Crowdfunding in Colorado - One Person's Opinion

Abstract

Crowdfunding is a ubiquitous term that now means any of a number of things, including donative funding (such as gofundme.com), rewards-based crowdfunding (such as Indiegogo.com), and equity crowdfunding where investors receive an equity interest in the issuer. Donative and rewards-based crowdfunding have generally been held not to involve the offer or sale of a security subject to regulation under federal and Colorado securities laws. Equity-based crowdfunding, where the investor receives an equity interest in the crowdfunding issuer, does involve the application of federal and applicable state securities laws. Colorado's 2015 Crowdfunding Act (CCFA) has not proven to meet the goals of its legislative declaration to "allow[] small companies to access the capital they need to start or expand businesses." This paper contains a proposal for a simplified small crowdfunding offering where businesses can raise up to $300,000 to $500,000 without meeting the more complicated procedures and requirements of the CCFA.