Startup Exemption

Entries categorized as ‘Crowd Fund Investing’

White House Press Release: Legalize Crowdfunding

January 31, 2012 · 1 Comment

In a press release issued by the White House today to celebrate the 1-year anniversary of Startup America, President Obama again called on Congress to pass a Crowdfunding Bill that would allow entrepreneurs to Crowdfund Investments to launch new businesses and create jobs.

The announcement comes after the State of the Union Address in which President Obama made reference to easing the regulatory burdens on startups, small businesses and entrepreneurs.

The current regulatory system requires that entrepreneurs seeking to raise capital go through lengthy and costly  procedures.

These procedures are necessary for businesses that are raising larger, more traditional means of financing but for ideas coming from college business plan competitions or Startup Weekend Challenges they are a deterrent.

Since small businesses are our nation’s net job creators, we need to do everything in our power to get them the capital they need so that they can innovate and hire.

Crowdfund Investing is a zero-cost solution to the jobs crisis.  It doesn’t require government spending but easing of regulations that were written over 80 years ago.  These regulations while good in there intent are holding back the creative force of America’s entrepreneur.  Only with the advances in the Internet and Technology can easing regulations allow the crowd to step in where Wall Street and the Banks have left off.

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Categories: Crowd Fund Investing · crowdfunding · Sherwood Neiss
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Obama Pressures Congress for Crowdfund Investing!

January 25, 2012 · Leave a Comment

In tonight’s State of the Union Address the President said the following to a loud round of applause: “It means we should support everyone who wants to work and every risk taker and entrepreneur who espires to become the next Steve Jobs.  After all innovation is what America has always been about.  Most new jobs are created in startups and small businesses.  So let’s pass an agenda that helps them succeed.  Tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow.  Expand tax relief to small businesses that are raising wages and creating good jobs.  Both parties agree on these ideas.  So put them in a bill and get it on my desk this year!”

Crowdfund Investing is the zero-cost government initiative he is discussing that can create millions of jobs!  The President gets it.  The House of Representatives gets it!  Now we have 2 bills in the Senate.  Let’s get this on the desk of the President NOW so that we can get back to innovating and creating jobs!

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Investor Protection in Crowdfunding – Why for 5 Years There Has Been No Fraud

January 11, 2012 · 2 Comments

When discussing the current crowdfunding taking place, the question is raised: “why are people doing this?” If only 43% of projects on Kickstarter succeed, why aren’t people crying foul but instead pledging more than ever before? ($9M in December, 2011 on Kickstarter compared to $4m in January, 2011). The answer is simple. They want to help someone they know. They want to support an idea. They want to be part of a community and they want some recognition for it. People are drawn to crowdfunding because they are capitalists. They admire entrepreneurs, and they know that sooner or later they may be entrepreneurs as well.

What are they basing it on? It comes down to trust and transparency. AirBnB is one of the nation’s fastest growing crowd sourcing startups focuses on renting other people’s floors, rooms, homes, yachts – even igloos. It is growing at a staggering 45% per year because people trust the system, vet the offerings and rate them as well. On the Internet, when your “wares are out there,” it is on the line for everyone to see. By being transparent, you build trust. Users check out the reviews, read what other people are writing and make careful and informed decisions. All of this is recorded and becomes part of a larger “self-­policing community” of profiles for both parties and a greater community rating system. These reputations today are carrying across the web from eBay to Tripadvisor to Rate-­a‐VC.

Other companies like TrustCloud aim to become a portable reputation system where their algorithm collects your online “data exhaust” – the trail you leave as you engage with others on Facebook, LinkedIn, Twitter, commentary-­‐filled sites like TripAdvisor and beyond – and calculate your reliability, consistency and responsiveness. The result is a contextual badge you carry to any website, a trust rating similar to the credit rating you have in the offline world. These are tools that can and will be incorporated into any online crowdfunding platform to help foster transparency and accountability.

We think any of you would find it hard to disagree with this statement, “the internet today has made the world a more transparent place. Your actions are followed and the opinions flow freely.”

