Earlier this year, I showed you how the JOBS Act of 2012 will allow you raise capital by selling shares of your company to the public (just like the large corporations). Though the Securities and Exchange Commission (SEC) has not fully authorized this equity crowdfunding yet, experts anticipate we will get the go-ahead by early 2015.So, if you need up to $1,000,000 of capital it’s time for you to start laying the foundation for your campaign.
As this infographic shows, when the JOBS Act got rid of the “accredited investor” requirement and allowed entrepreneurs to publicize their efforts to raise money, it increased your pool of potential investors from $258K investors to over $233 Million. According to Kendall Almerico, getting access to these investors will not be a walk in the park. With the proposed SEC rules, you will have to jump through a bunch of expensive hoops before you will be able to sell shares via crowdfunding.
Given all of this, how would you feel if, because “bad actors” were involved in your issuance, you were forced to unwind your deal and refund all the capital back to the investors? Obviously you would be mortified. According to Cathering Clifford, Crowdcheck is just what you need to provide the protection you seek. Actually, Crowdcheck was gracious enough to provide a list that gives us a general idea of the kind of individuals who should be monitored and the types of violations they would have to commit before they can be labeled that “bad actors”. But, even with guidelines, without the help of a company as Crowdcheck, who has the time to do searches across different databases to ferret out this type of information?
Though it may be frustrating, if you plan to sell shares using equity crowdfunding, you must find a way to avoid “bad actors”. In this instance, it makes sense to just spend the money to have an expert do comprehensive bad actor searches for you. This way you avoid being “penny wise but pound foolish”.
