On September 23, 2013, entrepreneurs will have a new way to reach accredited investors with private offerings—advertising. Stemming from Title II of The JOBS Act, allowing advertising is intended to make it easier for entrepreneurs to raise capital for their new businesses, and create jobs in the process.
There are approximately 8.6 million accredited investors in the U.S. and they fund 3% of startups/small businesses. During 2012, an estimated 260,160 angel investors collectively invested $22.9 billion in 67,000 companies. An additional $26.5 billion was invested by venture capitalists in 3,698 companies. Advertising to these wealthy individuals has the potential to significantly expand the market of accredited investor small business capital.
Later this year, it is anticipated that the SEC will release the rules for Title III of The JOBS Act, enabling entrepreneurs to offer securities (debt or equity) to unaccredited investors in exchange for investment in their early-stage companies.
This new fundraising tool, known as equity crowdfunding, comes with a myriad of regulations that will have to be met. While potentially transformative for entrepreneurs, it is one of many ways available to raise money for new businesses. The primary options today include: personal savings, friends and family, donation crowdfunding, angel investment, venture capital and institutional investment.
To educate entrepreneurs about this exciting option—how it works, whether it is a good fit for their business and how to utilize it—CareerFuel has launched a comprehensive crowdfunding education site for entrepreneurs. Free for their use and regularly updated, CareerFuel is the go-to place for the crowdfunding education “issuers” will need.
AnnMarie McIlwain is a former Executive Board member and co-head of the Issuer Committee of CFIRA.org, a leading advocacy group for crowdfunding regulations. She is a panelist at the 2nd Annual Crowdfunding Investor Innovation Conference on August 9, 2013. TheHill’s Congress Blog recently published "Is Crowdfunding to be Crowdless", an opinion piece co-authored by McIlwain.