Glossary for Investors

Crowdfunding

Crowdfunding means financing a business venture, product, idea, or property using funds pooled from a large number of potential investors (“”the crowd””). Crowdfunding is typically associated with raising funds through an online platform, which utilizes technology to present information and manage the transaction. Crowdfunding began as a new means to finance business or artistic ventures and initially relied on donations from the crowd. Pioneering companies like Kickstarter and Indiegogo helped fuel the growth of donation based crowdfunding and also utilized reward crowdfunding, where donoros would receive a gift or sample product for their funds. In 2012, Congress passed the JOBS Act to spur the creation of equity crowdfunding. Equity crowdfunding differs substantially from its predecessors in that the crowd can now earn a return on investment, rather than a reward or goodwill. Technically, the “”crowdfunding”” portion of the JOBS Act still has not been implemented by the SEC. However, some of the regulatory changes implemented in late 2013 allow accredited investors to access a range of new ventures that were previously very difficult to access. These offerings are filed with the SEC but are not subject to the steep regulatory costs associated with public offerings.

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