The Securities Exchange Commission, the body that enforces federal securities laws and regulates the securities industry, the nation’s stock and options exchanges, among other functions have agreed to propose a rule that would allow the average-Joe to invest in startups. The “Regulation Crowdfunding” proposal would allow a company to receive money directly from nonaccredited investors in exchange for equity-ownership of the company. Without this law, smaller companies had limited options for raising money from investors (typically accredited investors, commercial banks and VCs). Now they can raise money similar to that as if they were a public company.
There are conditions to crowdfunding:
1) Companies can only raise up to $1 million per year from crowdfunding
2) Investors can only invest upto 5% of their annual income.
3) Investors must invest through crowdfunding portals like CircleUp.
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