Six Things To Know About Crowdfunding in Oregon

Monday, January 19, 2015

Joanna Evoniuk, GoLocalPDX Contributor

Oregon’s new crowdfunding rule went into effect on Jan. 15, 2015, allowing small businesses and startups to raise money through small cash transactions made by non-accredited investors.

Crowdsourcing for funds isn't new —platforms like Kickstarter and Indiegogo have been used to successfully fund thousands of projects over the last several years. However, the rules are slightly different for business investments.

Ahmed Dohliqa is the technology director at Hatch Innovation, the group who spearheaded Oregon’s crowdfunding movement.

“Someone who cares about a small business or local business and wants to support them, now with this law, they can,” Dohilqa said. “It gives the business capital for what they need without using loans and it helps the community grow."

The new rule will apply to small Oregon business, and is expected to add over $900 million in fresh capital to economy.

The United States Congress passed the Jumpstart Our Business Startups (JOBS) Act in 2012, giving states the go-ahead to craft their own regulations for crowdfunding. So far, over 20 states have legal regulations in place for crowdfunding investments. The U.S. Securities and Exchange Commission is still drafting guidelines for a federal framework.

However, before Oregon would-be investors and entrepreneurs begin, there are some rules to understand. Here are six things to know about crowdfunding in Oregon.

Related Slideshow: 6 things To Know About Crowdfunding in Oregon

Small businesses can now crowdfund for investments in Oregon. Here are six things you need to know about Oregon's new rules:

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#1

New Investors

To invest in a in business in the state before, you had to be an accredited investor. This called for a meeting a number of legal criteria, such as having one million dollars.

Now, anyone who agrees to the business terms is eligible to invest their capital in a business.

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#2

Funding Limits

Although a business can ask anyone to invest now, there are limits as to how much can be acuminated by crowdfunding. A single investor cannot put more than $2,500 towards one investment.

There is a limit to how much capital businesses can gather as well. Companies can raise up to $250,000 to go towards a new business or an existing operation.

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#3

Not Kickstarter or Donations

Crowdfunding a business is not simply donating money to fund a project. Investors will be dealing with equity and securities—and will get real returns on their investments.

Each investment deal will be crafted differently, requiring investors to review financial documents, and acknowledging the venture is an investment and could be risky.

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#4

Compatible Capital

With the new crowdfunding rule comes an online platform by Hatch Innovation for businesses to post investment proposals. The owners can craft business plans that match their needs, while investors can search for proposals that interest them or work best for them. Amy Pearl, founder of Hatch Innovation, calls this compatible capital—where both sides of the deal can pick a good fit to increase capital.

“Because the entrepreneur defines the terms of the public offering, the fundraising process will be more compatible with his or her business, improving the likeness of success,” Pearl said.

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#5

Just Oregon

Although other states may have their own crowdfunding laws, each one is unique in its outlines. Oregon’s rules only apply to Oregon. Only business registered in Oregon can participate in crowdfunding and only Oregon residents can invest.

This will help business, money and jobs stay in Oregon, according to Dohliqa.

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#6

Education

To help make sure investors and businesses make the most of crowdfunding, educational material will be available to make sure people know what they are doing.

Dohliqa said investing can be scary thing, so Hatch Innovation is making sure people have the resources and support they need to properly invest.

On the Hatch Innovation website, which will also provide the platform for crowdfunding requests, is research and educational materials to help guide interested parties through the process. The educational side is what sets Oregon apart from the country, according to Dohliqa.

“It’s not only about the law, it’s the whole education—that’s where Oregon is leading,” Dohliqa said.