If your clients have ever wanted to explore venture capital (VC) investing, they soon may have more choices under a model called "crowdfunding." As enabled by Congress in the 2012 JOBS Act, crowdfunding allows entrepreneurs to promo equity investment in their companies through SEC-approved portals. In July of this year, the SEC advanced the concept by eliminating the ban on advertising 506(c) securities issuers to accredited investors.
At a later date, the SEC will decide on how to implement Title III of the JOBS Act, which will allow non-accredited investors to participate in crowdfunding.
Until now, most top crowdfunding sites have been donation-based. Forbes' reported on the Top 10 crowdfunding sites.
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While crowdfunding may soon become a hot trend (similar to Bitcoin), investors face several risks including business failure, lack of share liquidity, and potential dilution of the first equity shares sold. For an analysis of crowdfunding risk factors, read Elliot Dater's informative report in the Pittsburgh Business Times.
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