Crowdfunding began as a fundraising model used by entrepreneurs or artists to fund projects. Investors gave money as a donation or with the expectation of receiving the final product. Now, more and more companies are using crowdfunding simply as a means to raise money.
When a company raises funding, it usually issues stocks or bonds (in the case of debt raising) to its investors and must disclose all material information related to the issuance. In most cases, an issuance of securities to the public is made through a prospectus published on the stock exchange.
If your company would like to offer and sell securities through crowdfunding, you must comply with the local securities laws.
Israel’s legislature has finally understood that crowdfunding should also be regulated and supervised by the Israel Securities Authority (ISA), and indeed regulation in this field is both necessary and welcome.
So who can invest in a securities-based crowdfunding offering? which companies are best suited to raise funds through crowdfunding platforms? What is a “proposal coordinator” and how can it receive a license? What are the risks involved with this type of investing? and what should you keep in mind?