April 3, 2012
As we reported yesterday, the president is expected to sign a bill on Thursday to allow crowdfunding for startups from non-accredited investors (i.e., you and me).
Once this happens and the SEC details the rules, EquityNet will be one of the first sites to allow this new crowdfunding. The site has already seen $50 million crowdfunded from accredited investors, who can use its analytics and tools to manage their portfolios.
Unsurprisingly, EquityNet CEO Judd Hollas is an advocate of crowdfunding. “Raising capital is usually the most challenging, time-consuming, and limiting aspect of starting and running a young business,” he wrote. With mass crowdfunding, potential investors could soar from 2 million to 50 million, and available capital from $1 trillion to $5 trillion.
But do we really need more money in the market, and hence more startups – when they’re already a dime a dozen?
Hollas acknowledges that the wrong companies will sometimes get funded, and new investors will sometimes lose money. But, he says, that will be outweighed by better-funded startups, more jobs, and more innovation.
As we also reported, the CROWDFUND Act includes safeguards to protect unsavvy investors. Hollas thinks they don’t “go far enough,” so EquityNet provides a bunch of extra features – which also differentiate it from other crowdfunding sites. These include analytics on risk and returns, standardized business plans across companies, and comparable data on valuation, profit margins, and other metrics. These could help quell the qualms that some critics have expressed.
Other sites that have shown interest in mass crowdfunding include IndieGoGo. If you’re a startup looking for funding, we’ll keep an eye on this issue and help you compare options.
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