Georgia Exemption Opens Door for Equity-Based Crowdfunding
[Note: A similar story aired nationally on Marketplace. To go to that story, click here.]
Community-based crowdfunding sites like Kickstarter and Indegogo make it possible for just about anyone to donate to a project.
But if a small company wants to sell shares to raise cash, federal regulations make it nearly impossible.
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Unless you live in Georgia or Kansas, which are currently the only two US states to allow what’s known equity-based crowdfunding. 
Atlanta-based Bohemian Guitars hopes that concept will help propel it from shoe-string start-up to big time musical instrument company.
“So just from it rubbing up against your body, you get a really unique tone,” says Shaun Lee as he turns a metal oil can into a gritty-sounding electric guitar.
The brothers heard a street musician play an oil can guitar on a visit to their native South Africa. They brought one back and people started asking about it.
So last year they used crowdfunding site Kickstarter to found Bohemian Guitars.
“Our goal was $32,000 and we did $55,000 after about 35-days,” says Adam Lee as he sweats inside the company’s headquarters–an unairconditioned loft near the Sweat Auburn District.
Jeff Bekiares says Adam Lee “gets” crowdfunding. Bekiares is one of the founders of Atlanta-based start-up SparkMarket, the equity-based crowdfunding site poised to help Bohemian Guitars raise $150,000 to expand.
To do it, they’ll sell shares to anyone in Georgia.
“The securities laws here in the state have changed very favorably,” Bekiares explains.
Since the 1930s, federal regulations meant to curb fraud have made it cost-prohibitive for small businesses to seek public investment. But in 2011, the Invest Georgia Exemption opened that door. 
“We wanted to have an environment in place where the market could determine whether this type of mechanism would work,” says Vincent Russo, general counsel for the Georgia Secretary of State.
Russo says nobody really understood the potential of the law, until recently.
The IGE has now opened the door for platforms like SparkMarket and competitor Sterling Funder to create a new crowdfunding phenomenon.
And it could mean more small businesses like Bohemian Guitars open their doors here in Georgia.
Kansas is the only other state with similar rules.
While last year’s federal JOBS Act holds the potential for opening equity-based crowdfunding, the SEC has yet to publish rules.
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