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Equity Crowdfunding a Viable Option for Startups

posted Apr 11, 2013, 12:00 PM by Sallar Khorram

Another funding option for startups has potentially emerged with the SEC greenlighting an aspect of crowdfunding as part of the 2011 JOBS Act. 

Crowdfunding allows a group of investors to pool their resources to make micro-investments to individuals or organizations such as new startups in exchange for equity.

The SEC announced last week that it won’t take enforcement action against the equity crowdfunding platform FundersClub who were previously thought of “operating in a murky legal grey area because it’s not a registered-broker dealer,” according to Josh Constine of TechCrunch.

Equity crowdfunding is a part of the JOBS (Jumpstart Our Business Startups) Act meant to capitalize new businesses and investment funds with the goal of creating more jobs in the United States.

Many startups nationally and here in South Florida are monitoring the SEC’s enforcement of the new law in hopes of finding new funding sources.

“This was meant to give entrepreneurs access to the markets,” said Tamara Brenes, CEO and Founder of the Miami-based DemoHire.com. “I know the SEC has to implement certain things about the law.”

DemoHire is a video-based hiring app. “Our demographic would be anyone who is looking for a job, but also anyone that wants to create their own professional brand,” Brenes added. “Our site takes the better elements of a dating site, a video site and a job site.”

Brenes said equity crowdfunding sites such as FundersClub, Gust.com and Miami-based EarlyShares.com are potential options for DemoHire, but the company is still concentrating on local investors.

“Most of the amounts raised through these crowdfunders are smaller, individual amounts,” Brenes said. “So, I guess, in aggregate, it would be an attractive option. But with DemoHire, we’re still operating with local angel funds that we know of.”

DemoHire is currently in two active rounds of fundraising. According to Brenes, the company is trying to raise a mini-round of $150,000 to strengthen their marketing and advertising. DemoHire is also pursuing seed round investing of $1.5 million.

The site officially launched two weeks ago, and the startup is growing rapidly.

“In the past two weeks, we’ve launched and expanded our team to 14 people including three advisors,” said Brenes. “We’re aiming to eventually have a sign-up rate of 500 companies per month and 2,500 user per month. That would be our six month milestone.”

With new equity crowdfunding platforms an increasingly viable option, South Florida startups such as DemoHire may find the funds to make such milestones possible.


Read this on Gant Daily:

http://gantdaily.com/2013/04/10/equity-crowdfunding-a-viable-option-for-startups/