Boost a Hero by Sprigster is one example of a new platform that has sprung up to help business owners raise capital through crowdfunding.
by Mark Mohler, CEO of Sprigster
Crowdfunding is the process whereby large numbers of individuals pool their resources behind a common cause or project, usually using the internet, to support efforts initiated by other people or organizations.? As of now, allowing those backers to own an interest in the project to be funded has been illegal under longstanding U.S. securities laws.? On April 5 of this year, the JOBS Act was passed to eventually make crowdfunding investment legal.? This change in the law is widely hoped to be the key in providing small business with the investment capital that has been so absent since the recession began.? In the future, franchisees will generally have the ability to solicit investment in their franchise business from friends, neighbors and total strangers alike using the internet.? However, it is not legal quite yet because the SEC is still writing the rules under which these investments can be made.
There are two separate sections in the JOBS Act that will enable crowdfunding investments and the timing of their implementation will likely be different.? What is likely to happen first will be the legalization of solicitations for private investment made through broad-based advertising.? Historically, this type of ?general solicitation? has been strictly banned for private offerings that do not comply with very costly registration requirements.? However, the JOBS Act lifts that ban in a way that will enable most companies to solicit private investment over the internet (or TV, radio or most any other method for that matter).? However, similar to current rules, the investment can only be sold to accredited investors who meet certain requirements for high income, net worth, and other requirements.? Think of it like this: you can only take investments from the same type of investors for private offerings that you could before?however, you can use modern day technologies like the internet to advertise and find those qualified investors.? These rules will likely be available somewhere around the end of the year.
The second change relates specifically to crowdfunding investment.? The JOBS Act will permit everyday Americans, regardless of net worth or investment sophistication, to invest in companies through crowdfunding.? This will allow businesses, including franchise businesses, to raise up to $1 million per year in each business.? Everyday Americans can then invest $2,000 or more in these investments each year (depending on income and net worth).? The specific rules for this new capital raising tool have not yet been written and probably will not be available until some time next year.? However, these new rules will dramatically update securities laws that were written in the 1930?s.? This should be very enabling for franchisees and franchisors alike.
Mark Mohler is the CEO of Sprigster, the dedicated crowdfunding platform for the franchise industry. Its flagship program Boost A Hero brings crowdfunding to benefit military veterans starting small businesses.
Tags: Boost a Hero, crowdfunding, crowdfunding for veterans, franchise funding, how to start a franchise, jobs act, mark mohler, Sprigster
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