New Securities and Exchange Commission rules going to effect today will allow small investors to participate in equity crowdfunding, in which startups can raise up to $50 million through online campaigns, the Wall Street Journal reported today. The rules, called Regulation A+, authorize an existing provision of the 2012 Jumpstart Our Business Startups Act (JOBS Act), which set out to ease securities laws on equity crowdfunding and other fundraising tools for new ventures. Until now, that law has limited to accredited investors — those who earn over $200,000 a year or have a net worth of at least $1 million — the ability to buy shares through crowdfunding campaigns. The new rules are “democratizing something that historically only institutions and the high net worth had access to,” said Kiran Lingam, general counsel at SeedInvest, a crowdfunding platform. Beginning in September 2013, more than 1,700 companies have raised over $700 million through equity crowdfunding, according to Crowdnetic, a firm that tracks about 18 of the industry’s most popular crowdfunding sites. In the three months ended March 31, accredited investors committed $161 million to startups through those sites, more than three times the amount from the same quarter a year ago. There are roughly 80 crowdfunding sites but many are largely inactive, according to Crowdnetic.
