Chicago-style pizza is world famous, now equity crowdfunding Chicago style is hoping to be the ingredient for startups percolating in ChiTown and entrepreneurs who want to get a piece of the capital raising pie…
(BizJournals.com) Author Evonne Liu– Over the last few years, crowdfunding websites in the United States like Indiegogo have proven a popular way to solicit charitable donations and to raise funds for artistic projects.
New regulations now enable a company to use crowdfunding to offer and sell securities to the public, allowing small companies to raise up to $1 million annually from investors.
Indiegogo, one of the most popular rewards-based crowdfunding platforms, announced late last year that project supporters will be able to make equity investments after the Securities and Exchange Commission removed the barrier of small-equity investment.
Crowdfunding generally refers to a financing method in which money is raised through soliciting relatively small individual investments from a large number of people, as defined by the SEC.
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Keith Higgins, director of the SEC Division of Corporation Finance, said through a spokesperson that up until the end of last month, there had been more than 139 solicitations conducted pursuant to crowdfunding regulation, seeking to raise nearly $16 million in capital with an average target of approximately $115,000 per offering.
“Of those, 19 offerings have been reported as completed, raising a total of $6.6 million or an average offering of approximately $350,000,” Higgins said.
Funding technology startups
Chicago has been considered a Midwestern hub for technology startups in recent years. However, technology startup companies at an early stage in Chicago are still struggling with getting seed money.
“It’s a kind of a common investing value among Midwestern investors,” said Ryan Milligan, a partner of ParkerGale, a Chicago-based private equity company, which recently raised $300 million to invest in technology companies. “They want to see growth and revenues before investing.”
In the third quarter of 2016, venture capitalists invested $4.6 billion into San Francisco metro-area startups. In the same quarter, Chicago metro-area startups attracted just less than $200 million, according to the Dow Jones VentureSource Q3 report.
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“The new SEC crowdfunding regulation enables startups to find investors that are not only the super-rich and accredited investors, but generally everyone who wants to invest,” said Scott Kitun, CEO of Technori, a Chicago-based startup showcase and partner of Republic, an online equity crowdfunding platform.