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US SEC Allows Crowdfunding of Start-Ups US-Based Start-Ups Allowed to Offer Equity Stakes to Non-Accredited Investors

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美国证券交易委员会允许初创公司众筹 Ordinary Americans will from now on be able to invest online in companies they believe in, following the Securities and Exchange Commission approval of a new set of rules for the JOBS (Jump-start Our Business Start-ups) Act signed by President Barack Obama four years ago. Until recently, only accredited investors –  those with an annual income exceeding $200,000 or a net worth of at least $1 million – could have invested in most deals advertised on numerous investment portals appearing within the past few years.

From now on, US-based start-up companies will be allowed to raise up to $1 million a year via crowdfunding, albeit with rigorous limitations – allowing individuals with income lower than $100,000/year to only invest up to $2,000 in crowdfunding. In addition, the regulatory burden was eased for new start-ups, and companies seeking less than $500,000 will not be required to provide audited financial statements. The new SEC rule, known as Regulation Crowdfunding, is a potential game-changer in the market, shifting the focus of smaller start-ups from VCs and institutional investors to Plumber Joe who might find value in the product and invest in its future, rather than just buying one for himself.

Equity crowdfunding is an innovative financial model for new start-ups, attracting attention by venture researchers worldwide and disrupting old banking, according to the World Bank. In a recent guest post, Prof. Gary Dushnitsky has shared the results of his research of over 500 crowdfunding platforms in Europe. Prof. Nir Vulkan’s research project, “Herding and Overfunding in Equity Crowdfunding“, examining financial herding within the new crowdfuding phenomena, received a CIV Award in 2015. We expect crowdfunding to become one of the focuses for the Financial Models research strand, to be developed by CIV in the near future.

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