On 18 February, Andrew Dowell reported in The Wall Street Journal that a ‘computer attack’ breached the crowdfunding site Kickstarter Inc. According to Dowell, Kickstarter was founded about five years ago and has raised $850m (£510m) in pledges from five million people. Kickstarter retains five per cent of the funds raised by projects that meet their funding goals. The article describes Kickstarter’s platform as an ‘exchange in which people can contribute often small amounts of money to fund projects’.
Crowdfunding generally refers to the process by which capital is raised from numerous, typically small, financial contributions to fund a project or enterprise and unfortunately a great deal of confusion remains regarding its regulatory status. Kickstarter is the leading example of donation-based crowdfunding. Contributors do not receive any equity or any financial return in the projects or enterprises that they finance. The Jumpstart Our Business Startups Act (JOBS Act) does not directly affect this form of crowdfunding.
The 80-year-old prohibition on general solicitation ended on 23 September 2013. This means that it is now legal for companies to solicit accredited investors and advertise that they are seeking to raise capital. This change was mandated under Title II of the JOBS Act…
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