With access to capital being the primary hurdle that entrepreneurs currently face, understanding what crowdfunding regulations imply for capital markets is critical for startups and small business owners. Small businesses only receive one percent of all investment capital in the U.S. — an astoundingly low figure.
Crowdfund investing enables large groups of people to pool small amounts of money together to help fund an entrepreneur in exchange for a piece of the company — kind of a cross between traditional venture capital and purchasing shares on the open market. Social networks will bring interested investors together to fund entrepreneurs and enable them to discuss associated risks.
In 2013, debt- and equity-based crowdfund investing will become legal thanks to the Startup Exemption, part of President Obama’s JOBS Act which passed Congress earlier this year. This was an unparalleled development for job creators needing investment capital for their startups but who encountered hurdles obtaining a small business loan or traditional venture capital. Raising capital for small- to medium-sized startups will become substantially more efficient via crowdfund investing, setting the stage for 2013 to be the “Year of the Entrepreneur.”
[via Huffington Post]