By Lisa Walls-Hester on Wednesday 16 November 2016
Indiegogo, the US-based platform for entrepreneurs, is to utilise new equity crowdfunding regulations that took effect in May to launch an equity crowdfunding service.
The equity crowdfunding rules that were recently passed by the Securities and Exchange Commission as part of the 2012 JOBS Act allow anyone the opportunity to invest in companies online (under strict conditions). Previously, only accredited investors with an annual income of more than $200,000 or a net worth of at least $1m, could invest in early-stage companies in the US.
“In a lot of ways, this levels the playing field,” said David Mandelbrot (pictured above), Indiegogo’s chief executive. “This was one of the few areas of the law where citizens were treated differently based on the amount of wealth that they have.”
All campaigns must be offered through portals registered with the Financial Industry Regulatory Authority and as such Indiegogo has created a joint venture with MicroVentures. Investment opportunities will be listed on both the Indiegogo and MicroVentures platforms, with the transaction being made through MicroVentures.
According to statistics compiled by the investment portal Wefunder, around 20 portals have so far become certified and only 55 companies have run successful equity crowdfunding campaigns, raising a total of $12.4m.
The new equity crowdfunding service on Indiegogo is launching with four new Title III offerings:
Indigogo estimates that for equity campaigns, companies will need to spend about $7,000 on compliance and regulatory costs. The site will take a fee of 7 per cent of funds raised, plus an additional 2 per cent in stock. Investors will pay a $7 processing fee or 2 per cent of their investment, whichever is higher.
Indiegogo says it has more than 15m visitors to its site every month and the company is well-positioned to rapidly expand the market for investment crowdfunding by introducing both investors and entrepreneurs to the new equity opportunities.