Mini-Angels: You Might Be One – Or Benefit From One – Soon!
November 20th, 2011
For anyone needing more substantial investment than typical reward-based crowdfunding may attract, there seems to be good news on the horizon. peerbackers has been involved in supporting and championing some new legislation that may ease restrictions on those wanting to raise money through selling equity shares in their ventures via our platform. The new rule called “Entrepreneur Access to Capital Act” (H.R. 2930) proposes to allow small businesses to use crowdfunding sites as a way to solicit small investors in their ventures (currently this is prohibited by SEC rules which do not allow public solicitation of capital, nor does it allow for unaccredited investors to participate in the funding process). What does this mean for you and me? That those in your social circle and beyond may soon be able to invest up to $10,000 (per person) in your idea in return for a small equity stake therefore freeing up necessary capital that we currently cannot get through traditional sources such as bank loans – or through venture capitalists or angel investors if we do not have them in our rolodex!
The legislation passed the House with wide support (407-17) and now is in the hands of the Senate. Keep your fingers crossed – or better yet, write your Senator expressing your support for the passage of the Bill!
In summary, the key highlights of the House bill:
The Entrepreneur Access to Capital Act (H.R. 2930):• Creates a crowdfunding exemption from SEC regulations for firms raising $5 million, with individual investments limited to $10,000 or 10 percent of an investor’s annual income, whichever is lesser.
• Preempt Blue Sky Laws and eliminate the application of the ban on general solicitation for issuers relying on the crowdfunding exemption.
• Excludes crowdfunding investors from counting as shareholders for the purposes of calculating the 499-shareholder cap under 12(g) of the Securities Exchange Act.