Yesterday was a big day for the capital markets. For the first time, startups can raise (relatively small amounts of) capital from the public without registering with the SEC and by offering its securities over the internet. It’s called “crowdfunding.”
Some people think that crowdfunding is a good thing while others think it’s too dangerous, even when subject to the fairly strict SEC regulations that have just now become effective. The naysayers believe that only sketchy companies that can’t raise money via the “private placement” structures already in place will go the crowdfunding route.
But proponents stress that the safeguards, which the SEC has taken three years to develop, will help; and that relatively modest crowdfunding transaction costs will be affordable to a new segment of issuers. It is also the first type of offering that levels the playing field between the sharks and small investors who want to expand [Read More...]