Starting today, small companies can raise up to $1 million from ordinary investors through what are called "crowdfunding portals." These portals are different from sites like Kickstarter. Instead of just getting, say, a t-shirt, by investing through one of these portals, you get an actual equity stake in a small company that's looking to raise money and grow. You own a piece of the company. And you can make money by selling that stake down the road if it appreciates in value. As part of the JOBS Act in 2012, Congress decided there should be a way for ordinary Americans to invest in small businesses or startups too. To protect investors though, there are new rules surrounding the process.If you're a small business owner looking to raise money this way, you have to go through a registered broker dealer or a funding portal that's been approved by regulators. Some of these new portals include NextSeed, SeedInvest, and Wefunder.
This seems to be an amazing new idea for companies to raise money quicker and easier than traditional bank loans and professional investors. The only flaw I see in this plan is if there are too many fees associated with either the investors or business owners, that could really slow down the popularity of crowdfunding.
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