Crowdfunding, Entrepreneurship, and Start-Up Finance

32 Pages Posted: 12 Oct 2018 Last revised: 26 Mar 2019

See all articles by Lawrence J. Trautman

Lawrence J. Trautman

Prairie View A&M University - College of Business

Oliver W. Aho

Western Carolina University

Date Written: September 18, 2018

Abstract

Crowdfunding, the collective effort to raise capital from a broad audience (primarily via the Internet), each of whom contributes a relatively meager amount, has grown exponentially in recent years. Crowdfunding is an important and contemporary topic that has implications in entrepreneurship, finance, business law – and has applications across multiple industries and categories of human behavior. Both equity and non-equity crowdfunding has proven to be productive methods of capital formation for start-ups. The equity crowdfunding provisions of The Jumpstart Our Business Startups Act (the "JOBS" Act) offer perhaps the most promising development to the facilitation of capital formation for entrepreneurs since the Great Depression. The JOBS Act became law in April 2012 and established a regulatory foundation enabling startups and small businesses to access new capital using crowdfunding. Through this Act, Congress intended to lower regulatory barriers in order to give small companies and startups a larger pool of investors from which to raise capital.

This paper presents a history of crowdfunding; discusses elements of crowdfunding and entrepreneurship; explores crowdfunding finance; the tension between U.S. securities laws and the potential for equity crowdfunding; looks at Congressional intent and what, if anything, needs to change at this point to enable equity crowdfunding to achieve and optimize its intended purpose.

Keywords: Crowdfunding, entrepreneurship, JOBS Act, equity, non-equity, capital formation

Suggested Citation

Trautman, Lawrence J. and Aho, Oliver, Crowdfunding, Entrepreneurship, and Start-Up Finance (September 18, 2018). Available at SSRN: https://ssrn.com/abstract=3251538 or http://dx.doi.org/10.2139/ssrn.3251538

Lawrence J. Trautman (Contact Author)

Prairie View A&M University - College of Business ( email )

Prairie View, TX
United States

Oliver Aho

Western Carolina University ( email )

226E Forsyth
1 University Dr.
Cullowhee, NC 28723
United States
5035504888 (Phone)

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