Success Factors in Reward based and Equity based Crowdfunding in Finland

Master’s Thesis 
36 
(Giudici et al., 2013). 
Overall, investment-based crowdfunding requires considerable 
paperwork in European countries (
Valanciene and Jegeleviciute, 2013). 
Though investment-based crowdfunding is also cumbersome in the US, the situation 
there is changing rapidly (Valanciene and Jegeleviciute, 2013). In the US securities 
laws apply to business investments such as stock, bonds and partnership interests. 
Investment in the form of a loan, rather than ownership, is also subject to securities 
laws. (
Hazen, 2012) 
Thus, all investment-based funding falls under securities laws in 
the US. However, due to concerns about the stagnant economy, the congress passed 
the JOBS act in 2012, which exempts crowdfunding from registering with the Securi-
ties and Exchange Commission. This was done in light of the growing popularity of 
crowdfunding and is likely to become a popular alternative for small businesses to 
raise funds. (
Sigar, 2012) 
Policy makers face trouble balancing investor protection and encouraging entrepre-
neurship (Hazen, 2012). Regulation is required to protect funders from potential fraud 
or abuse. This is why the JOBS act includes restrictions on crowdfunding. All invest-
ment-based crowdfunding projects must meet four criteria 
(
Sigar, 2012): 
• The total amount of securities sold by an entrepreneur cannot exceed 1 million 
US dollars 
• The total amount sold to a single investor cannot exceed either 2 or 100 thou-
sand US dollars, depending on the individual’s income or net worth 
• The transaction must be facilitated by either a broker or platform that must 
register with the Securities and Exchange Commission and a self-regulatory 
organization 
• The entrepreneur must comply with statutory requirements, such as disclosing 
certain financial and other information 
Overall, legal regulation especially in regards to investment-based crowdfunding is 
still evolving. Currently, there are no universal policies for crowdfunding, so a crowd-
funding project is subject to its countries legislation. Since the legal environment is 
still evolving, keeping up with the most recent developments is crucial in order to 
succeed in crowdfunding. This might be difficult to do, since most entrepreneurs and 

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