View Full Version : Getting a headstart on crowdfunding your business

Tom Allen
08-30-2012, 06:13 PM
To get a head start on crowdfunding a business, an entrepreneur could work on 4 of the 7 steps of crowdfunding—now—before the SEC’s crowdfunding rules are issued around the end of 2012.

The 7 steps to crowdfunding a business are: 1) prepare your business plan, 2) assemble your due diligence package, 3) have your due diligence plan reviewed either by a service or your crowdfunding portal/broker, 4) conduct “pre-rules” advertising, 5) have your portal/broker sell your securities, 6) receive the funds from your portal/broker when your target funding amount is reached, and 7) execute your business plan.

Before the SEC issues the rules, executing Steps 1, 2, and 3 are straightforward, but doing Step 4 (“pre-rules”advertising) would be up to the entrepreneur’s interpretation of Section 302 of the Crowdfund Act, which says:

"....an issuer who offers or sells securities shall....not advertise the terms of the offering, except for notices which direct investors to the funding portal or broker...."

Entrepreneurs may consider “pre-rules” advertising in order to prevent their offer from getting lost in the flood of crowdfunding advertisements that is sure to come when the crowdfunding rules are issued. A pre-rules ad will have much greater visibility than an ad published after the rules are issued. A pre-rules preview advertisement would plant the seed in the mind of an investor of an upcoming investment offer.