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Unpublished Paper
Bridgefunding Is Crowdfunding for Startups across the Private Equity Gap
ExpressO (2015)
  • Seth C Oranburg, Florida State University
Abstract
Title III of the JOBS Act of 2012, which attempts to encourage entrepreneurship by allowing startups and small business to sell stock to the general public over the Internet through “crowdfunding,” is completely backwards. Its ceiling should be a floor—the $1 million limit should be inverted. By capping startups at raising $1 million from crowdfunding, the JOBS Act does not address the private equity gap, a fundamental problem in startup markets, and exposes unsophisticated investors to risk and fraud. This Article presents a regulatory framework premised on “bridgefunding,” an approach that this article develops to protect new investors by encouraging them to fill a gap in the market. Startups have the greatest difficulty raising between $1 and $5 million, not the initial $1 million. That failure in the startup funding market could be solved with crowdfunding, but only if the regulations are changed. Bridgefunding also explains why startups should obtain financing from professional investors first, and then turn to crowdfunding. Bridgefunding takes crowdfunding to its logical conclusion, allowing crowdfunding to act as a means by which to bridge the funding gap, and thus occupy a valuable niche in the startup investment market.
Keywords
  • bridgefunding,
  • crowdfunding,
  • angel,
  • venture,
  • capital,
  • investment,
  • startups,
  • start-ups,
  • entrepreneurship,
  • regulation,
  • securities,
  • JOBS Act
Publication Date
February 23, 2015
Citation Information
Seth C Oranburg. "Bridgefunding Is Crowdfunding for Startups across the Private Equity Gap" ExpressO (2015)
Available at: http://works.bepress.com/seth_oranburg/1/