Crowdfunding - Explained

The video tutorial explains two types of crowdfunding: donations and equity funding. Donations involve asking for money in exchange for privileges, while equity funding involves selling ownership interest in a company. The focus is on equity crowdfunding, which requires compliance with SEC regulations. Businesses must adhere to specific rules and exemptions to avoid the arduous registration process. Key limitations include a $5 million cap on securities sales and restrictions on non-accredited investors. The process must be conducted through approved platforms, and securities are restricted from resale for 12 months.

What is a common feature of donation-based crowdfunding?

• Funds are returned if the goal is not met.

• It requires SEC registration.

• Contributors get perks or early access.

• Investors receive shares in the company.

In equity crowdfunding, what is typically sold to investors?

• Products at a discount

• Advertising space

• Ownership interests

• Future services

What is a requirement for a business to sell securities through equity crowdfunding?

• It must be a public company.

• It must offer a fixed interest rate.

• It must register with the SEC or qualify for an exemption.

• It must have a minimum of 100 investors.

What is the maximum amount a business can raise through equity crowdfunding without SEC registration?

• $1 million

• $10 million

• $20 million

• $5 million

What is a restriction placed on securities purchased through equity crowdfunding?

• They can be resold immediately.

• They cannot be resold for 12 months.

• They must be resold within 6 months.

• They can only be resold to accredited investors.