Equity Crowdfunding Investors – check your Facebook! – SEC now says Social Media OK for Company Announcements.

Equity Crowdfunding Investors – check your Facebook! – SEC now says Social Media OK for Company Announcements.

The announcement is considered a big win for equity crowdfunding by some equity crowdfunding investors.

Yesterday, the SEC recognized social media as an acceptable way to distribute information to shareholders. In the press release the SEC referenced the company Netflix in which spurred the question of whether or not it was ok to submit company announcements via social media. So what could this mean for equity crowdfunding investors?

Although Netflix is no longer a start up company. The news from the SEC to allow companies to submit company announcements via social media is a great step forward for investing in equity crowdfunding and equity crowdfunding sites. Virtuous Vodka a startup that received funding from the equity crowdfunding site “Funded by Me” out of Sweden currently has a private facebook group for all equity crowdfunding investors. Below highlights the Pros and Cons of investing in equity crowdfunding companies that utilize social media.

Pros:
- Distributing company announcements via social media can be much cheaper for the company. (no one reads snail mail anymore these days anyway)

-  Quicker distribution. It doesn’t take much to write a facebook post. The CFO could even post from a cell phone to alert all equity crowdfunding investors)

- Additional collaboration with stakeholders all together in one place on the internet can produce ideas, suggestions, and additional resources for increased company success, as an equity crowdfunding investor this can be huge especially in small startup companies.

- Equity crowdfunding sites will bring a lot more investors. Social media announcements could get you the information faster than the competition.

 

Cons:
- Not every equity crowdfunding investor has a Facebook or wants one either.

- With easy access to investors, companies can send information overload. (Not that we don’t want to hear about the CEO’s grand daughters dance competition, but that might be information overload)

- Security issues can easily arise. While facebook is actually somewhat secure. It wouldn’t take much for information to get in the wrong hands with that savy equity crowdfunding investor leaves his social media account open on a public computer and forgets to log out.

In summary when investing in equity crowdfunding be sure to check how information will be distributed, how often, and who will be distributing the information. Using social media for distribution of company information will surely be a heavily debated topic in the coming months. Investors that are not up to date on their social media should probably get up to speed sooner rather than later. The pros appear to outweigh the cons depending which side of the table you are at, and the way things are looking if you are investing in equity crowdfunding it wouldn’t come as a surprise to see social media as a key player in distributing company information.

 

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  1. Crowdfunders rejoice! SEC says OK to social media communications - Crowdex : Crowdex - April 4, 2013

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