Following the passing of Regulation A+ of the JOBS Act that went into effect earlier this month, private firms were given the ability to raise up to $50 million in funds from non-accredited investors. The main offshoot of the regulation is the widened base of investors now able to participate on equity crowdfunding platforms in the US.
As part of the new rules, the SEC has also passed guidelines to allow firms to use social media to market their fundraising goals and solicit new investors. First reported on Bloomberg, the rules are for funding deals up to $50 million of either equity or debt sales. Similar legislation exists in the UK and Europe, of which Twitter has become a popular method for startups and crowdfunding platforms to announce and provide updates on the funding campaigns.
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For startups, the ability to use Twitter and other social media sites enables firms to target potential investors who have shown an interest in either investing in the products and services being marketed by the company. It also allows them to pitch their funding campaigns to influencers who could be critical to promoting the deal to their followers.
Overall, the rules for promoting private fundraising occur as global financial regulators have been reacting to the use of social media as a voice of communication of investments. Other examples where the SEC and other financial supervisors have created guidelines, include the dissemination of information by public companies using social media feeds, as well as the promotion of investment advice by banks and brokers.