Five Principles of Equity Crowdfunding

Equity Crowdfunding Principles

Equity crowdfunding is an updated version of an old concept, based on new principles.

Equity Crowdfunding Values

The horizon of crowdinvesting in the U.S. has generated bold predictions, high expectations and vibrant on-screen enthusiasm. An increasing hype of references for equity crowdfunding principles sheds significant emphasis on its most delicate segment: the importance of educating non-accredited investors. Building communities of healthy equity crowdfunding practices is an ongoing process and the delay of Title III has provided everyone with the unique opportunity to look before we leap. While the SEC is actively finalizing Title III provisions, truCrowd aims to capture the do’s, don’ts and principles of equity crowdfunding. Here are the attributes we believe make crowdinvesting an exceptional financing instrument:

1. Accessibility to cost effective capital – We’ve all heard the line, “There’s not enough money to start my business,” so often it’s become a stereotype. Until now, acquiring traditional capital took hard work and sweat and dealing with high risks and no guarantees. Federal rules are shedding their 80-year-old mentality to stepping into the present moment, where the need for capital, the desire to support a community and new technologies create an opportunity to form a prosperous threesome.

2. Inclusiveness of all industries and investors – The legal barriers that made crowdinvesting a luxury of the rich are about to be lifted.  After Title III, non-accredited investors will get the chance to buy stocks in businesses and support ideas they believe in. This fundamental equity crowdfunding principle provides equal access to capital and investment opportunities, therefore speaking to everyone.

3. The lean startup methodology principle – The designers of the JOBS Act statutory framework (Sherwood Neiss, Jason W. Best and Zak Cassady-Dorion) aimed to provide small businesses with an operational growth instrument “while avoiding the unintended consequence of having larger organizations use this asset class as an ATM.”. With that in mind, the framework limits crowdfunding to $1 million and raises awareness on how much money business owners actually need to reach their goals.

4. Financial transparency – Crowdinvesting is about building an issuer’s relationship with their environment.. This equity crowdfunding principle supports clear and complete self-disclosure based on what information the crowd can perform its due diligence. Establishing realistic milestones for the company’s future enables the business owner to manage investor assumptions and expectations about his business. The non-accredited investor will have all the necessary information at his/her fingertips before deciding whether to invest or pass.

5. Legislative protection. The most feared and cheered principles of equity crowdfunding are based on Title III’s provisions. In order to prevent businesses from soliciting money from random people, the JOBS Act mandates that anyone seeking crowdfund investments must join a SEC-registered website – such as truCrowd. The platform acts as a gatekeeper to the pocketbooks of investors and must uphold all of the well-established regulations set in place.

The initiating, growing and advertising processes for emerging growth companies will undergo a full makeover once crowdinvesting become legal. Among its many benefits, we believe accessibility to cost effective capital, inclusiveness of all businesses and all investors, lean startup methodology, transparency and legislative protection to all be highly promising principles of equity crowdfunding.


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