Equity-Based Crowdfunding- The Wait Just Got Longer

Been waiting to buy a share of your favorite artist’s album? Looks like you are going to have to wait at least another year. Equity-based crowdfunding is one of the most anticipated types of crowdfunding by small businesses. Equity-based crowdfunding will allow startups and small businesses raise capital in exchange for shares.

What does this mean in the music industry? In a nutshell, this will be the most unusual way yet to fund an artist. You can pay for shares in your favorite artist’s album to help them finish their next album and then get a piece of their royalties.

This new concept will act as yet another distupter in the music industry and will enhance the D2F relationship between artists and their fans. The outlook looked promising when the US senate looked to pass Title III of the Jumpstart Our Business Startups (JOBS Act) which would allow the following:

  1. Certain small stock offerings such as those taking place on future US crowdfunding sites won’t be required to register with the SEC.
  1.  One won’t have to be accredited to invest in these companies
  1.  A company won’t have to file with the SEC until they have 500 non-accredited investors OR 2,000 total investors
  1. The ban on general solicitation and advertising will be lifted for equity crowdfunding.

However, it was just announced today ( 12th December 2014) via http://www.entrepreneur.com/article/240558  that the Securities and Exchange Commission (the financial regulator of the US) has delayed their decision to pass Title III of the act and hence the wait has been extended. Music crowdfunding platforms like PledgeMusic, KickStarter, and IndieGoGo will have to rely on reward based crowdfunding in the US till Title III is passed.

For more information on the Jobs Act see visit the following link for a cool infograph

http://www.forbes.com/sites/work-in-progress/2012/09/21/the-jobs-act-what-startups-and-small-businesses-need-to-know-infographic/

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