SEC Says Yes to Some Crowdfunding Platforms

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Legal uncertainty has hung over crowdfunding but now letters from the SEC have lifted this cloud of doubt from several platforms. By Jessica Stillman (Editor, Women 2.0)

Crowdfunding may have been exciting entrepreneurs for awhile, but whether the idea would be as appealing to regulators has been an open question. Now the SEC has given the green light to two platforms, lifting doubt and firing the starting gun on further crowdfunding innovation. Referly's Danielle Morrill broke the news that AngelList received a letter from the SEC stating the authorities were not recommending taking action against the platform. This, she notes, follows similar good news for Y Combinator-backed FundersClub just two days previously:

On March 26th The Funders Club received a no-action letter from the Securities and Exchange Commission stating that it will not recommend enforcement action against the year-old private equity investment platform, making it the first government sanctioned online VC.

What has not yet been reported is that AngelList, a competing service used by early stage companies to receive introductions to investors and take some online investment, received its own no-action letter just two days later on March 28th.

She called up AngelList CEO Naval Ravikant to discuss the news, so check out her post for more details and his comments. TechCrunch also covered the news, speculating on its roots and impact on the industry:

With both AngelList and FundersClub receiving the blessings of the SEC, we can expect more platforms for crowdfunding investment in startups to take off. A few weeks ago, for instance, another Y Combinator-backed startup called WeFunder launched with its own crowdfunding platform for startup investing.

These letters are also being sent in the wake of the passage of the JOBS Act, which is expected to go into effect by the end of the year. That act will make it easier for non-accredited investors to make investments in non-public companies, while also enabling startups to publicize that they are raising funds.

Women 2.0 readers: Are you considering crowdfunding as a possible funding source?

Jessica Stillman is a freelance writer with interests in unconventional career paths, generational differences, and the future of work. She writes a daily column for Inc.com and has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist, among others. Follow her on Twitter at @entrylevelrebel. Photo credit: ÁWá.