Allow Contacts to Bring Other Possible Crowdfund Investors into the Conversation

By Sherwood Neiss, Jason W. Best, Zak Cassady-Dorion

As an issuer’s social media contacts begin to engage in a crowdfund investment offering, they may want to reach out to other people in their own social networks to share this opportunity with them. For this reason, per the JOBS Act, online funding platforms must provide ways to share links to an issuer’s campaign.

The ability to easily share a link to a crowdfund investment campaign enables a pitch to go viral. What does that mean?

Consider an example outside the crowdfund investing realm. A previously unknown gaming company built an Android game console called the OUYA, which allows people to create and play games using an open software system (so they aren’t dependent on the Xbox or PlayStation platforms, for example).

Under the old law, the company wasn’t allowed to sell equity in the business, but consumers were allowed to preorder the software. The company raised $8,596,475, in less than 45 days on Kickstarter because the campaign went viral — friends shared the information with friends, who shared it with their friends, and the news spread like wildfire.

Under the new law, the same viral spread can take place, but instead of only being able to preorder products, people can have a financial interest in the company.