How To Start & Grow Your Business

Legal Changes Allow Internet Startups to Seek Crowdfunding!

Jan 19th, 2015
  • Estimated reading time: 3 min read
  • Hummy's

    1Ban against public solicitation of VC's has lifted. 2Crowdfunding is now allowed for web startups. 3Take advantage of the "Kickstarter" format.
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Fund Raising

Legal-Gavel on stack of American money Photo Credit: Vitaliy Pakhnyushchyy

Deciding to begin an Internet startup can be one of the most rewarding decisions that an entrepreneur ever makes. However, like anything these days, doing so costs money. To complicate matters, raising capital for an Internet startup is far from an easy thing to do. Fortunately, there are several very viable options for raising capital. Ironically enough, the Internet itself is an incredible way to raise funding for a quality startup. Previously, that had not been the case but a recent government act has paved the way to allow entrepreneurs to generally solicit for potential investors, which is incredible news for those looking to begin their Internet startups.

Out With the Old (Act), Solicit Anew

In effect, it used to be much more difficult for entrepreneurs to contact venture capitalists or angel investors. Previously, entrepreneurs were forced to find introductions to investors that might be willing to back their startup privately, but recently that has all changed. On September 23, 2013, a part of the recently signed JOBS Act went into effect. The entirety of the act is not all that important for the purpose of entrepreneurs, but one part in particular is crucially relevant. The ban on general solicitation was lifted as part of the JOBS Act, which has lasting ramifications for crowdfunding and other public solicitation initiatives that an entrepreneur may wish to use to fund his or her startup. In short, the wise and legally aware entrepreneur will take advantage of this new advantageous position, since crowdfunding is now one of the easiest and most efficient ways to start funding that dream business!

Benefits of Crowd-funding

When deciding to begin a new startup online, having venture capital can often be essential to the early stages of the process. There are few better places to obtain venture capital than reputable crowdfunding websites. Indeed, sometimes the crowdfunding can be incredibly large, as one startup funding website helped a music label get 1.5 million dollars in venture capital backing. Better still, crowd-funding is often the simplest, safest and most efficient way that an entrepreneur can go about raising capital. The U.S. Securities and Exchange Commission has strict and draconian rules in place that restrict exactly whom an entrepreneur may solicit for investment funds. Further, there are restrictions in place as to how the solicitation may be done. Long story short, crowdfunding is an incredibly efficient and legally safe way in which to fund the Internet startup that any entrepreneur could be proud of.

In Short, Take Advantage of General Solicitation

The law is not always a friend of entrepreneurs, but when new laws such as these benefit the entrepreneur, it is essential that a savvy businessperson act immediately. While there are many ways to generally solicit investors openly in order to raise capital for the startup, this article advocates seeking out crowdfunding primarily. This is an ever growing field, as evidenced by websites like Kickstarter, and there are plenty of startup focused websites that emulate the Kickstarter format. Put plainly, take advantage of general solicitation!

This article was written by Emily at Tech Patioa blog about blogging, tech news, photography, SEO, Internet marketing, social media and lots more!