When Congress passed the Jumpstart Our Business Startups Act in 2012, a proposal for a system of “equity crowdfunding” to back entrepreneurial ventures was included. There was excitement about democratizing investments beyond the virtual monopoly of venture capital funds. It’s been three years, and the Securities and Exchange Commission just issued 685 pages of crowdfunding rules last week which won’t take effect until after a 90-day comment period and final vote.
Dave Nicklaus takes a look at the new rules in his St. Louis Post-Dispatch column and gets Cliff Holekamp’s read on the issue.
Cliff Holekamp, a partner at Cultivation Capital who teaches an entrepreneurship class at Washington University, advises founders to approach the new rules warily. If you pitch your company later to traditional venture capitalists, he said, they may not want to deal with dozens of $2,000 investors who backed your crowdfunding campaign.
“I’m advising my students and entrepreneurs I work with to stick with the old rules until we learn how the new rules are going to play out,” Holekamp said. “But the more options we can provide for entrepreneurs, the better.”
Holekamp is senior lecturer in entrepreneurship and director of the MBA Entrepreneurship Platform at Olin.