According to the Sustainable Economies Law Center, “The success of crowdfunding sites demonstrates the desire of the public to support projects that they believe in. Enabling the additional motivation of possible financial return would only reinforce this economically healthy impulse.”

But crowdfunding goes beyond money, experience or trust. Michael Shuman, author of The Small Mart Revolution: How Local Businesses Are Beating the Global Competition, states “Crowdfunding has the potential to deliver the jobs Americans have been longing for. We know that small businesses, especially locally owned ones, are key for expanding the nation’s employment, and these businesses comprise (by output and jobs) more than half the private economy. And yet almost none of the $30 trillion we have in our long-­term investments (stocks, bonds, pension funds, mutual funds, insurance funds) touches these businesses. This is a colossal market failure, driven by obsolete securities laws. Moving even a few percentage points of our capital into local, small business could effect a stimulus home run.”

So let’s address all the naysayers. What if we carve out an exemption and it all comes tumbling down? What if we open the doors to defrauding thousands of people out of $80? Are these protectionists right? Will crowdfunding bring down the entire economy? To them we say, recall what happened in the Ireland Banking crisis of the late 70’s when the bankers went on strike and warned the public that the economy would collapse without a banking system. What happened instead was a peer-­to-­peer banking system where the local pubs became de facto banks, lending money to their customers. It worked so well that some people even joked that there is no better judge of character than a bartender.

Opening the doors to a limited exemption will not cause the fraud that Worldcom and Enron did to their employees and investors, or that Wall Street and Bernie Madoff perpetrated on the American people. It will create a peer-to-­peer system where communities become the de facto seed and early stage funders to entrepreneurs. And if you think about it, there is no better judge of character in the United States than your neighbor, friends, and family.

But there are more reasons to trust the crowd. First, they are massively diverse. Fundamentally the collective IQ of the crowd works like this. Every time a new member joins who has one or more superior facets of IQ, the collective IQ is raised by those unique facets. Second, the values that VC’s claim to provide will be disrupted by the crowd. A VC’s Rolodex is easily replaced by social networks (i.e.: LinkedIn). And the Rolodex of a few thousand crowd investors is much stronger than that of a few VCs. Third, expertise – it is disputable that the people who manage money bring more operational experience to the table than an interconnected crowd of people, many of whom are investing in you because they understand your business. And finally, valuation sophistication – the crowd has been putting their value on things since the beginning of time. Price anything too high and no one will buy it.

These naysayers act as if crowdfund investing were made legal, then every American will dump their savings into this. So either that makes us think they REALLY think we have the solution to kick starting our economy and are afraid of money not being invested traditionally OR they think that everyone for some reason will see crowdfund investing as lower risk than any other choice they make in their daily lives when in fact we all know this isn’t true.

Crowdfund investing is more than just money – it is facilitation, diligence, team building, and valuation. Most importantly, it is jobs.

That being said, we shouldn’t assume that “everyone” will bring expertise. Some will be a marketing engine for the entrepreneur and others will just bring a few dollars. Collectively, they will gather behind entrepreneurs they believe in, they will fund only those they are willing to risk their investment in and they will invest only if they think what they are being offered is fair. Trying to circumvent the crowd to bilk them out of a lot of little dollars isn’t going to be worth the time or energy of a shyster.

There seems to be a general understanding in Washington that government spending stimulates the economy, but that when it comes to letting the average American decide how he or she wants to spend and/or invest his or her own money, then we need government oversight.

We stand at a moment in time when we can use crowdfund investing to start an education process. Where the average American who wants to be part of the process (mind you there’s no forcing here) can be taught to think like an investor and ask questions of entrepreneurs like, “How does your idea generate cash? Do you offer a product or service I would buy? What skills/experience do you have to be accountable with my money and why should I trust you?”

In doing so, Entrepreneurs will learn how to communicate, be accountable and transparent, and investors will provide critical seed and early stage capital. Jobs will be created, innovation will be spurred and our economy will continue to grow.

