The Securities and Exchange Commission is about to vote on a proposal that should it easier for small startups to raise funds.
The regulation, called Title III of the JOBS act, will allow companies to raise up to $US1 million by selling stock to small investors. These so-called unaccredited investors will be able to buy $US2000 of a startups shares through crowdfunding platforms.
Right now, the SEC restricts those kinds of investments only to high-net worth investors, and crowdfunding has instead worked more like advance sales of a startups product or service.
Virtual reality headset maker Oculus got its start on Kickstarter by offering backers everything from t-shirts and posters, to the chance to spend a day at the company.
The JOBS, which stands for Jumpstart our Business Startups Act is meant to foster the growth of smaller companies, by making it easier for them to raise funds. Its best know provision allows companies with less than $US1 billion in revenue to secretly file for initial public offerings with the SEC, in order to have their filings reviewed outside of the public eye.
There will be limitations on the crowdfunding: startups would have to be based in the US and provide disclosures to investors and the SEC alike.
But the new regulations have the potential to substantially alter how startups are raising money in early stages.
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