SEC Opens New Floodgates For Startup Funding

It’s been in the works for years, but now it’s official: Startups can raise money by non-accredited investors online. The Securities and Exchange Commission voted last week to approve of Title III of the JOBS Act, which allows SMEs to raise money via crowdfunding.

The legislation is known as the Regulation Crowdfunding of the JOBS (Jumpstart Our Business Startups) Act.

According to analysts, the SEC’s decision could make waves in the national economy as the market suddenly has access to 233.7 million potential startup investors, up from the previous 3.5 million.

[bctt tweet=”The market suddenly has access to 233.7 million potential startup investors.”]

Reports said the legislation was created in an effort to help policymakers guide the development of the crowdfunding space, which is quickly infiltrating the market without much regulation.

The Crowdfund Intermediary Regulatory Advocates (CFIRA) group, launched soon after the signing of the JOBS Act, is part of this effort to collaborate with the SEC and other regulators that have been eyeing the crowdfunding space and other alternative lending players. CFIRA issued a press release following the SEC’s decision.

That announcement included commentary and reaction from some industry players. Chris Tyrell, the founder and CEO of private placement platform Offerboard Group, said that he is “thankful” the SEC made this decision.

“This part of the industry has been an industry-in-waiting, and I know many platform operators — and prospective platform operators — are eager to get started helping companies raise capital under the new regulations,” he said.

Kim Wales — a JOBS Act and securities crowdfunding expert, as well as the founder of Wales Capital, which offers business strategy and regulatory compliance consulting services — said that while the SEC’s vote is a move in the right direction, the market will need greater effort from players and authorities alike to ensure crowdfunding can be done fairly and securely.

“This is a timely move from the SEC,” Wales said. “But now we must ensure that an ecosystem is in place to support the industry, especially due diligence and transparency.”

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