Editor's note: This article is based in part on the forthcoming book by Frederick D. Lipman titled “New Methods of Financing Your Business With U.S. Investors.”

Crowdfunding has created a revolution in the raising of funds for startup companies and for other projects, including both for-profit and not-for-profit projects. Crowdfunding is a process by which a company or project can raise capital with relatively small individual contributions from a large number of contributors using the Internet and other social media. Crowdfunding sites include, but are not limited to, Kickstarter, Indiegogo, GoFundMe and many others, and can be reward-based or donation-based.

For example, using the crowdfunding Web portal Kickstarter, approximately 10,000 people contributed over $2 million during 2012 and 2013 to help Palmer Luckey (now 22 years old), the creator of a virtual reality headset, transform a prototype into a finished product. Unfortunately for these 10,000 people, not one of them received any money when Luckey's entity, Oculus Rift, was sold to Facebook for $2 billion on March 25, 2014. That was because the U.S. Securities and Exchange Commission had not adopted final regulations permitting the sale of investment securities by Oculus Rift to these 10,000 backers pursuant to Section 4(a)(6) of the Securities Act of 1933.