On Tuesday January 24, 2012 President Obama delivered the State of the Union Address. He highlighted the challenges our economy faces and the direction in which we need to take the country. One of our nation’s biggest challenges he focused on is unemployment. Crowdfund Investing (CFI) also known as equity-based crowdfunding, is a solution to the jobs crisis. We originally pitched this idea to Washington a year ago. CFI allows the community to fund their local entrepreneurs to spur innovation, launch businesses and create jobs. And it is one of the solutions the President supports. Our framework is the basis for all the bills before Congress (HR.2930, S.1791 & S.1970). And until we legalize it, we can’t help fund our nation’s net new job creators.
Politicians use crowdfunding daily. It is how they fund their campaigns. They go out to thousands of supporters and say, “Hey give me as much money as you can afford (capped, of course). Collectively it will add up to something substantive so that I can talk about my goals, build my team, market my message and get elected (or re-elected).” Entrepreneurs do the same thing (take an idea, make a proof of concept, build a company, and hire employees to market and grow) but only with accredited investors. Here’s the ironic part. It is legal for politicians to go to the masses but illegal for entrepreneurs to do the same thing.
When it comes to crowdfunding, entrepreneurs are held to a different standard than politicians. Yet politicians constantly look to them as the solution to our economic woes. Why are there rules on how much money one has to make in order to give to an entrepreneur but there are none when it comes to politicians? Do you know that 100% of Americans can give to politicians of their choice but only 5% of Americans can invest in entrepreneurs that can create jobs? In full disclosure, the rationale (according to the opponents to Crowdfund Investing) is that Americans aren’t sophisticated enough to understand the risks inherent in investing in startups. They don’t understand that there are bad actors in the marketplace. They are gullible and believe the first thing anyone says.
If they don’t think people are sophisticated enough to decide how to invest a few thousand dollars in a venture, why do they think they are smart enough to choose the right candidates? Why do we allow people the freedom to use their money as they wish when it comes to crowdfunding politicians but we don’t give them the same freedom to use their money as they wish when it comes to investing in startups and entrepreneurs? Are we to assume that there’s no fraud in politics? Should the supporters of Representative Weiner or Presidential Candidate Herman Cain get refunds?
This election season half a billion dollars will go to fund the campaigns of many a politician. Imagine the impact we could have on our economy if those same dollars went into starting new business ventures? Businesses create jobs; jobs provide income, which consumers spend in order to live. Increased consumer spending stimulates the economy. This will get us out of the recession.
Our conclusion is simple. If people are deemed smart enough to invest in the right politician, shouldn’t they be able to do the same, freely, in a business? The time is now to change the security laws that were written 80 years ago. The Internet can allow us to identify those ideas we deem worthy and fund them with the same dollars we spend on political campaigns. Crowdfund Investing is the mechanism to allow it all to happen. Join our cause to make Crowdfund Investing legal in 2012!
Ps – Our statisticians performed some analysis on entrepreneurship based on data from the Census, the SBA and the Kauffman Institute. If we legalize Crowdfund Investing over the next 5 years we can launch over 500,000 jobs that have the potential to create 1.5M jobs!