding rules due from SEC in 2012
In our work with early stage technology companies, most of whom confront daunting funding challenges on the road to building positive cash flows, we believe that any regulatory change which expands the size and depth of the pool of financing sources available to these companies augurs well for preservation of the true venture capital model.
Unfortunately, the SEC has until the end of 2012 to codify the specifics of the rules which will govern this exemption. Given that important legislation is dependent upon the wheels of government actually moving combined with an election later this year, we will be fortunate to see those rules in the next seven months. In the meantime, we’ll look to Facebook’s IPO to keep investor’s interest in the venture asset category.
John is Executive Vice President, Valuations & Financial Advisory Services of The Brenner Group. John joined The Brenner Group® in 1994 and manages the firm’s Valuations and Financial Advisory Services Groups. John has more than thirty-five years of experience in corporate finance, and has assisted more than 600 companies with financing, public underwritings, mergers, acquisitions, and valuations. Prior to joining The Brenner Group, John held executive management positions at Smith Barney, The First National Bank of Chicago, and Price Waterhouse. He received an MBA in Finance from The Wharton School of Business, and a BA degree from the University of Pennsylvania. John is a candidate member of the American Society of Appraisers and a member of the Appraisal Issues Task Force.
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