It might cost you $39K to crowdfund $100K under the SEC’s new rules.
On October 23, 2013 the Securities and Exchange Commission (SEC) issued the proposed rules for Regulation Crowdfunding. The 585-pages included an explanation of the rules, the feedback it received, and a cost/benefit analysis.
If this happens, crowd funding (selling stock) to fund companies, will get expensive.
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They’re talking about crowdfunding securities, i.e. raising money by selling debt or equity in your company. That’s a little different than selling hardware through KickStarter.
To be clear, I don’t think this would affect Kickstarter the way it works now – this is about equity crowdfunding, not pre-selling products. But I am curious about how that 39% compares to a priced round today…
As I understand it, this proposed regulation does -not- apply to most Kickstarter projects. With Kickstarter, you are making a contribution and hoping to get a product, performance, etc. You (the contributor) have no further interest in the project beyond that.
What the SEC is looking to regulate is crowdfunding where people are making contributions and expecting to actually own a share of the business in return. This is much closer to selling shares through a private placement or IPO; things the SEC already regulates.