Crowdfunding may be the next big wave for investing in small rapidly growing businesses, but it’s still the wild west of investing, and both entrepreneurs and investors need to proceed with caution.
The Office of U.S. Senator Michael Bennet is hosting a series of crowdfunding seminars across the state for Colorado small and start-up business owners looking to raise early-stage capital.
In Colorado Springs, Bennet is partnering with Startup Colorado Springs and Epicentral to host the crowdfunding seminar June 28 at Epicentral, 409 S. Tejon Street, to explain how the latest trend in crowdfunding works.
The recently approved JOBS Act, signed by the President in April, is meant to jump-start business startups by allowing small businesses to use the Internet to raise up to $1 million from small-dollar investors, known as “crowdfunding.”
“Given the fact, that we are not a robust angel investment area, this provides connectivity to new sources of funding and the opportunity to new investors who want to get into startups,” said Chris Franz, Colorado Springs entrepreneur and angel investor who will be a panelist at the upcoming seminar. “The limitations are lower – it’s easier for people to participate.”
There are potential pitfalls, Franz said.
“There is risk of a bad investor and risk of group think,” he said.
Crowdfunding has become popular in recent years for art and technology projects with successful crowdfunding sites such as Kickstarter.com, which launched in 2008 and now nearly half of all the projects on the site have been fully funded to the tune of millions in public pledges.
The JOBS Act is meant to promote American entrepreneurship and innovation while maintaining important protections for American investors, according to the prepared statement from the White House press secretary.
Under the new legislation, crowdfunding must occur through platforms that are registered with a self-regulatory organization and regulated by the SEC. In addition, investors’ annual combined investments in crowdfunded securities will be limited based on an income and net worth test.
The legislation removes some of the previous legal and financial barriers and allows entrepreneurs to be more aggressive about seeking funding. It gives the entrepreneur more flexibility and formalizes the process.
The Colorado Springs crowdfunding seminar includes local panelists: Paul Lizer, CEO of Devium, which used crowdfunding; Jeff Thomas, founder of Invertual; Ben Sparks, attorney; Justin Vause, Accion; Robin Roberts, Pikes Peak National Bank; John Street, entrepreneur; and Ric Denton, Colorado Springs Technology Incubator.
RSVP at Crowdfunding Seminar