Until the SEC finalizes rules to implement the JOBS Act, private fundraising, i.e. of rounds of financing without registering securities with the SEC, is restricted to accredited investors with a net worth of $1 million or $200,000 in annual income. Interestingly enough, only four percent of dollars raised by companies in 2012 involved investments in exchange for equity in a company.
In recent years, other types of fundraising have been gaining enormous momentum. They are donation/pledge, rewards or lending based. According to a recent report by Massolution, contributors across the world pledged $2.7 billion in more than a million campaigns in 2012, an 81 percent increase from 2011. Since Kickstarter’s launch in 2009, more than 4 million people have pledged over $609 million to projects ranging from an Oscar-nominated film to a bus stop in Georgia.
Here is a run-down of the most common types of crowdfunding:
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