There has been a lot of ink spilled about the JOBS Act, especially its “crowdfunding for securities” provisions. The JOBS Act is an exciting piece of legislation for the startup community. What is my favorite part of the Act? Section 201 (quoted below).
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The idea of crowdfunding has been around for some time, but is only now getting traction among lawmakers who can bring about the loosening of Securities and Exchange Commission (SEC) restrictions and make the practice a readily available option for startups to generate investment revenue.
Even before the name “crowdfunding” was coined around 2001, it has been a regular practice in charitable circles where a large network of donors contributes smaller individual amounts toward the cause. In more recent years – especially after the Internet’s cultural revolution – the idea has been applied in different ways including the funding of: band recordings and concert tours, journalistic enterprises including the controversial WikiLeaks, film production, political campaigns and blogging. A number of organizations have sprouted up with platforms where investors and ideas meet but the legality of these arrangements remains clouded in many cases.