Germany is reportedly planning to introduce a new law, which will regulate fund raising by startups through online platforms.
The move is expected to protect savers while supporting innovation in the country.
The Wall Street Journal cited Christian Democratic Union of Germany member Frank Steffel as saying that the ruling coalition has agreed on rules for crowdinvesting, and some companies will have to show detailed information about their business.
Investors might also have to disclose their wealth prior to funding a startup.
Under the new rules, a startup will have to provide detailed information of the business, including risks involved, if it seeks to raise at least €2.5m from retail investors.
Investors will get a right to ask for a refund within 14 days after agreeing to provide it.
The Federal Financial Supervisory Authority will have the power to limit advertising if it considers the ad to be problematic.
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Private investors will be allowed to fund only up to €10,000 on a single venture, and they will need to have liquid funds of at least €100,000 or a monthly net income that is more than twice the invested amount.
The government has decided to toughen up regulations after wind farm operator Prokon became insolvent last year, resulting in huge loss for retail investors.
WSJ cited German Startup Association chairman Florian Nöll as saying: "We welcome the compromise because it establishes a functioning framework for crowdinvesting.
"Crowdinvesting has become an important funding source for founding of innovative companies over the past two years."
