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2 Days in a Row – Wall Street Journal Covers us Again

Small Internet Sales of Stock Get Review

Without directly mentioning our name, everything that we have been working on in Washington seems to be coming up in the news!

Today (April 9, 2011), a day after it was the cover story in the Wall Street Journal, we again make the headlines.  Check out the story, Small Internet Sales of Stock Get Review (http://on.wsj.com/ft24am)

Together we can make Crowd Fund Investing Legal!  Spread the word!  Sign the petition!

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The Sweet Smell of Progress

Cover Story WSJ - April 8, 2011

It has been just over 1 month since we launched this initiative and today we take heart in the fact that the SEC is listening to our concerns.  Without directly mentioning our names, Startup Exemption was part of today’s (April 8, 2011) Wall Street Journal cover story: U.S. Eyes New Stock Rules – Regulators Move Toward Relaxing Limits on Shareholders in Private Companies (http://on.wsj.com/eBJC52 – subscription required)

On March 22nd a Congressman we have been working with sent a letter to the SEC asking them to explain if there is a correlation between the decrease in capital formation in the U.S. since 1996 and antiquated U.S. Regulations.  In that letter we contributed six questions that asked the SEC to respond to our crowd fund investing solution that could immediately get capital flowing to entrepreneurs but is hindered by regulation.

In particular we asked: Continue reading

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Our Response to the Bloomberg News Editorial

The following was sent to Susan Antilla as well as her editor at Bloomberg News following her March 28th piece, Making Whoopi as Small Investors Absorb Risk: Susan Antilla.

Hi Susan,

How depressing.  I don’t understand how all our communication led to your summary that we are choosing ‘business interest over investor protection.’  When time and again I spoke of working in “the spirit of the law.”

In one of my emails today I even said, “We are not trying to circumvent the law but to come up with a commonsense solution that will let Americans invest a little, essentially risk-less money into entrepreneurs who cannot access capital the traditional way.  I think it is important to reiterate that while we do think the maximum anyone can invest should be limited to $10,000, we highly doubt, based on the principals of crowd funding, that people will be investing that singular, large amount.”

You focused solely on the $10,000 figure when I stressed, “What makes crowd funding such a powerful way to raise money is that thousands of people can invest $100.  People that have large amounts of money and are looking to invest will most likely not use this model and continue to use the traditional means.”  The article made it sound as if everyone was going to risk $10,000?  I thought I had made it clear that my intention was to help startups crowd fund small amounts of money from many different people?

Crowd fund investing is not a solution “to the aggravation of regulation” but rather a commonsense framework to help entrepreneurs while at the same time following the spirit of the securities law: protecting the investor and enabling companies to raise money.

Continue reading

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When Reporters Neglect to Share all the Information

Over the past few days I had the opportunity to be interviewed by Susan Antilla from Bloomberg News about Crowd Fund Investing (CFI).  When we spoke there were are a few points I always circled back to:

a)    It is not our intention to work around the law but rather to work within the spirit of the law – anti-fraud & investor protection.

b)   If crowd funding has worked in principal to help launch art related projects, then within a commonsense framework, it too should be able to work with small investments in startups/entrepreneurs.

c)    While I agree that the government needs to oversee the securities markets to prevent large, difficult to understand organizations from taking advantage of investors, I do not see how regulating a $25 crowd funded investment in a transparent startup would require the same oversight.

d)   Crowd funding isn’t a way to debunk millions of dollars from Americans but a way to let the people decide if and what they think is a good business idea and if and how much they should invest.  An entrepreneur/startup will not get funded if he doesn’t pass the muster of the crowd or meeting his funding targets.

In addition, the March 26th blog entry “How Risky is Crowd Fund Investing,” was presented to her as ways to mitigate risk.  Much to my dismay, these points were ignored in her story.

Luckily, the majority of our conversations took place over email.  So take a look at what  she wrote (Making Whoopi as Small Investors Absorb Risk: Susan Antilla) and then see the our response to her (with actual text cut and pasted from email correspondences with her).

Media exposure is important and in order to effectuate change, we need that exposure.  However, it is a shame when reporters with a platform to disseminate two sides of a story utilize it in way to craft a story that has little bearing to what is being presented. It’s especially disappointing when reporters from respectable publications leave out large amounts of information from an interview in order to present an invalid angle to a story.

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How risky is Crowd Fund Investing (CFI)? Capital Flow & Investor Protection

Crowd Fund Investing is probably less risky than public companies because the crowd has access to more, and easier to understand, information about the entrepreneur and his company.  In CFI, no one is forced to make an investment.  Quite the contrary, people typically won’t make an investment unless they feel comfortable about an idea and the entrepreneur behind the idea. His executive summary will discuss the idea, how it will make money and why people should invest in him.  Since CFI is an “all or nothing” platform, if an entrepreneur doesn’t hit his funding goal because he didn’t have a winning idea or he asked for too much money, then the investors don’t fork over their cash.