We do not believe it is the role of government to limit how we can spend our money. Nonetheless, we appreciate their desire to protect our savings and so let’s have the discussion, “if you believe that $10,000 is too much for an American to risk, what is the smallest amount you believe I should be able to invest in my entrepreneurial friend without SEC scrutiny? If you are fine with $1, at what point are you uncomfortable?” That is the point whereby we should set the limit. I wouldn’t be surprised though, if we put it to a vote, the crowd would tell you “I’m an adult, I can make my own financial decisions.”

If the dollar amount isn’t what concerns you but the potential for fraud, even at $1, then we need to have a frank discussion about that.

As Kevin Lawton, author of The Crowdfunding Revolution says, “Fraud isn’t really the issue, ‘Failure’ occurs much more frequently in startups.” According to a Kauffman Foundation survey, approximately half the time you will lose all or some of your investment. Just as you diversify in the publics markets to reduce exposure, having a portfolio of varied investments solves failure in the crowd funding space. As we have seen from over $500 million donated to projects and ideas through crowdfunding already, while people are concerned about losing their money, they are more interested in helping someone bridge the gap, bring an idea to fruition, succeed, and in the end being able to tell their friends and family they had a part in the creative and entrepreneurial essence of what it is to be American. It’s like paying for a brick in a new park or baseball stadium to be engraved with your name.

“Fraud is just some noisy component of failure,” As Lawton says, “and at that, it’s going to be pretty hard to get away with much of it when there are millions of eyeballs worth of visibility and mechanisms which social networking enables to further vet entrepreneurs.”

And thus, the biggest problem we need to solve is education. Running a portfolio and understanding the risk-­vs.-­reward dynamics of investing in early phase companies is essentially an education problem. One way to solve the problem of unaccredited investors making investments, if you think of it as a “problem,” could be to make people ‘educationally accredited’. This can be done with a simple document, which explains the basics of the risk-­vs.-­reward curve of risk startups and the basic principles of a portfolio. It can be done in a few pages and can be sent out in paper form, transmitted via email as a pdf, or done online in a more scalable way via a platform. Before being allowed to invest, people would have to answer a series of questions that test their comprehension of the document.

Instead of pushing people down with a relentless assault on their intelligence, perhaps we should contemplate that people are adults and will make their own decisions. Our job should be to educate: education helps to create prosperity.

Education will teach the participants about analyzing and understanding risk. Nearly every company has a level of opacity. Even a brick-­and-­mortar restaurant business probably doesn’t give you their recipes. Tech startups don’t give you their ‘IP’, often not even to VCs. That’s how it is. Lack of complete transparency creates a level of risk, which is why we have varied portfolios. And within an open market, if an investor has access to two similar deals, one of which is more transparent, which do you think he’ll invest in? Concerns should be focused on the basics of investing, such as disclosures of the principal people in the company, details of the business model, use of funds and the securities offered.

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Categories: Crowd Fund Investing · crowdfunding · Kevin Lawton · Sherwood Neiss
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Frustrating Day for Crowdfunding at the Senate

December 1, 2011 · Leave a Comment

Today was a frustrating day for Crowdfunding.  The Senate Banking Committee, one of the most powerful committees on Capitol Hill held a hearing called, ‘Spurring Job Growth Through Capital Formation While Protecting Investors.’  It should have been called, ‘Why We Need to Stop Americans From Investing $1,000 into their Community Entrepreneurs.’

Anyone attending today’s hearing could tell it was to listen to special interests and regulators talk about the risks inherent in investing under the current system and why we need to protect consumers.  There was no discussion about protecting people from spending their $1,000 paycheck on a lottery ticket, gambling it on Red in Vegas, nor spending more than that on their credit cards and being locked into interest payments upwards of 36% on the balance.   For some reason, the only area they feel we need to provide prudent consumer protection is when a person is making a decision where they want to invest their money.  Why?  Because the expectation is different.  Yes, we expect to win the lottery.  Oh wait, no we don’t.

