Crowdfunding Continues Changing the "Rules" of Venture Capital

New Ventures Update

Date: November 17, 2021

It has only been nine months since the SEC’s amendments to the Securities Act took effect with a goal to “facilitate capital formation and increase opportunities for investors by expanding access to capital…” These amendments upgraded Regulation Crowdfunding by: (a) increasing the maximum amount that can be raised annually to $5 million (up from about $1 million), (b) allowing investment through SPVs for cleaner cap tables, (c) removing the cap on investment for accredited investors and (d) changing the investment limits for other investors.

Not only do we expect to see more companies include a crowdfunding offering as a piece of their fundraising pie, but we also foresee that innovative uses of crowdfunding could further disrupt the status quo of venture capital. In “Crowdfunding the Venture Capital Firm: How the SEC’s Expansion of Equity Crowdfunding Could Redefine Venture Capital Fundraising,” published in the ABA Preferred Returns Newsletter, Fall 2021, Layla Dotson Lumpkin and M. Daya Bean from our New Ventures practice group discuss the evolution of crowdfunding regulation and examine an example of a novel application of the crowdfunding model – using crowdfunding to fund the operations of a venture capital fund general partner.

Read full article here.

FOR MORE INFORMATION

For more information, please contact:

Layla Dotson Lumpkin or M. Daya Bean

or visit our QuickLaunch site for startups and investors.