A New Way Of Financing Small Businesses: Cloud Fundraising

< p > the SFC is proposing a series of legal proposals that will allow venture companies and other small businesses to sell their shares through the "cloud fund-raising" (also known as "public private placement") for the first time.

Last year, the US business assistance act 2012 required regulatory bodies to develop new series of laws to allow small businesses to get low cost capital and avoid cumbersome financing procedures.

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< p > < a > href= > http://pop.sjfzxm.com/popimg/fz/index.aspx > > Obama < /a > when the president signed the decree of the enterprise Assistance Act, he believed that the act would become a potential change case.

Traditionally, small businesses can only seek financing from a limited number of investors, such as banks and wealthy donors.

But in the future, "venture companies and small businesses can have access to new and powerful potential investors, that is, the American people," Obama said. "This is unprecedented. Ordinary Americans will be able to invest in their promising entrepreneurs through the Internet."

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< p > the cloud fund-raising mechanism refers to an open online platform that allows business owners to directly attract the general public to invest in his projects without requiring any broker or other regulated financial intermediaries.

Ordinary people invest in projects through online cloud funding platforms, including independent companies, record companies or some innovative product.

Investors' rewards include displaying his name on the screen, being able to use products and other interests first.

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< p > but before, investors can not get the share of financial return or profit from the invested projects.

Because in order to get financial returns, they must hold shares in start-up companies, and the SEC requests that equity investments must be applied to federal securities laws.

Because small businesses usually need only small amounts of money, it is not realistic to let them spend money to meet the requirements of the securities law.

In addition, the cloud capital raising website must be registered as a broker to sell securities.

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< p > according to the proposal, < a href= "http://www.91se91.com/news/index_x.asp" > small business < /a > can raise up to 1 million US dollars in 12 months through cloud fundraising.

Investors who earn less than $100 thousand a year and net assets below that amount can invest up to $2000 in only 12 months.

The annual income or net asset value exceeds US $100 thousand, which can invest up to 100 thousand US dollars in 12 months.

These investment caps will be adjusted at least every five years according to inflation level. Investors must hold at least one year's share of the company.

Startups must submit annual results to the sec.

According to the amount of funds raised, these financial reports will be audited by independent public accountants or auditors.

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The legislative body and the securities and Futures Commission of the United States have also consulted him on the legislative issues concerning the fund-raising of P.

He expressed his support for the idea of cloud fund-raising.

He pointed out that the SFC must balance the two objectives of promoting financing and protecting the public from fraud.

"The SFC's decision must be trust cloud funding, which means a more open financing environment," he said.

At the same time, the SFC must also protect investors' rights and interests through law.

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< p > but if it is to prevent fraud by raising the regulatory threshold, it has been commented that this action has reduced the interaction between users who could have used to detect fraud.

Therefore, the SFC must act cautiously to achieve the right balance. Molik pointed out that when the law was promulgated, the SFC could correctly cope with the pressure.

"I don't know for sure whether they are properly controlled," he said.

The SFC will seek public opinion within 90 days after the registration of the statute at the federal level.

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< p > < strong > has "revolutionary" financing way < /strong > < /p >.

< p > no matter what risks, supporters say, < a href= "http://fz.sjfzxm.com/" > cloud fundraising < /a > will open up new financing channels for small businesses.

"This will be revolutionary," the other three traditional financing channels for start-up companies are relatives and friends, venture capital and banks.

Fitzgerald pointed out that relatives and friends may not be able to provide sufficient funds for the company. Venture capital will only invest in companies that are suitable for a certain type of investment and market.

Banks have plenty of money, but they need real estate collateral, which is a "scary" move for startups.

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< p > therefore, many small businesses may welcome the fund-raising of cloud as another way of financing.

The financing ceiling set by the securities and Futures Commission is $1 million a year.

Fitzgerald pointed out that most start-up companies do not need to start up with $1 million.

In start-up companies, most companies start up capital of $25-50, unless these businesses are developing hardware or setting up certain standards.

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< p > for investors, cloud fund-raising means that they can invest in many business opportunities.

Previously, such business opportunities could only be enjoyed by rich groups, funds or companies. Fitzgerald pointed out that "before this law came out, only a few qualified individuals and groups were the only group able to invest in start-up companies, which is obviously unfair."

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< p > the SFC now allows private investment from qualifying investors, namely individuals and other standards whose annual income is more than $200 thousand, Fitzgerald said. "However, this greatly increases the investment threshold and will make the rich richer.

In my opinion, if you find your promising company, you should be able to invest in the company from a financial point of view.

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Less than P, however, the disadvantage of such a democratic financing is that such investments may be too risky for ordinary people. Experts say that typical small investors do not know how to properly examine a company.

"Compared with professional venture capitalists or angel investors, ordinary investors do not have the necessary ability to distinguish between the advantages and disadvantages of the company," he said. "Besides, unless there are ways to invest in 1000 start-up companies, it may be a" bad "diversified investment to increase the share of the start-up company in the portfolio.

