So you have a great idea for a new business but don’t have the money to get it off the ground. Equity crowdfunding is now a popular way to draw attention (and potential funders) to startups. But is it the right choice for you?

What is equity crowdfunding?

By putting itself on an online equity crowdfunding portal, a company makes its fundraising needs known to a wide range of people who can decide whether to invest in the business. Rewards-based crowdfunding campaigns - where investors receive a gift, such as a T-shirt - have been around for awhile (think Kickstarter projects) and are exempt from securities laws because investors aren’t getting “securities.” Under the Jumpstart Our Business Startups Act, enacted in 2012, companies may now use equity crowdfunding to raise capital in exchange for debt or equity securities.

Originally Published in The Texas Bar Journal - January 5, 2015.