Colorado is not waiting any longer, and consequently the Colorado crowdfunding bill accelerated through the legislature, passing in less than seven weeks. Roughly 17 other states have also passed rules allowing intrastate crowdfunding.
“This is to help Colorado small businesses trying to raise capital and Colorado residents who want to invest in Colorado businesses,” said Rep. Pete Lee, D-Colorado Springs, who co-sponsored the bill with Rep. Dan Pabon, D-Denver. “It was the perfect bill.
The new law will ease the process of raising the first $1 million by letting people ask other Colorado residents for up to $5,000 each. Conversely, investor have opportunities to invest locally, outside of Wall Street. Companies have to inform investors of the risk, provide quarterly reports, but hey can skip audits and other expenses typically needed to attract investors.
The state’s Securities Commission must now create rules before the first equity crowdfunding deal in Colorado is made. Draft rules will be completed by the end of April 2015 and must go through an approval process before becoming official, according to deputy state securities commissioner
Previously in the U.S., only accredited investors can buy stock in a private company. And such investors must make at least $200,000 annually and have a $1 million net worth.
The Colorado crowdfunding law requires investors and the company raising funds both be in the state. In addition any company raising funds must provide quarterly reports, keep investors apprised of risk and spend 80 percent of the proceeds in Colorado. Companies are limited to raising $1 million, but can raise $2 million if they provide audited financial statements.
The most flexible crowdfunding software platform available, CrowdForce allows investment offerings for non-accredited investors to post concurrently with allowing accredited investors to view and get involved with the same deals.
CrowdForce was the first into the white label crowdfunding software market to support intrastate portal owners, and helped customers launch platforms in Indiana, Texas and Alabama in early 2014.
The CrowdForce white label crowdfunding platform software makes it easy for portal owners to manage different types of investors and also has a very complete reporting system to manage accounting. Everything you need to host investment offerings for non-accredited Colorado resident investors and accredited investors is included as part of the software. All that’s required is to plug in your Colorado escrow accounts for specific deals, and plug in in your broker to handle all compliance.
Colorado was quick out of the gate with its crowdfunding regulations based on the federal exemption in April 2015, shortly after other early adopters of intrastate crowdfunding, such as Illinois, Indiana and Texas. Whatever the capital raises are targeted towards in Colorado, it presents a huge opportunity to raise necessary capital for large development projects and capital raises for the many local companies located in the state.
What’s next? That depends on how you want to get involved in the Colorado Crowdfunding industry. Maybe you’ll want to launch your own Colorado Crowdfunding Portal. Or if you’re an entrepreneur, business or startup, you might consider issuing a Private Equity Placement to raise money for your business under the new Colorado Crowdfunding Exemption. Or become a Colorado Crowdfunding Investor and start browsing for new businesses investments.