Thursday, President Obama will sign the pro- crowdfunding JOBS Act into law. Once signed, the SEC will have 90 days of rule making, and then the SEC will open the draft for 90 days of comments.
Already, competition in the space is heating up. Just days ago, UK-based Funding Circle raised a $16 million dollar round to presumably move into the US market once the pro-crowdfunding law is enacted. Funding circle raised Series B capital from Index Ventures and Union Square Ventures (USV). Notably, USV was also one of the first big names invested in Kickstarter.com, a potential indirect competitor to Funding Circle. It appears Funding Circle will directly compete with established players in the P2P debt lending marketplace like Prosper and LendingClub.
Crowdsourcing.org, the industry website, has also developed a crowdfunding accreditation for platforms. Accreditation is awarded based on passing marks in operational transparency, security of information and payments, platform functionality, and operation procedures. So far 7 platforms have received their ribbon of accreditation.
Crowdfunding offers value for both business owners and investors alike. First, for Entrepreneurs, Crowdfunding (in its different iterations) is a powerful alternative to raising money from Banks or VCs. US IPO offerings have declined significantly since the passage of Sarbanes-Oxley (SOX). The JOBS Act seeks to reverse some of the negative regulations that have adversely affected US IPOs. Second, Everyday investors will have more options for taking advantage of potentially higher (albeit riskier) returns on their capital that would otherwise be sitting in low risk-low growth financial instruments.