Entrepreneurs face challenges raising capital to fund the development of new ideas in the United States because of regulatory constraints,
primarily those imposed by the Securities Act of 1933 (“Securities Act”). Although avenues exist for entrepreneurs to seek financing, funders typically hold the purse strings tightly and release them selectively. Crowdfunding is a promising method of raising capital that allows an entrepreneur to shop his or her idea to a greater audience of potential investors without running afoul of the Securities Act‘s constraints.
Traditional funders, such as venture capitalists, refused to finance an idea by Eric Migicovsky and his colleagues at Pebble Technology to develop Internet-connected, customizable wristwatches.1 These watches could link via Bluetooth to, and display information from, smartphones and could also function as cycling or running computers or remote controls for playing music.2 So, on April 11, 2012, the Pebble team turned to Kickstarter, a crowdfunding platform, through which they asked the public to pledge a total of $100,000 to the team’s idea. Just 37 days later, Pebble had attracted 68,929 “backers”3 of its watch and had raised over 100 times its request: $10,266,845.4
To read the original article: Democratizing Entrepreneurship: An Overview Of the Past, Present, and Future of Crowdfunding - Bloomberg Law
