INNOVATION AND ENTREPRENEURSHIP
The JOBS Act seeks to accelerate the rise of Internet-enabled “crowdfunding” as a source of startup capital for entrepreneurs. But the gains may be countered by major growing pains.
(1) The aggregate amount of equity sold to all investors by the company does not exceed $1,000,000
(2) The aggregate amount sold to any investor does not exceed:
a. The greater of $2,000 or 5 percent of the annual income or net worth of an investor, as applicable, if either the annual income or the net worth of the investor is less than $100,000 b. 10 percent of the annual income or net worth of an investor, as applicable, not to exceed a maximum aggregate amount sold of $100,000, if either the annual income or net worth of the investor is equal to or more than $100,000
(3) The transaction is conducted through a regulated crowdfunding intermediary (broker or funding portal)
(4) The company complies with certain information delivery requirementsFurthermore, nonaccredited investors seeking to participate in crowdfunding a company will need to:
(1) Review investor-education information
(2) Positively affirm that he or she understands that the investor is risking the loss of the entire investment and that such investor could bear such a loss
(3) Take a quiz demonstrating an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small issuers and the risk of illiquidityCompanies will be required to make available to potential investors and the SEC certain company information, including an anticipated business plan and, most significantly, a description of the company’s financial condition, including, scaled disclosure depending on the offering amount, with offerings in excess of $500,000 requiring audited financial statements.
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