Crowdfunding: A New Fundraising Option for Colorado Entrepreneurs

Crowd Surfing with Skype @SXSW

A new bill that is expected to be signed into law soon will allow startups to raise finance using online platforms and their social networks. It forms part of the JOBS Act, whose goal is to cut down on red tape for US startups and help these companies expand and create jobs.

Coined the Crowdfunding Bill, but in actuality part of the Jumpstart Our Business Startups (JOBS) Act, it is backed by Colorado Senator Mike Bennett. The Bill encourages equity crowd-funding, which allows start-ups to raise seed capital from any number of investors in small amounts through emerging equity crowd-funding platforms. Some of these platforms include:

  • Seedups, which claims, via their website, to have matched startups with investors for over $58 million in capital thus far.
  • Crowdcube, out of the UK, providing family, friends or people with an interest in a business now have an easy way to invest in people and companies that they want to support
  • Kickstarter, is on track to deliver $150 million in equity funding. It is a hotspot for creative ideas, allowing users to post their own ideas for projects  and solicit donations from the rest of the Internet to turn them into reality. Aimed squarely at the creative set, the Kickstarter’s guidelines state ““Kickstarter can be used to fund projects from the creative fields of Art, Comics, Dance, Design, Fashion, Film, Food, Games, Music, Photography, Publishing, Technology, and Theater. We currently only support projects from these categories.”

In with the Good, Out with the Bad

Some restrictions placed on these platforms by the Bill’s amendment are designed to make sure that they do thorough checks on both the startup companies and the potential investors in order to prevent fraud. Websites that want to act as crowdfunding investment platforms will have to register with the SEC. This will hopefully keep those non-legitimate businesses away, and protect the investing public from swindlers.

The availability of this creative funding option may be just what some of our state’s startups need for their initial business formation plans, allowing them to progress from forming their Colorado LLCs, C Corps and S Corps to being able to grow and enrich their ideas and actually build their business.

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