Why is CfPA recommending the industry standardize around the term "Regulated Investment Crowdfunding"?
Since the passage of the JOBS Act and the subsequent rulemaking, there has been massive confusion by the general and investing public who often conflate the activities of the regulated investment crowdfunding industry and those of rewards-based or donations-based crowdfunding platforms. Aside from marketplace confusion, there is considerable reputational risk that regulated entities, and the regulated industry as a whole, face by being mistaken for the activities happening in a less regulated environment and by unlicensed actors (e.g. GoFundMe, Kickstarter, IndieGoGo).
Furthermore, while admirable, the efforts by some industry participants to provide clarity through use of other terms (e.g. “online capital raising,” “investment crowdfunding,” or “equity crowdfunding”) are insufficient or, in some cases, potentially misleading.
By embracing ‘Regulated Investment Crowdfunding,’ we not only clarify our industry's scope but also underline the legal and regulatory frameworks that govern our operations.
The landscape of crowdfunding has evolved significantly since the passage of the Jumpstart Our Business Startups (JOBS) Act in 2012, which aimed to ease securities regulations to help small businesses and startups raise capital more efficiently. This legislative change marked a pivotal shift, introducing the concept of regulated investment crowdfunding into the broader crowdfunding ecosystem. However, this evolution has also ushered in a wave of confusion among both the general public and potential investors, blurring the lines between different types of crowdfunding. This confusion not only affects the decision-making process of potential contributors but also poses reputational risks to the regulated investment crowdfunding sector.
As an investment crowdfunding strategy consultant and coach, my role extends beyond advising businesses on capital raising; it also involves educating the market about the nuances of crowdfunding. By clarifying the distinctions between different crowdfunding models and underscoring the regulatory framework governing regulated investment crowdfunding, I can mitigate confusion, enhance investor confidence, and foster a more informed and secure marketplace. My efforts in this direction, including educational initiatives like the "Introduction to Crowdfunding" section in the Raiseway app, are crucial steps toward demystifying regulated investment crowdfunding and guiding businesses toward the most appropriate fundraising paths.