Doing nothing isn’t an option because if we don’t get capital flowing to entrepreneurs/startups, then they won’t create the jobs that will spur the economy. Since the banks aren’t lending, credit cards are charging exorbitant interest rates and the private equity folks are only concerned about the next Facebook, someone has to help the little guy.

Crowd Fund Investing is based on groups of individuals giving small amounts of money, $50, $100, $500, to entrepreneurs to help them start their businesses.  While we suggest a $10,000 limit to each investor, based on the way crowd funding works, we highly doubt individuals will be making singular, large investments like that.  Another way, we reduce risk by limiting exposure. Continue reading

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Whoopi and Neiss in the WSJ

Today the Wall Street Journal picked up the story of the startup exemption.  As more people hear about this exemption being pushed forward the more people that realize it is a tangible solution to getting money flowing in our economy.

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The US Takes Steps to Improve the Economy by Focusing on Startups

Senators John Kerry, D-Mass., and Richard Lugar, R-Ind. are leading the way to ease immigration requirements for foreign entrepreneurs with their “Startup Visa” bill. There are many different requirements to qualify for the Startup Visa, but most importantly the foreign entrepreneur must directly create jobs for Americans.  Essentially, what this is saying is that foreigner entrepreneurs will be allowed to come and work in the US if they have a direct and major impact on the US economy.

These visas will not effect the overall immigration quotas in the US, they will simply be using unused visas. Entrepreneurs, small businesses and startups are the way we are going to grow our economy to get out of this recession.  The UK has already realized this and have passed a Startup Visa of their own recently. It is important to note that the crowd funding exemption we are talking about here at Startup Exemption is already allowed in the UK.  If the US does not move fast we are going to get left behind while entrepreneurs, money, and jobs flow overseas to the UK and other more forward thinking countries.

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Miami Beach Entrepreneur & Whoopi Goldberg Team up to Help Entrepreneurs Access Capital

Want to know how we are going to kick start our economy?  Follow successful entrepreneur and Miami Beach resident, Sherwood (Woodie) Neiss and you’ll see.

Woodie is another one of those “Type-A, I can do anything I put my mind to” personalities.  He is an ambitious entrepreneur who just won Miami’s “Startup Weekend” with an idea to use smartphones for instant polling.  He was also in the June, 2006 INC cover story “From the Heart” where he helped start and grow a 3-time, INC 500 company that solved the problem of getting kids to take yucky tasting medicines.  (He successfully exited from that company in 2007).

According to Neiss, the traditional means of startup and growth capital are no longer available to entrepreneurs.  “This capital is critical for startups and small businesses to grow and hire Americans,” he says.  While government is focused on trying to fix the current system, he thinks the solution goes back to our roots.  Roots?  Yes indeed, but not the kind you find on vegetables.

“You see,” says Neiss, “when our Nation was born there weren’t big corporations, large banks or even private equity & venture capital.  For example, there were businesses like the blacksmith and his customers who needed tools.  Customers purchased his products, which paid for his employees and helped fund his growth.   And they were his neighbors.  Only today do we identify a problem; then come up with a solution (aka product) and think, “ok now let’s find some Venture Capital.” Continue reading

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Hong Kong Invests in US companies where Americans can’t

American companies are having a very difficult time raising the money they need to grow their businesses. It’s not because the money is not there but rather because it is not flowing from the people who have it to the people that can use it to grow our economy. One of the things that has always made America great is our ability to innovate. Unfortunately, innovation is currently being stifled by overly strict SEC regulations. These regulations however are not stoping other countries from innovating and riding off the coat tails of US entrepreneurs.

GrowVC, a Chinese company, has now launched with its intention to fill this funding void by collecting money from investors (including Americans).  They already have successful cases of US Startups raising capital from them.  What does this mean? First, by being offshore they just worked around the entire SEC process.  And second, the future success stories of the USA as well as their technology, Intellectual Property and future profits will be owned/shipped overseas.  The one major loophole in these regulations is that if you are not an American or an American company, you are not regulated by these security laws. Clearly, these outcomes were not the intention of the Securities law however it is exactly what is happening. I personally don’t feel that selling our nation’s entrepreneurs to foreign countries is in anyone’s best interest.

By making common sense amendments to the 1933 and 1934 Securities laws we can stop this mass export of US entrepreneurs and get back on track to recovery and innovation.

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US companies look to China for investment

Small businesses and startups in the United States are having an increasingly difficult time raising the money they need to expand their businesses.  During the recent economic downturn funding has become increasingly difficult to find. Banks have stopped lending, credit card companies are tightening up their lending requirements, and there is substantially less Venture Capital and Private Equity available.

The money is out there but there but it is simply not flowing from the people who have it to the people that need it.  Making this problem worse is the stringent investment regulations that the SEC imposes on small businesses. Entrepreneurs and small businesses are starting to look outside the US for the capital they need to expand their businesses.

A recent article in the WSJ highlighted just such a situation.  A small manufacturing business in Riverside California, has been desperately searching for capital so it can hire more workers and expand its operations.  “During the downturn, we went on the hunt for capital, but after 44 presentations we came up short,” says Mr. Williams, 56 years old. Continue reading

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