Innovations in Equity Crowdfunding Take Center Stage in San Diego

Securities regulators are still formulating new rules that would allow startups to use Kickstarter-like campaigns for equity crowdfunding. But in the meantime, a couple of investment groups have put together Internet crowdfunding platforms for people who qualify as accredited investors under existing law.

One of the crowdfunding portals, OpenRound, was unveiled last October by Roth Capital, the investment-banking firm based in Newport Beach, CA. So far Roth has used its new crowdfunding website to raise capital from accredited investors for two California startups—San Diego’s Mogl, which operates a Web-based restaurant rewards program, and Mountain View, CA-based Soasta, which provides cloud-based software used by developers to test their Web and mobile apps.

Today, former Qualcomm executive Jeff Belk is lifting the curtain on another crowdfunding initiative in San Diego at a breakfast meeting of The San Diego Venture Group. Belk has founded a new San Diego-based firm, Bright Light Management, to serve as the first U.S. venture partner for OurCrowd, an Israeli venture firm that enables accredited investors throughout the world to co-invest in emerging technology companies.

Both initiatives are intended to make it easier for accredited investors to sink their capital into early stage companies by using Web-based systems, a model pioneered by San Francisco-based AngelList. Under current U.S. securities law, accredited investors must have a net worth of at least $1 million (not including their home) or annual income of at least $200,000 (or $300,000 if married.)

“I think equity funding for accredited investors will end up working,” says David Titus, a local VC and president of the San Diego Venture Group. “But I think crowdfunding for the masses is doomed to fail.”

ORLogo“It’s a new frontier,” said Ted Roth, the San Diego-based president of Roth Capital and head of institutional sales. “It’s trying to meld the historical era of doing everything by mail with some of the newer tools that are available to us.”

Roth Capital’s OpenRound makes money by

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Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.