What’s the point of having a hearing about small businesses and capital formation if there isn’t one panelist that is an entrepreneur, small business owner or crowdfunding expert?  How do you have a balanced discussion of crowdfunding if there is no one on the panel to discuss how crowdfunding works, the merit of allowing the community to back their local entrepreneurs, how the crowd will only fund those ideas they collectively decide are worth and how the social media connectivity will expose fraud and foster winning ideas.  More importantly, if you don’t have a crowdfunding representative on the panel, how do you expose the blatant misrepresentations from the other panelists about crowdfunding?

One of the most frustrating parts of the hearing was when John Coffee the anti-crowdfunding law professor from Columbia said crowdfunding could lead to a situation where unlicensed, nefarious salesmen “who look like Danny Devito,” could set up shop in a bar or coffeehouse and peddle risky offerings to unsophisticated investors. And “In its current form, [Senator Brown’s] bill could be called the Boiler Room Legalization Act of 2011,” Boy does this drama sell.  His fabrication immediately became the cover story for Investment News.

If you are reading this, you understand that the Crowdfund Investing framework we put together is based on a few main principles:

  1. Social Networking – you are raising capital from your friends, family and community.  Your 1st degree connections.
  2. Communication – you must clearly articulate to your friends, family and community what you are doing, why you need this money, why they should trust you to do what you say and why this is a good investment opportunity for the crowd.
  3. All or nothing financing – using the principles of lean startup, you should set the minimum amount of money that you need to accomplish the milestones that you set out to your investors.  If you don’t hit that funding target, you aren’t funded.

You also know that the very first thing we advocate is a fraud/background check to keep unsavory people from participating.  That Crowdfund Investing platforms will need to be registered with the SEC and that we advocate for communicating who (including name, address, social security number, etc) is raising money on crowdfunding platforms and sending that information to both the SEC and the State Regulators.

What the panelists were discussing today was another form of Reg D offering without the safeguards that we’ve been advocating for 11 months.  Not one of the panelists today acknowledged how crowdfunding works or any of the principles above. Obviously, just looking at them, it is clear that none of them have a Facebook page, have tweeted or blogged to a community that follows them.  No wonder they don’t understand how crowdfund investing would work.

Why is it that the people who are crafting the rules under which entrepreneurs can raise capital are the same people who benefit from the rules not changing or changing in their favor?

At the end of the day, why not focus on what we do know.  Crowdfunding has been around for over 5 years now.  Over half a billion dollars has been given away and while we still expect people to do what they say with their money, no one has complained of fraud.  It’s worked well enough up to now, under our framework it will continue to work well but have the added benefit of spurring entrepreneurialism and JOBS!

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Categories: Crowd Fund Investing · crowdfunding · Sherwood Neiss
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More Proof that Crowdfund Investing is Less Risky than the Special Interest Opponents Say

November 22, 2011 · Leave a Comment

The following is an excerpt from Kevin Lawton, the author of the Crowdfunding Revolution.

I recently re-ran a quick study of the risk-vs-reward profile of penny stocks vs initial angel investments in startups (data from the Kauffman Foundation’s AIPP).  See below.  It’s yet another confirmation that early stage investments are actually less risky and have better returns than “penny stocks” (which the public has access to without limitation).

Fraud has been trotted out as the ad naseum bogeyman, but it’s been nothing but a red herring.  Failure is the issue.  Given any degree of risk, a portfolio is necessary to mitigate against investment failure.  So far, I can not find a person (at least one who has any wealth left) who does not have a portfolio.  And thus, for any high-risk asset class where one can lose 50% of the time, having 1% of fraud is a tiny and noisy component in investment failure.

The issue has always been an education thing (i.e. the portfolio).  Beyond that, if a system suppresses crowdfunding in a futile attempt to fight the 1 unit of fraud, it will not only suppress the 99 units of investment, but often a 3x .. 10x economic multiplier (so up to a 1000 units).  Most of the crowdfunding projects tend to have a geographic locality component.  And as Amy Cortese points out in Locavesting, local businesses have a strong local economic multiplier.

