Jumping the Gun

As Equity Crowdfunding Nears, Platforms Race to Be the First

Equity-crowdfunding sites aren't wasting any time waiting for the SEC.
crowdsurfer As Equity Crowdfunding Nears, Platforms Race to Be the First

(flickr.com/portland_mike)

Equity-based crowdfunding, whereby unaccredited investors plunk down money in a company in exchange for more money down the road, is set to be legal sometime in early 2013. Small investors and unfunded startups are waiting until after the Securities and Exchange Commission figures out how to write the rules so widows and orphans don’t get fleeced of their last pennies. That could take a while. But the timeline hasn’t stopped startups from competing to be the very first equity crowdfunding site. Some aren’t even waiting until the law is finalized.

“Our platform is scheduled to launch in July as the first operating equity based crowdfunding platform,” one Betabeat commenter wrote on behalf of Smart Money Entrepreneurs, a platform for accredited and unaccredited investors alike to find and vet startups to fund. July is ambitious, considering equity-based crowdfunding for small-time investors is illegal until the SEC and FINRA make their final decisions in January 2013 at the earliest.

Smart Money Entrepreneurs can, however, set up equity-based crowdfunding with accredited investors while waiting for the rules to come down regarding unaccredited investors. The startup can also set up all but the final functionality for unaccredited investors, preparing for a last-minute dash across the finish line once the specific requirements for equity crowdfunding platforms have been laid out by the SEC.

Smart Money Entrepreneurs is just one of dozens of portals lining up to start taking other people’s money. (The JOBS Act, which made this type of funding legal, calls crowdfunding sites “portals.”) One such startup portal, Peoples VC, is also pushing itself as the “first mover” in equity-based crowdfunding, calling itself “the # 1 Crowd-Powered equity-based Crowdfunding Portal” even though no equity-based crowdfunding portals are open yet.

Hedgeable, an online investment management service, has declared it will be “the only platform that will charge nothing for companies to list, nothing for buyers to buy, and will make no money on transactions, regardless of how SEC defines the role of similar platforms, beginning in 2013.” Count chickens much?

Follow Adrianne Jeffries on Twitter or via RSS. ajeffries@observer.com

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