Image Courtesy Michelle Maria via Pixabay

Since the JOBS Act was passed in 2012, observers have waited for the Securities and Exchange Commission (SEC) to establish rules for equity crowdfunding. To this point, the SEC has yet to release those rules, and in the absence of federal guidance, a number of states have established their own guidelines. Now the state of Arizona has a proposed bill that would add it to the list of states that have taken the initiative to create guidelines for small businesses to join the equity crowdfunding fray.

The bill before the Arizona Legislature, HB 2591/SB 1450, is an amendment to the section of Arizona's statutes related to securities that would establish a privately run online portal permitting small businesses to solicit funds from investors in exchange for an equity stake in the company. Under previous regulations, companies were able to accept only a limited amount of funding from small, non-accredited investors, whereas funding from accredited investors was not capped. The proposed bill would allow non-accredited investors to invest up to $10,000 per company, and companies are permitted to seek up to $1 million in funding, with an increase to $2.5 million for companies with audited financial records. In order to establish a fundraising portal, companies would need to acquire a dealer license from the Arizona Corporation Commission and be based in Arizona.

Rep. Jeff Weninger, one of the bill's sponsors, stated that requiring either $200,000 in yearly income or $1 million in net worth for an individual to invest creates a "discrimination of opportunity". Rep. Weninger said that he consulted with the Corporation Commission when drafting the bill, and the commission's staff have been instructed to offer technical as the bill moves forward. Weninger has also sought input on Twitter on the legislation, while acknowledging that "there will be things to fix or add on in later y(ea)rs."

When developing a crowdfunding campaign, there are a few steps you need to take in order to keep yourself protected as well as ensure success. Before you begin, make sure you’ve identified all the intellectual property related to your venture, from the product or service itself to any branding or know-how surrounding it. Once you’ve figured out what your IP is, make sure you’ve taken the necessary steps to protect it, either with a patent, trademark, or copyright, depending on the element. After you’ve protected your IP, you need to find a crowdfunding platform that is right for you and your product. Once you’ve decided what platform you want to use, put the effort in to developing your social capital and raising your profile online. Most importantly, you’ll want to create a pitch that will show potential investors your plan for success. Finally, make sure that you are using music, video, pictures that either you created or have the rights for; an infringement notice is expensive! Check out our creative resources on Traklight Resources page.


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