Tag Archives: Equity Crowdfunding: Transforming Customers into Loyal Owners


Crowdfunding law gives Arizona startups a boost

A bill was introduced at the Arizona State Legislature during the 2015 session and signed by Gov. Doug Ducey that allows entrepreneurs to raise equity for their company from the general public.

The passage of HB2591 allows people to invest and potentially hold stock in companies that raise money through crowdfunding websites such as Kickstarter and Indiegogo.

“It’s basically the idea that companies shouldn’t be limited to having just rich people be their investors, and individuals shouldn’t be restricted from investing small amounts of money in companies that they know and love,” said Jonathan Frutkin, a Scottsdale attorney and author of “Equity Crowdfunding: Transforming Customers into Loyal Owners.”

Crowdfunding has become a popular method used by up-start businesses to raise money for product launches or other business ventures. It works by allowing anyone to funnel money into thousands of projects you can find online.

However, concerns over fraud loom over the different crowdfunding websites. Although many remain hesitant to give money to companies electronically, concerns over fraud and embezzlement may be unfounded, Frutkin said.

“When an organization may ask ‘hey, you want to raise money online?’ Give me a copy of your articles of organization, your lease, intellectual properties.’ When you ask those question the fraudsters say, ‘there’s a lot easier ways to steal money that this,’ ” Frutkin explained.

HB2591 was originally introduced to the legislature by Rep. Jeff Weninger, R-Phoenix. The Arizona Small Businesses Association helped write it.

Besides Arizona, 17 other states have passed crowdfunding bills. Frutkin said he expects at least 25 states total to have passed similar bills to HB2591 by the end of 2015.

Only Arizona residents would be allowed to invest in Arizona companies, according to the bill. Investors can donate up to $10,000, while companies can raise up to $2.5 million through crowdfunding campaigns.

Arik Tasa-Bennett, a finance major at Arizona State University, has run his own phone-resale business for several years. Tasa-Bennett said he hopes to become a successful entrepreneur, and sees the potential for future businesses to grow through crowdfunding.

“I think this system could be more efficient than traditional ways of financing a product,” Tasa-Bennett said. “With this idea, where the public can see the product and get an opportunity to invest in it, the advantage is that it brings the product closer to the end-user. That’s the whole goal of marketing. You want to know your consumer as well as possible.”

Said Frutkin: “The ability for the small investors, regular people, to invest $100, $200 in a company they love, a night club or restaurant they go to, that really doesn’t exist now. That’s what the Arizona crowdfunding bill will allow. It will allow Arizona people to invest in Arizona businesses.”


Equity Crowdfunding Rules Approved by SEC

Although delayed for nearly a year, today the Securities and Exchange Commission unanimously approved the release of proposed equity crowdfunding rules. The proposed rules have been published and are available on the SEC website for public comments. The rules are part of the implementation of The JOBS Act, a 2012 law which legalized the opportunity for regular people to invest in local businesses without cumbersome regulations.

Attorney Jonathan Frutkin wrote the book “Equity Crowdfunding: Transforming Customers into Loyal Owners” which was published earlier this year. The book, available on Amazon.com, explains how this extraordinary opportunity will allow local businesses to generate new enthusiasm to accelerate their growth. Frutkin is Principal with The Frutkin Law Firm, PLC in Scottsdale, Arizona.

“The release of proposed rules by the SEC is a monumental step forward,” Frutkin says. “It finally moves the ball forward, permitting equity crowdfunding to be finally legal and implemented in 2014.”

Frutkin believes that the ability of regular people to own part of their local economy, rather than being limited to simply investing in large multi-national companies like Exxon and Apple will be transformative to communities.

“People have become far too disconnected from their investment dollars. Instead of driving Wall Street, their investment in Main Street will make their neighborhood a much more interesting place to live,” Frutkin notes. “Now, at least some of their net worth will help their community flourish.” Frutkin also emphasized that equity crowdfunding is not permitted yet, and any company looking at this type of financing should contact their legal counsel.

Frutkin has been active in the crowdfunding movement since The JOBS Act was passed last year. He is a frequent speaker and commentator on the future of crowdfunding finance.


Frutkin Publishes Equity Crowdfunding book

There has been widespread recognition of the emerging power of crowdfunding, the online phenomenon that provided more than $10 million for iPhone-compatible watch creator Pebble and $5.7 million for the upcoming Veronica Mars movie. Valley Attorney Jonathan Frutkin of The Frutkin Law Firm recently published a new book about this new source of finance, known as “equity crowdfunding”. According to Frutkin, the same power of online funding will soon let local companies raise capital online – and more importantly, make customers into owners, increasing the market share of businesses that successfully leverage this new opportunity.

The book, titled Equity Crowdfunding: Transforming Customers into Loyal Owners, provides insight into how business owners can turn their customers into loyal customers while raising money for their company. It is now available for print and digital purchase on Amazon.com.

“Equity crowdfunding is the single largest marketing opportunity for local businesses to transform mere customers into loyal owners,” Frutkin said when describing the concept. “By resetting the relationship between corporation and patron, the new rules for crowdfunding are going to fundamentally shift the way entrepreneurs think about both raising capital and creating long-term engagements with their customers.”

Interest in crowdfunding drastically increased after President Barack Obama signed the JOBS Act (Jumpstart our Business Startups) in 2012 legalizing equity crowdfunding, subject to new rules being agreed by regulators. A total of $2.7 billion was provided through crowdfunding by individual donors last year, according to reports by research firm Massolution — up 81% from 2011. This space is only going to heat up further when SEC rules for the JOBS Act are released this year, paving the way for equity crowdfunding.

For more information on the book, author Jonathan Frutkin, and The Frutkin Law Firm, visit www.frutkinlaw.com.