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State-level tests underway for equity crowdfunding- report

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(Credit: Bohemian Guitars) Image shows a screenshot capture of the website of Bohemian Guitars. Bohemian Guitars
December 5
1:43 AM 2013

A report from The Wall Street Journal said a growing number of entrepreneurs have signed up for a test run of sorts of the new federal regulations for equity crowdfunding. The North American Securities Administrators Association told the WSJ that officials in almost a dozen states were enacting or proposing new laws to allow resident entrepreneurs to be get funding from local investors.

Equity crowdfunding arrangements and startups lawyer William Carleton told the WSJ that these are modeled as equity deals where investors get a share of the profits. The stronger campaign to enable entrepreneurs and small companies to get funding came at a time when the Securities and Exchange Commission considers how young businesses can use crowdfunding as permitted in last year's Jumpstart Our Business Startups Act. Although the agency has already released the notice in October, it did not state when the regulations would finally be implemented.

One of the companies in Georgia that have informed the state of their intent to use the Invest Georgia Exemption which was put in place two years ago is Bohemian Guitars. The startup, which makes and sells oilcan guitars, was formed by Adam Lee and his brother Shaun. Their company was already able to gather USD 126,000 under the new rules. He said the amount will allow them to make at least 1,000 guitars with a little amount left for marketing and operations.

Lee told the WSJ that crowdfunding entails a lot of effort. Lee said, "It's not just throwing up a profile on a website and investors swarm at you. It's a lot of effort. I had to educate them on crowdfunding and the Invest Georgia Exemption, and had to explain why we were raising money on this unique format. After all those educating points, I had to then move into courting the investors by sharing my business plan and investor deck."

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