But I’m most curious why we are starving private equity of some serious profits and deal flow.  Please see my brief post about how I applied a black-box hedge fund technique to amp up Venture Capital IRR from 30% to 46%.  Allowing crowdfunding platforms to flourish, opens up the door for some bigger players to access investments in smaller companies, and frankly eat some of the VC pie.

Crowdfunding platforms will include crowdsourced diligence & fraudster detection, which will rival the response time and accuracy of anything that Venture Capital has ever seen. We just need the government to get the heck out of the way…

-Kevin Lawton

Author of The Crowdfunding Revolution and serial entrepreneur

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VIDEO – What Does Crowdfunding Mean?

November 21, 2011 · Leave a Comment

Thanks to Congressman McHenry’s staff for putting together this amazing video on the Rally 4 Crowdfunding

McHenry Addresses Crowdfunding Rally

 

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Categories: Congressman Patrick McHenry · Crowd Fund Investing · Jason Best · Sherwood Neiss
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What Crowdfunding Opponents Don’t Want You to Know

November 15, 2011 · Leave a Comment

With all the time and attention that fraud has received, we wanted to talk about a much more important issue, failure.  Failure of early businesses happens 50% of the time – that’s just a fact of nature.  If we were to hold that fraud would happen 1% of the time, then failure is 50 times more important in risk mitigation for investors.  And nearly all Americans who invest in the public markets already mitigate against the risk of “losing it all” by way of holding a portfolio.  Diversification has been practiced for centuries, and it’s no different in any asset class, be it public equities, commodities or crowdfund investing.

We believe that prudent risk and fraud mitigation currently in HR2930, along with law enforcement provisions in the bill preserve the power of state and federal officials to aggressively pursue those who commit fraud.  Now, let’s create a plan to help more honest businesses succeed.

KNOWLEDGE & EXPERIENCE

When entrepreneurs talk about failure they talk about the lessons they learned and the experience they gained which is less sexy to the media than fraud.  In crowdfund investing, the entrepreneur has access to his investors to gain knowledge and experience from them in order to attempt to reduce the rate of failure.  The transparency and ease of many to many communication benefits all.

When investors talk about a stock’s failure, they always focus on the critical importance of diversification.  WHY?  Because everyone knows, a diversified portfolio is the best security against loss.  Why focus on educating people about portfolio diversification when it is easier to claim crowdfund investing will open the floodgates to fraud?

So why do we bring this up?  Because the opponents want you to focus on something that will grab the media’s attention (fraud).  This also distracts the debate while trying to prevent regular Americans from supporting entrepreneurs with their own dollars.

There are entrenched interests that don’t want you to focus on how getting capital to entrepreneurs will stimulate innovation.  They clearly don’t talk about alternative solutions.  AND most importantly they don’t want to lose jurisdiction over the business and revenue they are currently generating.  These are areas we hope the media starts to look into more fully.

Much of our new information economy is based on new ways of connecting people.  Preventing entrepreneurs from soliciting financing from their fans and potential customer base, equates to a massive form of economic suppression.  And it’s a suppression of the most powerful human right ever given, the 1st Amendment.

If the opponents took the time to think it through, they’d see that fraud is no more of an issue than in other forms of investing.  With prudent safeguards in place, let’s focus the majority of our energy on the real issues – continued education about diversification.

Think we are wrong?  Please tell us why.  How does one “lose it all” when holding a portfolio of businesses?  How does suppressing platforms which will drive Yelp-like crowdsourced checking & reviews of entrepreneurs help prevent fraud?

