Right now only accredited U.S. investors can invest in small businesses for an equity stake. Crowdfunding sites such as Equity Net allow accredited investors to do just that. Other sites such as UP America, Startups.co, AngelList and CrowdFunder match startups with professional investors and banks.
The hope is the government will open the door for nonprofessional investors to back startups for an equity stake, which could be a big windfall for first-time entrepreneurs.
The 2012 JOBS Act has provisions to make this happen, but the rules for doing so still need to be finalized by the Securities and Exchange Commission and there is no indication of when or if this will happen.
According to Richard Swart, director of University of California Berkeley’s Entrepreneurial and Social Finance research program and a partner at Crowdfund Capital Advisors, Congress will act to amend the JOBS Act in 2015 and get the ball rolling on equity crowdfunding.
In his predictions for the crowdfunding sector in 2015, Swart also suggests that corporate America will continue to expand its use of crowdfunding, both to funding its own product development but also to invest in other startups that could turn into potential acquisitions or partners.
He also points out that major companies will launch their own crowdfunding business models. YouTube is already doing this, with eBay, PayPal, Amazon and Facebook on track to do so as well. As these online giants enter the marketplace, the options for funding will dramatically increase for small businesses.
Swart predicts that the crowdfunding industry will continue to grow at least 100 percent a year.
With the rewards model of crowdfunding, in particular, becoming a very crowded segment of the industry and growth their likely starting to stall in the U.S., the debt lending and equity stake approaches could see the brunt of the new growth — with small businesses likely benefitting the most.