Understand the Crowdfunding Shift That Could Transform How Startups are Funded

To most people, crowdfunding means that someone invented a thermos that sings “Yankee Doodle,” and it just raised $750,000 on Kickstarter. But that’s about to change. In May, a regulation called Title III, a part of the Jumpstart Our Business Startups Act, clicked into effect, and it has the potential to alter the way many startups are funded -- and how people use the word crowdfunding.

The law itself, commonly known as the JOBS Act, is old news. It was passed in 2012, and part of it went into effect a year later. It initially allowed companies to publicly solicit and raise capital from “accredited investors” -- that is, people who the government determines are wealthy enough to take big investment risks, often meaning they have a net worth of at least $1 million. We’re not talking Kickstarter-style funding here, where backers are essentially buying a product ahead of time, or donating in exchange for a