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Guest Blogger Sang Lee: Equity Crowdfunding – can they even DO that?

Equity crowdfunding…can they even DO that?!

Crowdfunding? JOBS Act? Are you confused with the new lingo buzzing about the startup and investor community? Let me try to explain. I am Sang Lee, the founder and CEO of Return on Change (RoC), a company that provides an online medium through which startup companies and entrepreneurs will be able to pool capital through crowdfunding. RoC connects innovative startups and investors who are looking to change tomorrow’s world today.

Here are three things you need to know before we continue:

  • Crowdfunding is essentially collecting funds from a large group of people (also known as “the crowd”)
  • The JOBS act permits the exchange of funds through crowdfunding for some form of economic return, i.e. equity in the startup.
  • Return on Change and others like it will provide platforms to kick off your crowdfunding campaigns! Our motto is: “Startups. Crowdfunding. Simple.”

RoC would be fully launched right now…except….we have to consider the JOBS act and of course the good ole’ SEC. The good news is that the JOBS Act passed! The less exciting news is that everyone now has to wait for the conclusion of the SEC rule-making period to find out the exact details about what will and will not be permitted from a regulatory standpoint. From the date of the bills passing (4/2012), the SEC has a 270 day timeframe – that brings us to exactly December 31, 2012. Luckily, RoC anticipated this and we are eager to get more clarity and details around the following,as we know these will be key elements to the progression/development of crowdfunding as a viable and legitimate investing and capital-raising method.

RoC SEC wish list:

  • Being able to provide certain pieces of advice to startups and investors. There are subtle differences between being an advisor and portal.  As a portal, we can provide invaluable tools and the platform for startups to raise much needed capital. However, we unfortunately can’t provide the type of customized financial advice for each startup without being an SEC-certified advisor.  What we can offer is general advice to help the companies listed on our site prepare them for the fundraising process.  Our hope is that the SEC will establish sufficient leeway for RoC to provide more valuable help to both startups and investors.
  • Crowdfunding interaction with OTHER sources of Capital. RoC truly believes that crowdfunding can work seamlessly with traditional sources of funding (VCs and angels) and we are expecting some guidelines from the SEC as to how these funding sources can/will interact.
  • Startup Reporting Requirements. RoC has prepped for some strict reporting requirements, especially because we believe it’s an integral step for both startups AND investors. As the SEC finalizes these details, RoC will have the tools in place to help startups with reporting. Like we say: Everyone’s Invested – including us!

As both a founding and board member of the National Crowdfunding Association (NLCFA.org), the RoC team and I are eager to see the rule-making period come to a close with favorable results.

Although we cannot actually start raising capital for startups and allowing investors to invest on the site, there is something we can do…GIVE AWAY MONEY!!

Return on Change is hosting their first contest for startups in RoC’s high impact categories: Clean Tech, Bio/Med Tech, Web Tech, Social Ventures. The first 50 startups completing registration will be eligible to win one of THREE $1000 Cash Prizes to aid in funding your business. In addition, the top 50 qualified startups chosen by Return on Change will receive free placement on the RoC platform, with no posting fees collected upon reaching their funding goal. While startups can win cash prizes, potential investors also have the opportunity to register on the RoC site for an exclusive invitation to connect with the winning startups and receive a sneak preview of the site before the official launch. The deadline for entering is approaching fast- June 30th, 2012!

Entrepreneurs with great ideas need capital funding to jumpstart their businesses, and investors are looking to help fund the next big idea. Contact RoC@returnonchange.com or visit the RoC site: www.returnonchange.com

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