 

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Categories: Crowd Fund Investing · Funding Gap · Jason Best · Kevin Lawton · Sherwood Neiss · Woodie Neiss
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Entrepreneurs to Rally – Will Urge Senate and SEC Action on Crowdfund Investing

November 10, 2011 · Leave a Comment

Startup Exemption and SBE Council to Host a Crowdfunded Rally in Support of H.R. 2930

Washington, DC – The Startup Exemption and Small Business & Entrepreneurship Council (SBE Council) announced today they will hold an event to call attention to the need for the U.S. Senate and U.S. Securities and Exchange Commission (SEC) to act on a common sense proposal that would permit crowdfund investing. The rally coincides with Global Entrepreneurship Week and the SEC’s annual meeting on small business capital formation on November 17th. The event will be held on the Capitol grounds between Union Station and the Capitol building at 8:00 a.m.

True to the tenants of crowdfunding, the group is crowdfunding the costs of the event with a pitch on IndieGoGo.

The goal of the rally says Sherwood Neiss, Chief Advocate of the Startup Exemption is to “put a face to Joe the Entrepreneur and Jill the Innovator and call for action by the Senate and the SEC. Representative Patrick McHenry used our framework for H.R. 2930, the ‘Entrepreneur Access to Capital Act.’ The bill recently passed the House in a unique burst of bipartisan support with a vote of 407 to 17. This Act represents a major step forward in solving the capital crisis facing our nation’s job creators while bringing securities laws into the modern era.”

Crowdfund Investing (CFI) builds on the tenants of crowdfunding. While in traditional crowdfunding, a group of individuals “donate” small amounts of money to an idea (for example, an art related project). In CFI, individuals use small amounts of money to buy equity in a business. The goal of CFI is to provide entrepreneurs and small businesses with access to capital that they will use to grow and hire. Individuals are motivated to invest by the desire to support an entrepreneur and her business plan, to be a part of the solution to our economic woes, and for a potential financial return.

Jason Best, co-founder of the Startup Exemption said, “Our proposal is a jobs initiative that everyone can agree on and requires no government spending. Providing this funding option to connect entrepreneurs with the capital they need, will unleash the next wave of American innovation and create jobs. With President Obama officially backing Representative McHenry’s bill, we look forward to quickly advancing this common sense framework in the Senate.”

SBE Council President & CEO Karen Kerrigan observed that the quick pace of the crowdfund investing bill demonstrates that members of both political parties understand capital access is a critical issue for both entrepreneurs and our nation’s economic recovery.

“Crowd fund investing will give small business owners and entrepreneurs access to sources of capital they currently cannot tap into without triggering complex SEC rules. With common sense reforms, more Americans will be able to invest in promising small businesses, which means more jobs and greater economic growth. Reformulating outdated rules while maintaining investor protections will help entrepreneurs identify and connect with potential funders,” said Kerrigan.

She added: “We are very excited that Congress and President Obama are seeking intelligent and innovative ways to help small business owners access capital. Technology and the Internet have leveled the playing field in so many other areas for entrepreneurs, and it only makes sense that they are allowed to tap into its power and the intelligence of the crowd for needed capital.”

Crowdfunding has grown in popularity over the past 5 years with millions of participants around the world. Entrepreneurs see CFI as a way to raise moderate amounts of capital and investors see it as a way to help entrepreneurs in their community. Numerous academic reports discuss how SEC rules block small business’ access to capital. SEC-registered Crowdfund Investing websites will provide the platform for investors to analyze ideas and self-select those community entrepreneurs they wish to support.

According to H.R. 2930, only businesses that reach their funding target will be funded, entrepreneurs cannot raise more than $2M and investors are limited on how much they can invest. The SEC would continue to provide prudent oversight to CFI to mitigate the risk of fraud and protect investors.

# # #

________________________________________________________

About STARTUP EXEMPTION: Startup Exemption is an initiative spearheaded by Sherwood Neiss, Jason Best and Zak Cassady-Dorion. Mr. Neiss, a 3-time INC500 entrepreneur, came across the problem when trying to help crowdfund two of his startups. While discussing it with Mr. Best, a 2-time Inc 500 entrepreneur, lawyers made it clear that the rules for raising capital were arcane, complicated and required costly compliance measures. Understanding the critical importance of startup capital, these three colleagues set about changing the regulations for investing in Startups. Their goal is to add an exemption to the Securities & Exchange laws based on Crowdfund Investing aka equity-based crowdfunding. Online petition and more information can be found at: http://www.startupexemption.com/.