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"P," he adds, adding that cloud fund-raising is a "good news" for entrepreneurs, because "there may be unexpected scenes, for example, there may be a lot of old ladies to invest in your company."

Indeed, some venture capitalists may be too ambitious to be taken seriously, but only to attract followers.

For example, Taylor referred to a cloud capital raising company named Terrafugia, which raised $10 million 400 thousand to build a flying car.

"This is an eye catching product.

We can imagine flying cars, because we drive every day, so driving to work is cool, "Taylor said." but should my grandmother invest in flying cars? I don't think so.

We should let professional investors do it. "

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< p > < strong > stop fraud > /strong > /p >

< p > there is a view that small investors can easily be cheated, but this situation does not necessarily exist in the age of social networking.

With the sharing of information on the Internet, the wisdom and actions of the masses can prevent fraud, observers noted.

Molik said his research has proved that even in the absence of enforcement, fraud is very few: in his research projects, less than 1% of the funds and 4% of the projects are fraudulent.

Many people are concerned about the company, "if suspicious circumstances are found, someone will send a warning.

It's like open source software.

Under the eyes of the public, all the problems of the computer will be discovered soon. "

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< p > we want to use cloud funds to raise funds for Kobe beef jerky products.

It can raise tens of thousands of dollars quickly, and some people finally pointed out that all Kobe beef are active origin labels, so they require the startups to provide labels with serial numbers, Molik said.

He believes that many people invest in projects that they know and even know better than traditional VC companies.

"People are very good at detecting fraud, and we can find items with quality problems."

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< p > but even if the start-up companies are aboveboard, Taylor believes that career investors should still be the preferred investors, because they can provide the advantages that small investors can not provide, such as better monitoring these start-ups, providing management advice and providing professional networking capabilities.

"They have time and motivation to do it," Taylor said. "Ordinary investors will not supervise those start-up companies.

What happens if you don't monitor? The funds you invest in start-up companies may be used to buy table tennis tables or hire sushi chef. "

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< p > Fitzgerald pointed out that people have been losing money in various channels, not just investing in small companies.

"In fact, compared with the investment of US $2000 in local restaurants, there are more risks in some investment channels," he said. "I would rather see people investing in start-up companies than in gambling casinos or lottery tickets or other places that may easily lose money."

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< p > in addition, < a href= "http://www.91se91.com/news/index_f.asp" > the SFC < /a > requires the cloud capital raising company to submit its financial report, so as to kill the problem company in the cradle.

"To be practical, it is a good thing," Fitzgerald said. "This requires a certain degree of maturity and due diligence. Any company must provide financial results when accepting any form of investment.

If you don't even do this job, it means that the company is not trustworthy or business minded, and it lacks the due diligence to create a company.

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< p > < strong > new market < /strong > /p >

< p > but there is another problem, critics warn: cash.

It is not clear how investors will invest in venture capital through cloud capital raising.

They can't sell shares on the domestic stock exchanges because the companies that invest in them are too small to be listed.

If an investment company is acquired, investors can benefit from it, but the company must have a healthy business record to attract buyers.

Even if investors can sell their stocks, they may not be very mature, and they are not sure whether the paction is cost-effective.

After finding these challenges, the SFC warned in the legal proposal that "the strategy of exit from investors in cloud financing is uncertain, and this uncertainty will also bring restrictions on earnings."

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< p > but Lema Swami believes that if the cloud fundraising continues to develop, "we will definitely develop" the two tier market, because people want to cash in.

In fact, there are now two tier markets for private shareholders, if they want to sell their shares before listing.

These shareholders are usually invested in the company's shares or want to sell shares of venture capital companies.

For example, this week's upcoming a href= "http://www.91se91.com/news/index_c.asp" > Twitter < /a > will be traded in the two tier market through SharesPost, which is also true before Facebook went public last year.

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Wami P predicts that big banks will provide new services to help venture capital companies to meet their needs in investment banking, such as pricing stocks and determining the number of shares issued.

Mainstream financial institutions are already operating retail outlets to provide services for individual investors. If this mode is welcomed, they will enter the cloud fund-raising market, Lema Swami pointed out.

"When you see a lot of small savers buying stocks in the cloud capital market, they will find this potential profit opportunity and then join it," Lema Swami said.

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< p > venture capitalists may do the opposite: they may leave.

"I think VC may be far away from real early investment," Fitzgerald predicted.

Venture capital companies will easily invest in the first 100 thousand to 200 thousand US dollars through cloud fundraising, so venture capital will avoid these investments and return to their basic "big money big ideas" instead of following a lot of small ideas, he pointed out.

Over the past ten years, venture capital has begun to invest extensively in small businesses, because the cost of creating a company has been greatly reduced.

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< p > it is certain that the impact of cloud fund-raising on the creation of companies, employment opportunities and financial markets has not been clear for some time.

But this risk is worth investing, observers said.

Fitzgerald pointed out that "every time there is a similar large-scale disturbance, there will be some residual effects, but in the end, most people will benefit from it."

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