Crowdfunding is fundamentally changing how companies raise capital. Companies are able to seek capital directly from accredited and non-accredited investors. Further, companies that might not attract capital from traditional sources are able to raise funding from numerous sources through online portals and other entrepreneurs participating in the growth of these exciting ventures.
The JOBS Act, signed into law by President Obama on April 5, 2012, created two kinds of Crowdfunding:
Title II Crowdfunding, which allows companies to use general solicitation and advertisement (i.e., the Internet) to find accredited investors
Title III Crowdfunding, which allows companies to raise up to $1 million per year from anybody
Title III Crowdfunding final rules were adopted on October 30, 2015 by the SEC. These rules were designed to facilitate intrastate and regional securities offerings. They were also crafted to assist smaller companies with capital formation and provide investors with additional protections.
Crowdfunding II concepts:
Allows companies to raise money using general solicitation and advertising, a practice that has been prohibited for 80 years. Companies can now place advertisements anywhere (social media, online, newspapers, etc.). There is no limit on the amount of money that can be raised. All investors must be "accredited."
Crowdfunding III concepts:
Allows companies to raise up to $1 million per year from an unlimited number of investors. The amount each investor may invest is limited to the investor's income and net worth. Money is often raised through highly regulated internet portals