The Slow Revolution of Private Equity

By: Rohan Kusre, COO // Co-Founder, Crowdentials

After months of restless anticipation, there is finally some substantial progress towards the implementation of the JOBS Act. It has been exactly one month since the Title II rules- the ones based around general solicitation- went into effect and the SEC is moving forward with implementing the next portion of the monumental legislation.

Title III, the poster child of the JOBS Act, is focused around the sale of private equities in an open market. It is as groundbreaking for the industry as it is controversial in its own right. There are as many proponents of the crowdfunding bill as there are naysayers and today the SEC discussed the proposed rules that would provide the infrastructure for equity crowdfunding to take place. Platforms such as EarlyShares have been waiting for these exact rules in order to set in motion their part in facilitating the sale of private securities.

There have been claims that equity crowdfunding will result in a ‘ghetto stock market’ due to the high risk of fraud and the low barrier to entry. There have also been concerns about the cost of properly keeping up with SEC regulations. Currently, an investment group will spend anywhere between $50,000 and $100,000 in due diligence and this begs the question of how such practices will be handled at a smaller scale for investments that will be under $20,000.

Well, where there is a will there is a way. Solutions are already in place for companies wishing to utilize the new legislation as the SEC continues to implement it. Companies like CrowdCheck provide quick and secure diligence reports while companies such as Crowdentials assist with making sure your investor is accredited among various other compliance needs. Sure, the waters of the JOBS Act regulations are currently a bit murky but there is a lot of money to be made within these environments and those that take advantage of it will be handsomely rewarded. So when can those interested to utilize the new legislations expect to be able to do so? This is where it gets a bit tricky.

Title II of the JOBS Act, which went into effect one month ago on September 23^rd, and it allows for companies that are making a private security offering to be able to use public advertising in order to get the word out. While the JOBS Act itself was signed on April 5^th,2012, the SEC didn’t release the proposed rules until July 10^th of this year. This seems to be an ongoing trend as the SEC has delayed the implementation of the whole act by several months multiple times.

There is hope that this trend will be broken as the SEC held a live webcast today where the commission discussed the rules surrounding equity crowdfunding. Once these rules are posted to the Federal Registrar (this usually only takes a few days), they will be open for comment and the ball will be rolling to get this brand new industry up and running.

With industry experts waiting to pounce on the opportunity to help out investors and entrepreneurs navigate through the dense regulations of the JOBS Act, those on the fence about joining the crowd should feel a sense of assurance in doing so. CrowdCheck, Crowdentials, and several other industry leaders are poised to iron out the wrinkles as more and more people get involved with Title II and Title III of the JOBS Act.

Crowdentials Makes It Easier to Crowdfund Investors

There’s been a lot of chatter about the April 5 signing of the JOBS Act. Most people in the startup community are especially excited about the possibility of offering equity via crowdfunding platforms.

What many have missed in all the exultation is that, while it’s easier to offer equity, the standards for investors have risen. It’s now more difficult and invasive to prove you’re an accredited investor, but companies have to take “reasonable steps” to ensure their investors are accredited. This means more intrusive questions that few investors are willing to answer.

As Richard Rodman, CEO of Crowdentials, puts it: “There are two sides to this ruling. On one side, the bar for advertising has been lowered. On the flip side, the bar for verifying accredited investors has been raised dramatically.“

Crowdentials is on top of the new problem. This week they launched the Certified Accredited Investors (CAI) program. The program will use a simple form and third parties to verify that an investor is accredited. After that, they will certify that the investor is accredited. No need for every crowdfunding platform to have access to your bank statements or tax records. The program is secured by multiple passwords, randomly generated IDs, and pages that expire within a certain amount of time.

“Transparency with privacy” is the goal of the new program.

Crowdfunding platforms that expect a big need can license the technology based on monthly requests. Individual companies can use the service just once or twice for a smaller fee.

Crowdentials is accelerating at the new FlashStarts accelerator in Cleveland. Investors, crowdfunding platforms, and statups can check out the new program on their website. Below is an infographic explaining how it all works.

Ohio Startup Crowdentials Launches Crowdfunding Compliance Platform

Crowdfunding is the hottest space for startups right now. And now, with changing regulations, it could get even hotter.

The Jumpstart Our Business Startup Act was passed over a year ago, paving the way for crowdfunding startups to offer equity. After the bill passed in both the Senate and the House it was then referred over to the Securities And Exchange Commission (SEC) to come up with the regulations for crowdfunding.

The JOBS Act has a lot of regulations to follow, including the fact no individual making less than $100,000 can invest more than $2000 or 5% of their net worth. Crowdfunding is going to spawn a whole new type of investor and there are currently no regulatory software programs out there. That’s the guts behind Crowdentials.

Richard Rodman, the cofounder of Crowdentials, spoke about crowdfunding in February at the Everywhereelse.co Startup Conference in Memphis. He founded the company with Chief Operating Officer Rohan Kusre and Chief Technology Officer Max Heckel. The three came up with the idea for Crowdentials in April and were recently accepted into the Cleveland-based FlashStarts’ startup accelerator program.

While the SEC is still finalizing its regulations, the Crowdentials technology is ready to go. “Our compliance solution is all variable-driven and will adapt to any regulations put forth,” Rodman said in a statement. Once the regulations are officially complete, the entrepreneur plans to launch “within minutes.”

In the meantime, Crowdentials is preparing a collection of multi-media resources and guides for both crowdfunding rookies and experts. In addition to teaching the basics, the comprehensive suite will cover the nuances, regulations, risks, and opportunities associated with equity crowdfunding.

Crowdentials’ technology ensures that investors, businesses, and platforms are following the SEC’s rules. According to Rodman, “Crowdentials is the vital link between the SEC regulations and all crowdfunding parties”.

Individuals who gain compliancy through Crowdentials can trust that they are abiding by the regulations, and startups can feel confident that they are raising money through compliant individuals. Rodman believes the SEC’s regulations are meant to protect the new crowdfunding population from fraud and financial distress. “That’s why compliance is so important,” the entrepreneur said. “When everyone is aware of their level of compliance, we can make more educated investment decisions.”

Crowdfunding has spawned hundreds of crowdfunding sites that will help connect would-be investors to startups and other small businesses’ needing funds. Now startp founders are finding ways to support the crowdfunding economy. Cowdfunding vetting companies, insurance companies, and even discovery companies have all popped up over the past year with more expected when the rules change to allow equity investments.

In the meantime feel free to check out Crowdentials at crowdentials.com

7 key elements of a successful crowdfunding campaign.

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