Blog‎ > ‎

An in depth Look at CrowdFunding - - CFP

posted Apr 3, 2013, 2:59 PM by Andrew Manzo   [ updated Apr 5, 2013, 4:15 PM by David Khorram ]
This is a new chapter in America. One that we believe is equivalent to the birth of the Internet... the democratization of capital. Let's call it the Jobs Revolution.

The Old Way: (ouch!)

Securities laws in the USA made it illegal to advertise or even tell anyone you didn't have a "pre-existing relationship" with about your business' need for money. They also made it illegal for you to have more than 35 unaccredited (not-rich) investors in your business.

Start-ups and small businesses had limited options... 

  1. bank or SBA loan (most applicants are turned down)
  2. venture capital or angel groups (99% of applicants don't get money... heck, most businesses can't even get an introduction to make a pitch in the first place)
  3. family & friends (yeah right, like they have money)
In other words, if you're a start-up... or even if you're a 3rd generation commercial bakery that needs $150,000 for new ovens... you're out of luck. Access to capital was practically non-existent. Result, constricted growth and anemic job creation.

There are 17 million businesses with less than 100 employees. Most need capital and can't get it. There are 1 million new businesses started every year, most finance with credit card debt and family funds. Many fail not due to a lack of sales, but because they can't get the right amount of capital they need to finance the business.

• • • • • • • • • • • • • • •
Wow, Congress Did Something Right!

In a massive bi-partisan vote, on April 5th, 2012 the JOBS Act became law. This makes it possible...

First, to advertise your capital needs to rich people (you couldn't advertise before, so you had to network and get really lucky) in 506(c)-D offerings

Second, to advertise your capital needs to regular folk who aren't rich but might give you $25 to $1,000 – get enough of these folks together and you have your capital (the "crowd" in crowdfunding).

Heads Up! The American JOBs Act – Read the complete text (offsite:

• • • • • • • • • • • • • • •
The Future

A tectonic shift that will leave the Wall Street old guard in the dust. They will be the Sears to the new Amazons. This will create entire new classes of huge companies servicing the capital formation industry. It will enable regular people to do what a very select class of people have had the privilege to monopolize for 80 years. It changes everything!

• • • • • • • • • • • • • • •

Ah, we can't wait to delete this paragraph from the website!!! But, for now, although the JOBS Act is law, the Title II and Title III provisions are not yet lawful.

Status as of December 15, 2012:

Title II (506c-D "crowdfunding for rich people") – the SEC published rules several months ago, but the lengthy review process seems to be delaying final rules. With a new SEC Chairwoman in place, we fervently hope she takes the necessary steps to creating an amazing legacy for herself by quickly finalizing the rules. In doing so, this country will see millions of jobs created. This is currently anticipated sometime in February or March 2013, but don't hold us to that.

Title III ("crowdfunding for everyone") – former Chairman Christopher Cox, in a speech he gave in November 2012, said that the SEC has pretty much finished up the proposed rules and could put them out for public comment as soon as January or February. After the public comment period there will be more internal work at the SEC, and then final rules will be issued. However, then FINRA must also issue rules. Estimating the end of 2013 (fingers crossed).

Posted from;