What is crowdfunding as defined by the JOBS Act?

Crowdfunding, as defined by the JOBS Act (Jumpstart Our Business Startups Act), refers specifically to the practice of encouraging companies to raise money from the public by selling securities. This act was implemented to facilitate capital formation by allowing smaller businesses and startups to reach out to a wider audience of potential investors, rather than being limited solely to traditional funding sources such as banks or venture capitalists.

Under the JOBS Act, companies can raise funds from everyday investors, not just accredited investors, which is a significant shift in regulatory policy aimed at fostering entrepreneurship and innovation. This opens the door for a diverse pool of investors to participate in funding opportunities, thus democratizing access to investment in startups.

The other options do not accurately reflect the definition of crowdfunding under the JOBS Act. Options related to private loans or accredited investors ignore the public aspect of crowdfunding as supported by the act, while collecting donations without offering equity does not involve selling securities and is outside the purview of the JOBS Act's definition of crowdfunding.