Equity crowdfunding received very good news last week. AIG announced that they’re entering the crowdfunding insurance space and will offer Crowdfunding Fidelity insurance to protect investors against fraud in equity offerings. Crowdfunding Fidelity protects individual investors against the theft of issuer assets by issuer directors, officers, or general employees which cause a direct loss to the individual investor. This is big news for the industry as AIG’s entrance should add confidence to the retail public that equity crowdfunding is a good opportunity to invest in startups and growth stage companies around the world. AIG’s entrance will likely also cause other big players to follow and further legitimize the equity crowdfunding industry.
Regulation Crowdfunding became effective on May 16 and so far, 36 issuers filed a Form C with the SEC (which is the requisite filing to commence crowdfunding). This is another encouraging sign for the industry.
In other startup funding news, Virtuix, a virtual reality company specializing in gaming (its Omni product is used in such popular games as Skyrim, Team Fortress 2, Half-Life 2 and Call of Duty: Black Ops 2), launched and is well underway to making its Regulation A offering a success. Virtuix, with its gaming appeal, has the kind of mass following to attract Reg A retail investors. This offering follows successful and widely publicized Reg A offering by Elio Motors in which Elio was able to raise $17 Million from 6,000+ investors. It remains to be scene if other companies, with harder to understand business models, achieve similar Reg A funding success.
For those that maybe interested to see what a Reg A offering document looks like, you can see Virtuix’s here.
Overall, we at Foley Shechter LLP are encouraged by what what we’re seeing in the crowdfunding and Reg A space. We hope that both funding sources continue to gain popularity and credibility to continue to open up additional fundraising options for startups. If you have any questions regarding crowdfunding or Reg A offerings, please don’t hesitate to send us an email.