After over a year of information gathering and public hearings, the Texas State Securities Board has approved a set of regulations to govern equity crowdfunding. Given that the board voted 4-0 in favor of these changes, it appears that there is strong support for these changes.
Crowdfunding has been in the news since Indiegogo launched in 2008, followed by Kickstarter in 2009, but has primarily been seen as a way to fund artistic endeavors or technology products without the need to pitch to a CEO or board of directors. But with this ruling, Texas clears the way for a new kind of crowdfunding investing.
Now this can be investment capital. Picture by George Hodan.
Traditionally, only accredited investors — in the US, people with a net worth of over $1 million — can participate in certain types of high-risk investments, such as hedge funds or limited partnerships. Now unaccredited investors in Texas can invest up to $5,000 a year in return for equity, not just backer’s rewards as are found on ordinary crowdfunding sites. Which means investments such as the one in the Hard Rock Hotel Palm Springs could occur here in the Lone Star State.
Naturally, real estate is not the only industry that could be effected. In Austin, the many tech startups will surely benefit, likewise in Houston where the oil industry is also driving innovation. And all over the state, investment opportunities will open up for ordinary citizens.
Additionally, these new rules place no limits on accredited investors, so they can continue to operate as usual.
The new regulations are scheduled to go into effect in late November of this year. To continue the similarities to Indiegogo and Kickstarter, online sites will be allowed to list startups that are actively seeking investors. So keep your eyes open for these new investment opportunities and the impact they could have on the Texas real estate market.