A Very Simple Explanation of Why Crowdfunding Matters

Crowdfunding will change the world. 

Crowdsourcing (the act of giving money to a person or business through the internet in exchange for social good or an item to be delivered later) is already here in this country.  See www.kickstarter.com.  The next level is what is known as securities crowdfunding, or investment crowdfunding, or simply “crowdfunding.”  That is the act of giving money in exchange for debt or equity stake in the business. 

A recent article on Forbes by Devin Thorpe makes clear the colossal growth in funding.  Based on the recent study by massolution, funding given for crowdsourcing projects was $1.5B in 2011.  It is expected to double to $3B in 2012.  Oh, by the way, it is expected to increase by 16,566% to 500B in 2013.  While I haven’t seen any numbers directly on the U.S. market, it is hard to argue that the majority of this growth can be attributed to the approval of securities crowdfunding in the U.S. market.

Simple enough for you?


Regulation D Versus Crowdfunding

Comparison of Private Funding  
Regulation D (506) Versus CrowdFunding  
  Regulation D CrowdFunding
Potential Investor Pool 2,500,000: Accredited Investors 300,000,000:  Everyone                                   
Total Number of Investors Allowed Unlimited Unlimited
Raise Amount Unlimited Up to $1,000,000
Individual Investor Annual Limit Unlimited $2,000 without restriction; 5% for income/NW between $40k and $100k; 10% above $100k (max investment of $100k)
Required Intermediary No Broker-Dealer or Funding Portal