Crowdfunding is a model for collecting small amounts of money from an unlimited number of people through online platforms. Although the United States was one of the first countries to accept crowdfunding, the platform actually started working only two years later, when the regulations governing crowdfunding itself and obtaining a license for crowdfunding in Israel came into force.

Under Israeli securities law, companies that use crowdfunding in Israel are exempt from the obligation to publish prospectuses and disclose information to the public, provided they are not registered in Israel.

To obtain a crowdfunding license in Israel, you need to provide proof to the Israel Securities Authority that your business is platform-fit, insured, and that you are willing to pay a deposit of NIS 100,000, including registration fees. When intending to launch a crowdfunding platform in Israel, it is worth noting that there are restrictions on the maximum amount of investment that an individual can make to the platform. This amount depends on who the investor is, as well as on his annual income. In the course of a fundraising campaign, the company must provide detailed, open reporting, in particular, financial statements, business plans, information on past investments and expected future investments in the capital of the company,

Crowdfunding models

The JOBS Act, passed in 2012, facilitated the adoption of more lenient regulations to encourage and develop additional funding channels for small businesses. The main innovation of this Law is the ability to offer securities to an even larger number of people, that is, to the general public, including via the Internet. In addition, there is no requirement for a prospectus to be published when proposals are published. The JOBS Act provides for two crowdfunding models: regulation of crowdfunding Reg CF and Reg A. The difference between the models is the allowed size of the attracted investment amounts and the requirements for the publication of the proposal.

The Reg CF model allows raising up to $1 million per calendar year through a financial broker that is a licensed crowdfunding platform or a licensed broker-dealer. The reports to be submitted are fairly general but do not require financial disclosure.

The second Reg A model involves crowdfunding that is exempted from registration for public offerings. Two offering tiers are included in regulation A: in tier 1, up to 20 million dollars of offerings can be made in a period of 12-months; and Tier 2, up to 50 million dollars can be offered in 12 months.

If you are planning to launch a crowdfunding platform in the United States, please note that in order to protect the site, it is necessary to take reasonable steps to prevent investors from being defrauded. So, like the restrictions on crowdfunding in Israel, there are restrictions on the maximum amount of investments in the United States.