Innovations in Equity Crowdfunding Take Center Stage in San Diego

2/27/14Follow @bvbigelow

Securities regulators are still formulating new rules that would allow startups to use Kickstarter-like campaigns for equity crowdfunding. But in the meantime, a couple of investment groups have put together Internet crowdfunding platforms for people who qualify as accredited investors under existing law.

One of the crowdfunding portals, OpenRound, was unveiled last October by Roth Capital, the investment-banking firm based in Newport Beach, CA. So far Roth has used its new crowdfunding website to raise capital from accredited investors for two California startups—San Diego’s Mogl, which operates a Web-based restaurant rewards program, and Mountain View, CA-based Soasta, which provides cloud-based software used by developers to test their Web and mobile apps.

Today, former Qualcomm executive Jeff Belk is lifting the curtain on another crowdfunding initiative in San Diego at a breakfast meeting of The San Diego Venture Group. Belk has founded a new San Diego-based firm, Bright Light Management, to serve as the first U.S. venture partner for OurCrowd, an Israeli venture firm that enables accredited investors throughout the world to co-invest in emerging technology companies.

Both initiatives are intended to make it easier for accredited investors to sink their capital into early stage companies by using Web-based systems, a model pioneered by San Francisco-based AngelList. Under current U.S. securities law, accredited investors must have a net worth of at least $1 million (not including their home) or annual income of at least $200,000 (or $300,000 if married.)

“I think equity funding for accredited investors will end up working,” says David Titus, a local VC and president of the San Diego Venture Group. “But I think crowdfunding for the masses is doomed to fail.”

ORLogo“It’s a new frontier,” said Ted Roth, the San Diego-based president of Roth Capital and head of institutional sales. “It’s trying to meld the historical era of doing everything by mail with some of the newer tools that are available to us.”

Roth Capital’s OpenRound makes money by … Next Page »

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • ctblizzard

    The whole point of the original crowdfunding ideas was to appeal to the masses so a much broader segment of society can participate in start ups. Online “crowd-funding” for millionaires is really nothing more than a website to get rich people to invest. We already have poor ownership of stocks in this country and its funny how its ok for people to put money into kickstarter and indiegogo campaigns with the expectation of no ownership but not ok if they can get ownership. Also I am not sure how the final rules will come down or if they did but from what I read companes will needed audited or reviewed statements and that’s a pretty big expense for a small start up. To me the intent of the law is not being met by the regs.