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New Fundraising Options For Entrepreneurs

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feldman_amy Amy Feldman
Amy E. Feldman is a business commentator and legal business...
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By Amy E. Feldman

PHILADELPHIA (CBS) - A new law on crowd funding was passed that may change how companies attract investors.

Three days after actor Zach Braff posted a request for money on the internet platform Kickstarter to fund a movie, he met his $2 million goal from individual contributions.

Crowd funding websites like Kick starter, have been legal in the US only as fundraisers for individual projects because the people who give money aren’t considered investors – they are donors who get some small prize like a t-shirt or a product sample in return.

But with the passage of the Jumpstart Our Business Startups Act (the JOBS Act – clever), small companies may be able to raise money through the crowd funding model. The new rules will make it legal for small businesses to solicit up to a million dollars without having to register share transfers through the SEC.

This is a huge new investment tool, but for now, it’s in the hands of the SEC to put together rules so that companies can raise money but at the same time protect small investors from getting scammed.

For now, if you’re willing to pay a couple of bucks for the chance to see a cute actor take the big screen, you’ll be fine. But just because the law has been passed doesn’t mean you shouldn’t still be skeptical when asked to invest your hard earned dollars online.

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