Game Changer: SEC Lifts General Solicitation Ban


After a year-long wait since the announcement of the JOBS Act in April 2012, the SEC finally made a much anticipated vote of 4-1 yesterday in favor of lifting the ban on general solicitation for Title II of the JOBS Act.  This is exciting news for fundraising entrepreneurs with private companies and for investment crowdfunding/equity crowdfunding platforms that connect startups with investors like the one I cofounded, RockThePost.

What does this mean for startups?

Essentially, this means that startups and other private companies will be able to publicize that they are fundraising, instead of relying solely on word of mouth within their own personal networks of accredited investors with whom they have an existing relationship.  This move amends an 80-year-old regulation that previously restricted access to capital.  It’s a step towards democratizing access to funding for private companies, which is what my team and I work for everyday.

The new changes are expected to be implemented around mid September of this year. Once this happens, startups will be allowed to publicize their offerings openly, accelerating the fundraising process and the way people invest in startups substantially due to having a larger reach. The proposed rules advise that startups interested in engaging in general solicitation will need to file an Advance Form D with the written content that the company anticipates using for marketing purposes 15 days prior to publicizing their offering in this way.

What does this mean for investment crowdfunding platforms?

For equity crowdfunding platforms that connect startups with investors, this means that the community of users will be able to engage with each other in a more meaningful way. Our team is especially thrilled because the ban lift will allow us to be more transparent with our entire community, not only the elites- accredited investors.  The flow of information can now be equally shared and consumed by the general public. The use of social media as a marketing mechanism will be allowed, increasing the level of translucence as the company’s documentation will be made available on a larger scale, permitting individuals to engage in their own due diligence.  Increasing crowd involvement provides a further data point indicative of traction and interest from the public, which highly interested investors may take into consideration when deciding to move forward with an investment.

One of the other issues I’ve seen is that there are plenty of startups with a large customer base that they cannot tap into for capital support under existing regulations. These people are the biggest fans and evangelists of the brand, who might be first in line to invest. Once the user base is able to engage with their beloved company in fundraising mode via an investment crowdfunding platform, the company will be able to capitalize on the crowd’s interest in their success and accelerate the fundraising process by converting customers into investors opening a complete new world to startup investing.

Equity crowdfunding sites will need to provide some additional resources and structure around how companies can generally solicit without being deemed a bad actor. There is a big responsibility placed on platforms to educate and guide both investors and entrepreneurs through these frameworks.

What does this mean for investors?

Of the estimated 8.7 million accredited investors in the US, only 756Kparticipate in angel investments via angel networks and personal contacts.  Lifting the general solicitation ban could single handedly grow the infusion of early stage capital tenfold.

Unfortunately, Title III of the JOBS Act will still have to wait. This section introduces the possibility for non-accredited investors to participate in private offerings. Once the Tittle III is also addressed, there will be three different types of investors- accredited investors, non-accredited investors making over $100K (with 10% limitation on investments), and non-accredited investors making under $100K (with 5% limitation on investments).

As with any major change like this one, there will no doubt be a learning curve for everyone involved, and the biggest responsibility that we have as platforms is to educate stakeholders and fundraisers.


  1. […] Game Changer: SEC Lifts General Solicitation Ban ( […]

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