New equity crowdfunding option, JOBS Act, opens new doors for some businesses

Global Business

In May, the Jumpstart our Business Startups ACT, known as JOBS, opened the door for small-time investors to buy equity stakes in startups.

So far only about 100 companies have registered with the U.S. Securities and Exchange Commission (SEC) to hold equity sales using the ACT. But, that could soon change, as one of the world’s largest crowd-funding platforms—Indiegogo— recently partnered with Microventures to allow for equity crowdfunding through its site.

CCTV America’s Mark Niu reports.

New equity crowdfunding option opens new doors for some businesses

In May, the Jumpstart our Business Startups ACT, known as JOBS, opened the door for small-time investors to buy equity stakes in startups. So far only about 100 companies have registered with the U.S. Securities and Exchange Commission (SEC) to hold equity sales using the ACT. But, that could soon change, as one of the world’s largest crowd-funding platforms—Indiegogo– recently partnered with Microventures to allow for equity crowdfunding through its site. CCTV America’s Mark Niu reports.

In an industry dominated primarily by men and legacy families, Republic Restoratives serves up a different concoction.

Pia Carusone and Rachel Gardner started Washington D.C.’s only female-owned distillery by raising funds on crowdfunding site Indiegogo.

After a successful campaign, they became one of the first businesses to use Indiegogo‘s new equity crowdfunding option — where almost anyone can contribute at least $100 and get shares in their company.

“People are really excited about it. For as little as $100 they can be a part of this business and a part of our success. And it’s very helpful for us, not only do we need the money, but we need the support. Because we are a small company and we’re not independently wealthy. This is built on our hard work,” said Pia Carusone, the co-owner of Republic Restoratives.

The pioneering campaign is being watched closely at Indiegogo’s headquarters in San Francisco.

Along with Republic Restoratives, the very first batch of equity crowdfunding choices includes a gaming company, a social marketplace for music and a mobile-device connected game ball.

“We launched a few weeks ago and it’s going really well. You can see here we’ve done nearly half a million dollars in four campaigns and nearly all four of them have hit their target,” said Slava Rubin the co-founder of Indiegogo.

The arrangement is more complex than a regular crowdfunding campaign, where Indiegogo takes five percent of the money raised. With the equity crowdfunding option, businesses must pay fees of up to $7,000 to prepare for regulatory and compliance costs.

In addition, Indiegogo charges entrepreneurs seven percent of the funds raised and two percent of the total value in the form of equity.

For businesses like Republic Restoratives, there is now an extra responsibility of answering to shareholders. But, Carusone believes those shareholders help fuel more business.

“We already have over 300 investors through Indiegogo through this crowdfunding campaign–300 is a ton. Ideas that get generated from that crowd support both in terms of social media, product support, they might be more likely to ask for a product out at bars and restaurants if they live locally, just sort of the ripple effect of a larger crowd is I think really powerful,” Carusone said.

The Republic Restoratives co-owner says the funds will allow them to spread into markets beyond Washington, D.C. and expand their product line.


Slava Rubin discusses equity crowdfunding

To discuss how the equity crowdfunding option works, CCTV America’s Mark Niu sat down with Indiegogo’s co-founder Slava Rubin.

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