In May 2016, the Securities and Exchange Commission (SEC) began
allowing private companies to raise as much as $1 million per year
from everyday investors. How? The SEC approved the use of online
"crowdfunding" platforms run by intermediaries to carry
out the mandate under the Jumpstart Our Business Startups (JOBS)
Act. Here's a closer look at the mechanics of crowdfunding, the
reporting requirements based on the size of the company and the
market's response to crowdfunding in its first year.
The basics
Historically, the SEC has allowed private companies to solicit
capital only from "accredited" investors, which are
people with net worth of at least $1 million (excluding the value
of their primary residences) or annual income of more than $200,000
per individual (or $300,000 for married couples). Online
solicitations to these wealthy individuals were required to come
from SEC-registered intermediaries.
