Crowdfunding for Companies
Professor Andrew Schwartz presents research on U.S., Kiwi systems for securities crowdfunding at CU Law event

by Jessica Folker

In a Colorado Law Talks event, hosted by Akerman on Sept. 11, University of Colorado Law School Professor Andrew Schwartz presented his research on securities crowdfunding, a new way for startups to raise money.

As its name suggests, the idea behind securities crowdfunding bears some resemblance to sites like Kickstarter or GoFundMe. However, instead of seeking donations and rewarding contributors with, say, an autographed poster or premium podcast content, securities crowdfunding seeks investment from early stage investors who then get equity in the company.

Schwartz said the timing of the talk was auspicious because the Securities and Exchange Commission will be taking public comments until Sept. 24 about how to reform securities crowdfunding in the U.S.

Equity crowdfunding in the U.S. was first authorized under the Jump- start Our Business Startups Act, or JOBS Act, signed into law by President Barack Obama in 2012. The SEC published rules four years later, and equity crowdfunding debuted nationally in the U.S. in 2016.

Before the national rollout, a number of jurisdictions introduced their own systems, including Colorado, which adopted the Colorado Crowdfunding Act signed into law by Gov. John Hickenlooper in April 2015.

According to Schwartz, promoting entrepreneurship was just one of the goals of authorizing equity crowdfunding. Another was to create more inclusive funding opportunities for entrepreneurs, who have traditionally been funded by friends, family or angel investors, Schwartz said.

Entrepreneurs without wealthy friends and family or connections to venture capital have historically missed out on investment.

Some hope the model can also address a gender gap in startup funding. Schwartz cited a statistic saying that women-led businesses receive just 15% of venture capital funding.

To read the rest of this story and other complete articles featured in the Sept. 16, 2019 print edition of Law Week Colorado, copies are available for purchase online.

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