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The Law Blogger is a law-related blog that informs and discusses current matters of legal interest to readers of The Oakland Press and to consumers of legal services in the community. We hope readers will  find it entertaining but also informative. The Law Blogger does not, however, impart legal advice, as only attorneys are licensed to provide legal counsel.
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Tuesday, May 17, 2016

Regulation Crowdfunding

StartEngine Co-Founder Ron Miller
Yesterday a new set of SEC rules took effect that could be a game-changer in the way start-up projects obtain venture capital. The new rules, known as Regulation Crowdfunding, are the culmination of a bi-partisan act signed by President Obama nearly 4-years ago.

The Jump-Start Our Business Start-Ups Act introduces a series of technical changes that streamlines the process of raising capital for small businesses. The Act and the SEC regulations that went live yesterday will make it easier for companies to raise venture capital; now the little guy can swim with the sharks.

Many companies hoping to take advantage of the new rules have been gearing-up over the past several years.

StartEngine Crowdfunding is one such company, based in Santa Monica, California, and co-founded by our good friend Ron Miller, a 1987 graduate of the University of Detroit School of Law. StartEngine helps Los Angeles-based start-ups obtain venture capital quickly [90-days] and supports the companies with corporate mentoring and other business-related services.

One example of a successful crowdfunding project recently completed with assistance from StartEngine is the Elio Motors project. This unusual car company harnessed an innovative design to manufacturer vehicles that sell for $6800 get over 84 miles per gallon.

Another recent example of crowdfunding is the Big Apple Circus. A proudly local affair parked in Cunningham Park at the east end of Queens for the past 38 years, this circus is broke. So broke, it turned to crowdfunding to stay alive this season. The SEC's new regs came just in time to stave off scrapping this NYC mainstay.

While there is excitement in the air among hopeful start-ups and entrepreneurs, the SEC took great pains in promulgating their rules because they did not want to see smaller investors lose their money. Most start-ups have a rough go of it, going belly-up in 5-years or less.

Some folks are not above running scams, and of course, everyone wants a piece of the next Snapchat, Instagram or Tinder. But when you put your money into venture capital, getting it out is not as easy as calling your broker and selling shares of stock.

In the years to come, we will see how these new rules operate on this new investment platform.

Post #539

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