New crowdfunding rules: First words from FundersClub, AngelList, others

FundersClub CEO Alex Mittal worries that $1 million a year limits on crowdfunding proposed by the SEC are too low.

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Cromwell Schubarth: Senior Technology Reporter- Silicon Valley Business Journal; Email | Twitter | Google+

Leaders on the front lines of crowdfunding got a first look at 500 pages of new investment rules and their initial reactions ranged from guarded to outright negative.
The guidelines from the Securities and Exchange Commission allow startups and small businesses to raise as much as $1 million a year from anyone, rather than the pool of wealthy investors who previously were eligible. Leaders at AngelList, FundersClub, WeFunder and CircleUp, who are still digging into the rules, shared their first take with me.
Groups like AngelList and the others are crucial to the crowdfunding proposals because the SEC envisions them potentially acting as portals where the investing public can connect with companies.

"I think the community is still trying to figure out what this will mean but a $1 million a year limit on crowd-funding from unaccredited investors is too low," Alex Mittal, co-founder of FundersClub, said. "If you look at the companies that make a major impact, they all raise many millions of dollars. Most, if not all, of our portfolio are over $1 million in early funding."

FundersClub offers highly curated series of pooled deals to an invitation-only network of private investors who meet current SEC wealth requirements. That means they have liquid net worth of at least $1 million or annual income of $200,000 or more.
Mittal called the SEC's decision not to require startups to verify the income levels of their investors "a huge step in the right direction."

Naval Ravikant, co-founder and CEO of AngelList's huge network of founders and qualified funders, said he doesn't have a problem with the $1 million funding limit but hasn't had time to form opinions on other aspects the new rules yet.