The Big New Crowdfunding Vehicle for Startups Is a Bit of a Flop So Far

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Originally published in Entrepreneur Magazine

By Douglas Fink

On May 16, the latest stage of the 2012 JOBS Act took effect, but the expected gusher proved to be only a trickle: Only ten portals were approved, for crowdfunding for small investors.

The JOBS Act was created during the Great Recession to help capital-starved entrepreneurs. This latest rule, called Reg CF or Title III, allows private companies to crowdfund from non-accredited investors up to $1 million, in exchange for equity.

It’s the first time mom and pop investors may easily buy stakes in startups, and the Act’s use of online portals was supposed to make such transactions easier. However, investors who went looking for those online portals on May 16 likely had a hard time finding many that were operational.

The SEC has said that it expected at least 50 platforms to register in advance of May 16. However, only about 30 platforms applied to the SEC to operate as a funding portal, and fewer than two dozen completed the Financial Industry Regulatory Authority’s (FINRA) paperwork by the April deadline. With the portals grappling with red tape, few online platforms were operational on the big day.

Read the full story at https://www.entrepreneur.com/article/277458

Douglas Fink is the CEO of Group Capital LLC