Underwriting Crowdfunding

34 Pages Posted: 25 Feb 2020

Date Written: February 18, 2020


Crowdfunding has more in common with an initial public offering (IPO) than may be readily apparent. Both are coordinated sales of securities to public investors (in crowdfunding’s case, the “crowd”). Both rely on disclosure to mitigate information asymmetries between a company and its investors. Yet IPOs protect investors better for two reasons. First, companies undertaking an IPO have significant track records to disclose, unlike nascent startups. Second, IPOs are underwritten, meaning a reputational intermediary vouches for them.

This Essay considers applying underwriting to Regulation Crowdfunding (Regulation CF) to allow crowdfunding to mimic an IPO. It tackles questions such as: Who would be the underwriter? What potential legal liability would crowdfunding underwriters face? And what changes to Regulation CF are necessary to permit underwritten crowdfunding offerings?

Keywords: Funding Portal, Underwriter, Regulation Crowdfunding, Venture Capital, Angel Investor, Entrepreneurship, Startup, Crowdfunding

Suggested Citation

Ibrahim, Darian M., Underwriting Crowdfunding (February 18, 2020). Stanford Journal of Law, Business, and Finance, Vol. 25, 2020, Available at SSRN: https://ssrn.com/abstract=3540296

Darian M. Ibrahim (Contact Author)

affiliation not provided to SSRN

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