It is being described across the country as a “historic day for startups, small businesses and entrepreneurs.”
But what do the new rules on crowdfunding released by the Securities and Exchange Commission (SEC) last month actually mean? And, importantly, what is happening in West Virginia to take advantage of them?
Here’s the basics:
It used to be that if you wanted to invest in a small business or product development, you had to be an officially-accredited investor. That meant having a net worth of more than $1 million, or an annual income of more than $200,000. Unfortunately, that isn’t most of us!
But what Kickstarter and Indiegogo couldn’t do was allow investors to actually purchase real equity in the new business; instead, startups offered rewards and thank you gifts for people who chipped in some of their hard-earned.
Now, the two worlds have come together: Regulations and Security + the populist power of crowdfunding.
The new rules mean that, like Kickstarter and Indiegogo, everyone can invest in a small business that is seeking capital.
But, the improvement on then Kickstarter and Indiegogo model these new rules unlock is that, instead of receiving a t-shirt or thank you note in return for your investment, small investors will actually be buying a future share of that business’ profits (or losses!)
What does this mean for West Virginia?
An Intrastate Crowdfunding Bill will be presented to the Legislature when it convenes for the 2016 session in January. This bill will create the framework for a state-based crowdfunding system (or systems) here in West Virginia.
Details of that bill are still being negotiated. Once these rules are settled upon, the next building block to be rolled into place will be a web platform of some kind – the portal through which potential investors and small businesses will meet, exchange cash and equity, and be secured through appropriate oversight and regulations.
The Hub wants you to be involved in shaping this bill! If you’re an entrepreneur, tell us: how will crowdfunding facilitate your plans for launch or expansion? And what kind of a platform do you want to see in West Virginia?
Or, are you excited about being able to invest some of your savings in new or expanding local businesses? What kind of entrepreneurs are you looking for, and what will make you feel safe and secure when using a new crowdfunding platform?