There Are New 'Pools of Money' Available for Entre…

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The rules for equity crowdfunding, whereby an entrepreneur can raise money by selling a piece of his or her company for cash, changed in May. It’s been a hot topic since then. And to address this nascent and still as of yet largely misunderstood category of startup finance, the organizers of the Nashville-based startup conference, 3686 South, gathered a group of all-star experts to discuss these new rule changes. (Full disclosure: The conversation was moderated by moi!)

If you weren’t able to get to Music City last week, you can catch up on what you missed with this video of the panel embedded above.

Rules went into effect in May such that anyone with the cash and interest can invest in startups through equity crowdfunding. Prior to the rule change, only accredited investors could participate in equity crowdfunding.

Related: Starting May 16, Entrepreneurs Can Raise Money in a Whole New Way. Here’s What You Need to Know.

“What this has done is really allowed for more pools of money to be available to entrepreneurs, so that’s the really big news about all of this,” says Geri Stengel, founder and president of Ventureneer, a digital media and market research company that, among other issues, specializes in crowdfunding. “Only about 1 percent of all small businesses will raise venture capital. Only about 3 to 4 percent will raise angel investment,” says Stengel, who is sitting far left on the couch.

Equity crowdfunding is expected to provide a fundraising alternative for ventures such as yoga studios, restaurants or other various main street businesses.

Stengel is joined on stage by Doug Ellenoff, a corporate and securities attorney with a specialty in business transactions and corporate financing who has been actively involved in working with federal government agencies as the rules are being rewritten, and Pelli Wang (on the right end of the couch), the venture director at SeedInvest, a leading equity crowdfunding platform and early-stage VC fund.

To be sure, equity crowdfunding is not going to steamroll over other sorts of startup financing. “It’s not intended to replace venture capital. If you can get venture capital, God bless you. That’s wonderful, that means you are in a rarified group of profiled companies that are exciting to the VCs,” Ellenoff says. “But for many other thousands of entrepreneurs that have started up, they are only looking to find a few hundred thousand dollars, Title III (the provision of the law referring to equity crowdfunding) is a wonderful opportunity.”

Related: An Entrepreneur’s Essential Guide to the New Wild West of Funding Opening on May 16

Equity crowdfunding also gives a lot more individuals in the U.S. access to startup investing.

“For most of the last 80 years, venture as an asset class has been really difficult for the average investor to get in, unless you are a high net worth individual, unless you get the deal flow, you are part of an angel group or you invest into VCs, you just didn’t have access into this asset class,” Wang says. “It’s a great way to get into an asset class that previously was barred.”

To hear more about this new class of startup investing, watch the video above. And a wee note, get comfortable. The video embedded here is a bit longer than the typical video published on Entrepreneur. We want you to feel like you were in Nashville with us!

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