As things stand currently, Investment Crowdfunding is something that a lot of people are becoming interested in. It has simply emerged as a viable option for many people, especially as of 2012, when the JOBS act was passed.
As investment crowdfunding was impossible to do in the past due to various financial restrictions, a change needed to ensue. This is the main reason why the JOBS acts was passed. It made it possible for regular investors to invest in various companies.
This is not the Kickstarter way, but a real investment where investors acquire a certain equity in a company. It is a perfect thing for both creative people who want to boost their ideas and speed up their business growth and for investors who are ready to earn money with every smart investment they make.
How investment functioned in the past and how it is changed with the JOBS act?
Before the JOBS act, the only people who were eligible for investment were those who earned over $200,000 per year. This eliminated the chance for those with lower earnings to invest and earn steady money over time. Private companies, on the other hand, were unable to state their crowdfunding needs, but had to connect with a registered broker dealer to create a connection with an investor. This put regular investors in a much better position and lowered the chances of others to participate in private company investment funding.
Luckily, as the JOBS act passed, it has become legal for private businesses to raise $1 million per year from crowdfunding investments. All this is going to be made possible on the 16th of May 2016, when the last rules regarding the JOBS act are implemented. There are actually several different rules, called titles that are included in the act. Each of these was explained in a post by David Pricco who stated:
“Titles 1, 5, 6, and 7 were enacted immediately when the law passed in 2012. They deal with technical matters such as how many shareholders a private company is allowed to have before reporting to the SEC, streamlining the SEC disclosure process, defining a new class of “emerging growth companies” that these new rules will apply to, and a mandate for the SEC to focus more on businesses owned by women, veterans, and minorities.
JOBS Act Titles 2, 3, and 4, or as they are referred to in the industry, Title II, Title III, and Title IV, each create a whole new process by which private companies can raise money from investors online. These are the big ones. Title III is the one enabling Investment Crowdfunding we’ve talking about so far. “
But, even without title three, which is yet to be enacted, titles 2 and 4 are primarily being used for investment crowdfunding as we speak. This makes the whole JOBS act highly appreciated by numerous people who are following its rules and who are investing and improving their startup businesses. The JOBS act has made it possible for people to more easily invest and test their luck.
What options are there?
For those who are looking to invest, there are numerous options at their disposal. It is very important to do thorough research. There are various online resources that offer a detailed overview of all the available options out there.
How have the numbers changed in the past two years?
As investors are expecting different profits, there are several different options available. Investing in a tech company is proven to be much riskier than investing in other things. However, people are attracted to this sort of investment because the profits can increase tenfold. On the other hand, there are crowdfunding options for real estate investment.
This sort of investment is much smarter, as it offers 5% to 15% profit numbers. Additionally, Peer-to-Peer lending is becoming more popular, as it is also very stable, standing at 4% to 12% return rate, which is pretty high as well.
The JOBS act has drastically changed the crowdfunding investment world and there are already increases when it comes to money circulations per year. According to Crowdsourcing, in 2015, tech investment crowdfunding has seen around $1.2 billion, whereas real estate is at $1.4 billion.
Peer-to-peer lending is very big, with $25 billion in the US in 2015 alone. The estimate of $2.5 billion on a worldwide level turned out to be true, which only indicates the growing trend that will ensue in 2016. During the year of 2014, real estate investment saw an increase of over 56% in North America, the increase was closely followed in Europe as well, where it stood at 42%.
Overall, crowdfunding platforms have created an increase of 156% in 2014, making the numbers even higher in 2015. Growth is further estimated to occur in 2016, as people are rushing to invest their money in all the different crowdfunding friendly segments.
One can conclude that the growth trend is going to continue due to the fact this kind of investment pays off much more than traditional banking methods. We can only see how things are going to increase further as the final part of the JOBS act enacts on May 16th. If you are thinking about investing, it is a good time to seriously take it into consideration.
