• 10.30.15

SEC Expands Equity Crowdfunding Beyond Rich People

Crowdfunding comes to the masses: Starting next year, even small investors will be able to buy equity stakes in private companies.

SEC Expands Equity Crowdfunding Beyond Rich People
[Photo: Ildar Sagdejev via Wikimedia Commons]

It’s been three years since the Jump-Start Our Business Start-Ups Act passed, giving startups the option to sell equity stakes online. But until the Securities and Exchange Commission (SEC) released a set of final rules on Friday, only accredited investors–those who meet required levels of income and assets–could buy them.


Starting early next year, small investors will also be able to legally participate. Crowdfunding–real crowdfunding, the kind where you get returns when your investment succeeds–will soon be as widely accessible as Kickstarter and Indiegogo campaigns.

Under the new rules, companies can raise up to $1 million in a 12-month period through a crowdfunding campaign. Backers with an annual income or net worth of less than $100,000 will be allowed to invest up to $2,000 per year or up to 5% (whichever is greater) of the lesser of their income or net worth. Backers with income or net worth greater than $100,000 can invest up to 10% of the lesser of their annual income or net worth.

Earlier this year, Indiegogo CEO Slava Rubin told Fast Company that he was eagerly waiting for equity crowdfunding to come to the masses. “Our North Star is that we’re trying to democratize funding,” he said at the time.

[via Fortune]

About the author

Sarah Kessler is a senior writer at Fast Company, where she writes about the on-demand/gig/sharing "economies" and the future of work.