Below is description of SEC's newly proposed crowdfunding rule as seen in our Guest Post on BeerPulse.
Craft beer and food companies are one step closer to an innovative source of capital: passionate fans. On Wednesday the SEC unanimously voted to pass a proposed rule implementing Title III of the 2012 JOBS Act. Prior to the JOBS Act, private companies could by and large only sell equity to high net worth individuals. The JOBS Act changed this 80-year rule by allowing the general public to also invest in small private businesses like beer and food companies.
The SEC must pass a final rule implementing the JOBS Act before it becomes effective. Wednesday’s proposal was first step towards that final rule.
The SEC’s 585-page rule proposal would allow companies to sell up to $1 million in equity online every 12 months. Numerous conditions and requirements are written into the rule, including:
- The maximum an investor with income or net worth less than $100,000 could invest is $5000; investors making more could invest 10% of income/net worth up to $100,000;
- Companies required to provide disclosures, including income-tax returns or financial statements and annual operating results
- Companies raising more than $500,000 required to have financials audited;
- Raises must be conducted through a broker dealer or “funding portal”
CraftFund was formed to serve as the go-to funding portal for beer and food companies and their passionate fans. CraftFund founder David Dupee points to Scottish brewer BrewDog’s revolutionary “Equity for Punks” model as an example of what is to come. “Craft beer and food is very much about engaging consumers and creating experiences for consumers to participate in,” explains Dupee. “Ownership is the ultimate form of engagement; however there are very few ownership experiences in craft beer and food right now due to regulations. The SEC’s proposed rule is critical first step in changing this.”
Equity crowdfunding is not legal until the SEC reviews public comments on its proposal and passes a final rule (likely 2014). Beer and food companies can now create basic profile pages on craftfund.com as they wait for final rule legalizing equity crowdfunding. The profile is limited to basic product and brand information and is not indicative of a raise. Nor does creating a profile commit a company to ever raising funds on the site.
So far, over 30 companies have created profiles on the site, ranging in size from startups to established brands such as Maui Brewing, Bison Brewing, Freetail Brewing, MadTree Brewing, and Fullsteam Brewery.