Strictly Business

A Business Law Blog for Entrepreneurs, Startups, Venture Capital, and the Private Fund Industry.

Crowdfunding Archives

The Legal Pitfalls of Rewards-Based Crowdfunding Campaigns

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crowdfundingRewards-based crowdfunding sites, such as Kickstarter and IndieGoGo, have become a common way to get innovative businesses and products off the ground. The premise behind these crowdfunding sites is that, by raising small monetary contributions from a large number of people interested in supporting the business idea via the Internet, companies and entrepreneurs can amass enough capital to fund a fledgling project or venture. In exchange for supplying the funds, the funders are to receive the product being developed or certain other specified incentives, assuming that the entire funding goal is met by a certain deadline. If it’s not, the funds are to be returned to the backers.

The concept of crowdfunding has actually existed for some time. Players in the music industry launched online campaigns to fund tours and albums as far back as the late 1990s. It wasn’t until the mid to late 2000s when the word “crowdfunding” began to be used, and with the launch of major crowdfunding sites like IndieGoGo in 2008 and Kickstarter in 2009, the phenomenon took off and reached the popularity it sees today.

This post describes the common legal pitfalls associated with conducting a rewards-based crowdfunding campaign and steps to take to alleviate those pitfalls. [Read more…]

New Options for Raising Capital for Startups and Growth Companies

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“illustrationTraditionally, when raising capital, an overwhelming majority of businesses have used Rule 506 of Regulation D, also often known as the “private placement exemption” as their exemption from securities registration requirements. In recent years, Congress, the SEC, and state regulators have enacted a number of alternative exemptions designed to make capital formation easier for growing businesses, such as equity crowdfunding and “mini-IPOs,” as well as made refinements to existing exemptions, such as Rule 147 (intrastate offerings) and Rule 504. In this post, I’ll provide an overview of these newer options. [Read more…]

The Founders’ Intro to Raising Startup Capital

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For many startup founders, what led them into the risky but thrilling world of starting their own company was technology, innovation, the ability to affect the world, and the freedom of being their own boss. Learning the ins and outs of financing, attracting investors, and understanding how to comply with state and federal securities laws is probably not at the top of the list of a startup founder’s most favorite things. But, given that the vast majority of startups will rely on outside financing in their early years while they progress in stages of production and expansion, their founders are going to eventually need to do some real-world study in the basics of raising startup capital in order to grow their business while protecting their vision. [Read more…]

Thoughts on the Final Crowdfunding Regulations

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In October, the SEC finally completed its implementing regulations to Title III of the JOBS Act, more commonly known as the “crowdfunding” exemption. The 600-page release can be found here. I’m not going to bother summarizing these regulations, as so many others have done a very good job doing of that already.  So, as I previously did with the proposed regulations, I’ll instead offer some of my thoughts on and reactions to the final rules: [Read more…]

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