Arizona businesses can now raise capital from general Arizona residents via intrastate crowdfunding, after Gov. Doug Ducey signed the bill into law April 15, 2015. HB 2591 allows companies to raise up to $2.5 million, with non-accredited investors able to invest up to $10,000 each. Accredited (high net worth individuals) will not have a cap limit on investments. The bill will allow businesses to raise money in crowdfunding campaigns with a deadline, similar to the crowdfunding donation model like < a href="http://gofundme.com">Gofundme.com, but with investors getting equity in the company. The hope is that Arizona crowdfunding will “empower” businesses and entrepreneurs with greater access to capital and provide more options for capital than only banks, family and friends, and angel investors.
How will Arizona crowdfunding businesses get their money? Chairman, President and CEO of the Arizona Technology Council Steven G. Zylstra said “Transactions will be managed through a crowdfunding portal unaffiliated with the company who is either a registered dealer or someone who won’t receive any remuneration for the transaction. It will take some time for the portals to become operational.”
For startup companies anxious to start soliciting for capital, first ensure you fully understand security rules and regulations around Arizona crowdfunding.
“Entrepreneurs should be careful [to engage] in crowdfunding like any other type of investment method. They should seek advice from lawyers and accountants in Arizona who specialize in securities,” Zylstra said.
Highlights of Arizona crowdfunding Bill HB 2591:
– The company to offer equity must be an Arizona business, authorized to do business in the state, and doing business under the Securities Act of 1933.
– Investors must be an Arizona resident
– Investors will become equity stakeholders in a project or company
– The sum of all cash and other consideration to be received for all sales of securities may not exceed $1 million per offering in a twelve month period if the issuer has not undergone a financial audit of the prior fiscal year.
– The sum of all cash and other consideration to be received for all sales of securities may not exceed $2.5 million within a twelve month period if the company has undergone a financial audit of the prior fiscal year.
– Entrepreneurs can receive no more than $10,000 per person but unlimited for accredited investors per offering.