What is equity crowdfunding?

Last Updated: Jan 04, 2016 05:21PM CST
Equity crowdfunding is the name given to the process whereby people (the “crowd”) invest in a company in exchange for shares.

It is a new capital raising and investing method. Equity crowdfunding enables startups and small companies to raise up to 1 million capital/year from non-accredited and accredited investors, through online equity crowdfunding platforms. Non-accredited investors are considered all individuals with an income lower than $200 K/year. Until now only accredited investors (income higher that $200K/year) were allowed to invest in companies in exchange of equity. Since May, 2015 when the The Florida Intrastate Crowdfunding Exemption law was passed non-accredited are able to become shareholders. Unless the purchase is an accredited investor as defined by Rule 501 of Regulation D of the Securities Act of 1933, the aggregate amount sold by an issuer to an investor under this exemption during a 12-month period does not exceed: (i) if the investor’s annual income or net worth is less than $100,000, the greater of $2,000, 5% of the annual income of the investor, or 5% of the net worth of the investor; or (ii) if the investor’s annual income or net worth is $100,000 or more, the greater of $100,000, 10% of the annual income or 10% of the net worth of the investor.

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