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Illustration: Annelise Capossela/Axios

Beginning Monday, startups can raise up to $5 million every year from ordinary people who can get a proportionate slice of the company in return.

Why it matters: The changes take effect amid a retail investing mad dash, kicked into high gear by the pandemic and the extra money in (some) people's pockets.

  • It gives regular investors the opportunity to participate in a private company's upside (or the opposite, if a company goes under).

Catch up quick: Previously companies had been limited to raising a little more than $1 million in "regulation crowdfunding" per year.

  • This higher threshold could draw a new crop of later-stage companies into the crowdfunding equity trend that may have felt the $1 million wasn't worth the effort.
  • "There's kind of a snowball effect: When more companies do this, they're bringing their audience and customers, which brings in a whole bunch of new investors in the market," says Brian Belley, founder of Crowdwise, an equity crowdfunding research site.

Other changes taking effect today: Retail investors are now allowed to invest higher amounts this way each year, and companies can essentially pool crowdfund investors into a single line on the cap table.

  • Companies can also scope out whether there's crowdfunding interest before filing for eligibility, which can be a burdensome process.

What they're saying: "It increases the likelihood that good companies raising money from other options will also decide to allow their fans and customers and supporters to invest alongside those same terms," Nick Tommarello, founder of WeFunder, an equity crowdfunding portal.

What's going on: Gumroad — a platform that allows creators to get paid for their work — plans to raise $6 million in its latest funding round, it told Crunchbase today. It has already raised $1 million and plans to crowdfund the rest.

  • As of 4 p.m, it had raised more than $3 million from over 4,000 investors. (It's updating these figures on the hour here).
  • Gumroad's CEO Sahil Lavingia tells Axios the company wanted to let creators invest in the platform — it didn't necessarily need the money.

What to watch: Whether the eagerness ordinary individuals are displaying for the stock market translates into startup investing enthusiasm, as more cash flows into America's wallets.

  • Yes, but: The slosh of cash cuts both ways. Companies are raising bigger rounds of funding earlier, a nod to the voracious appetite of venture capitalists — which could make crowdfunding less necessary.
  • But these new rules create a bigger outside pool for companies, especially those without as much access to (or who have been rejected by) venture capitalists or angel investors.

By the numbers: So far the movement has been teeny, compared to the billions invested in startups each year.

  • Over 1,000 companies raised a record $215 million from equity crowdfunding last year.

Go deeper

Mike Allen, author of AM
26 mins ago - Politics & Policy

Scoop: Fauci's offensive against "craziness"

Photo: Win McNamee/Getty Images

After becoming a top punching bag for the right, Dr. Anthony Fauci is defending himself with a sharp new edge, arguing that an attack on him is an attack on science.

What he's saying: In comments to Kara Swisher on her New York Times "Sway" podcast, shared first with Axios, Fauci says: "It is essential as a scientist that you evolve your opinion and your recommendations based on the data as it evolves. ... And that's the reason why I say people who then criticize me about that are actually criticizing science."

Afghanistan's president coming to Washington on Friday

Ashraf Ghani, left, president of Afghanistan, and Abdullah Abdullah, chairman of the High Council for National Reconciliation. Photo: Sean Gallup/Getty Images

As the U.S. troop withdrawal accelerates, President Biden will welcome Afghan President Ashraf Ghani and Abdullah Abdullah, chairman of Afghanistan’s High Council for National Reconciliation, at the White House on Friday.

Our thought bubble: Axios politics editor Glen Johnson, who traveled to Afghanistan while working for Secretary of State John Kerry, said inviting both Ghani and Abdullah to Washington shows the administration’s respect for the delicate balance of power in the country.

Educators face fines, harassment over critical race theory

People talk before the start of a rally against critical race theory being taught in schools at the Loudoun County Government center in Leesburg, Va. Photo: Andrew Caballero-Reynolds/AFP via Getty Images

Elementary school teachers, administrators and college professors are facing fines, physical threats, and fear of firing because of an organized push from the right to remove classroom discussions of systemic racism.

Why it matters: Moves to ban critical race theory are raising free speech concerns amid an absence of consistent parameters about what teachings are in or out of bounds.