A new beginning
After waiting a long period of time, the US Securities and Exchange Commission (SEC) has finally published the Crowdfunding Rules. The SEC also set May 16, 2016 as the official date to allow websites to offer the equity crowdfunding service. Since May 2016, a group of websites that have been approved to operate have entered the US crowdfunding market.
Diversified Crowdfunding Services
If we take a quick look at the US crowdfunding market, we will find that the market is a bit messy and very confusing. Players in the crowdfunding market include websites that have been offering diversified services. Those existing players include donation-based websites like Kickstarter and Indiegogo, websites that have been approved by state law and regulators for intrastate capital crowdfunding, and websites that offer services based on Regulation D and/or or Regulation A, or for accredited investors only.
The new websites that are supposed to offer Title III, stock-based crowdfunding service, or just stocks may have added more confusion to companies and investors. Among those new websites, some of them have already been in the crowdfunding business for several years and were opened to accredited investors or accepted investments for Regulation D/A etc.
Brilliant Future
Over time, any website that wants to offer Title III crowdfunding (or shares) will need to get approval from regulators. But, by now, business owners or investors need to find out which website offers what type of crowdfunding service before using any of them. Perhaps, that was one of the reasons why crowdfunding websites, including some with millions of visitors, have seen a significant drop in traffic in recent months.
Although no one knows what will happen to the US crowdfunding market in the future, hopefully the market will take care of itself. With the Crowdfunding Regulation in place, the US crowdfunding market will grow and expand into a healthy market.
In some other countries, crowdfunding has been launched without proper regulations. The market quickly turned sour for companies and investors. Although most of the crowdfunding websites in that country are honest players, the bad reputation of the whole industry pushes most of the players to exit the market completely or run crowdfunding businesses under the cover of other businesses.
One of the key questions for the US crowdfunding market is whether the “crowd” will support and invest in companies seeking funding on websites. At the moment, no one has an answer yet.