Saddle Brook portal has $254,000 in capital pledged ahead of law easing regulations. Hundreds of websites worldwide -- including one from a North Jersey company -- are building virtual networks of investors and start-ups, anticipating the publishing of federal regulations to make it easier for start-ups to raise capital online.
Based in Saddle Brook, StartupValley.com is one of the Garden State's first equity "crowdfunding" portals -- websites geared toward connecting new small businesses that want to raise growth capital from investors interested in buying equity in their new ventures.
President Obama signed the Jumpstart Our Business Startups Act in April, enabling start-up businesses to raise funds this way from a wide pool of investors, where previously only accredited investors with high net worths and annual incomes could invest in high-risk ventures.
The act charged the Securities and Exchange Commission with writing regulations for equity crowdfunding by the end of this year. The regulations, will limit how much investors can crowdfund for equity yearly, based on percentages of their incomes.
Equity crowdfunding differs from popular reward-based crowdfunding sites that have been around for years, such as Kickstarter -- where users can raise funds from the public for projects in exchange for "rewards" like advance copies of products -- as it offers shares in companies instead.
Through these crowdfunding sites, start-up companies seeking capital can register to link with investors anywhere. However, since the regulations are not finalized, many sites like StartupValley are in the early process of gathering users, said founder and Chief Executive Officer Daryl Bryant, who launched the site last week, along with business partner Matt Mayernik.
For now, StartupValley is working to gain investors to sign up to show their interest. As of Monday afternoon, StartupValley had 34 investors pledging more than $254,000 total -- specifically toward entrepreneurs in any sector of technology, or "what an investor in Silicon Valley would invest in," said Bryant, who grew up in Sussex County and now lives with his family in Madison.
Soon, any company seeking capital will be able to join the site as well. Once the SEC regulations are published, the site will be live and ready to be used to raise capital, Bryant said.
Bryant, an entrepreneur with a background in technology and the Internet who founded the Hudson Horizons Web company, said it is difficult to get a loan to start a new business, but online crowdfunding could make access to funds easier.
"It's going to allow them to really take their businesses to the next level," said Bryant, whose company will take a percentage of fully funded projects only.
Some investors fear crowdfunding could lead to fraud, as it allows less experienced and unaccredited investors to give to high-risk ventures, potentially without thorough vetting.
Bryant said he thinks the "crowd" coupled with social media and information posted online can help protect against fraud.
"The crowd won't invest unless you're legitimate and people know who you are," Bryant said.
Bryant is also a member of the Crowdfund Intermediary Regulatory Advocates, a new industry organization of platform leaders and experts that will work with the SEC, the Financial Industry Regulatory Authority and other government bodies to help establish federal crowdfunding standards. StartupValley is an accredited platform with industry website Crowdsourcing.org's Crowdfunding Accreditation for Platform Standards.
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