SBE Council is a nonprofit, nonpartisan advocacy, research and training organization dedicated to protecting small business and promoting entrepreneurship. For more information, please visit http://www.sbecouncil.org/.

Sherwood Neiss sherwood@startupexemption.com
(202) 247-7182

Jason Best
Startup Exemption
(415) 999-2271
jason@startupexemption.com

Karen Kerrigan, (703) 242-5840
SBE Council, 
kkerrigan@sbecouncil.org
Mabel Vaught: mvaught@sbecouncil.org

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These Entrepreneurs are Changing the World for ALL Entrepreneurs!

November 9, 2011 · Leave a Comment

 ***If you cannot read the following clearly, click to go directly to mailchimp post ****

Changing the World for Entrepreneurs
AN UPDATE FROM WOODIE

 

On November 3rd the US House of Representatives passed, with almost unanimous bipartisan support, the Bill I’ve been working on HR2930, The Entrepreneur Access to Capital Act.  HR2930 Vote - 407 to 17It made headlines from the Wall Street Journal to USA Today.

This started less than a year ago when I was out trying to raise capital for a startup idea I had; using smartphones to do instant polling.  The idea won the November, 2010 Miami Startup Weekend Challenge. I went out to raise capital but hit the same barrier as most entrepreneurs.  There’s no capital. Banks aren’t lending, home equity lines aren’t an option because of fallen home prices, credit card limits were lowered and interest rates skyrocketed, and private money is only for a select few.

Entrepreneurs, ideas, capital, businesses and JOBS – They are all interconnected.  Without capital small businesses cannot innovate and hire.  The key to getting us out of this recession is to get American’s back to work and this requires job-creating businesses.  So rather than bemoan the problem my peers and I went out to solve it.

Jason, Zak & Woodie - The Startup Exemption TeamWe decided, given the advances in accountability and transparency due to the Internet and technology, the time was right to update 80-year old security laws so that we could go to our friends, family and community and sell them shares in our businesses via crowdfunding.  (This is currently illegal).

From there we built a framework, launched a petition, started blogging and began peddling the solution to influencers in Washington including the media.  In less than 6 months:

  •      I testified at 2 congressional hearings; Testimony one and Testimony two.
  •      We were consulted by the White House and included in President Obama’s Jobs Act
  •      We are the force & framework behind HR 2930, the Entrepreneur Access to Capital Act!
  •      This was publicly endorsed by President Obama, and
  •      Our bill was almost unanimously approved by a vote of 407 to 17 on the floor of the US House!U.S. Congressional Hearing - September, 2011

But we aren’t done yet.  Even though we had such bipartisan support, we we need to keep the pressure on.  Hence, we are taking our fight to the Senate.   We are holding a HUGE rally on November 17th in Washington, DC to coincide with Global Entrepreneurship Week and an annual, one-day meeting the SEC is having on Small Business Capital formation.

Our goal is to introduce Washington to ‘Joe the Entrepreneur’ and ‘Jill the Innovator,’ explain how they are the job-producing engine of the USA and have a teach-in with our Senators about Crowdfund Investing.

Our solution allows the community to pick and finance only those companies they think are worthy.   They will back them not only with money, but also with knowledge, experience and marketing power.

But in order to pull this rally off, we are trying to crowdfund the cost.  So feel free to check out our Indiegogo campaign.  Feel free to give a buck or two if you’d like.  Contact your senator (here) and tell them to introduce and support HR2930.  Ask them NOT to play politics with the Bill and attach frivolous amendments that don’t pertain to the bill.  Feel free to come to the rally on November 17th and most importantly, feel free to share what we’re doing with those that you think would find it interesting!

All our best!
Woodie, Jason & Zak 🙂
Our Campaign on Indiegogo

November 2011
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Categories: Crowd Fund Investing · Jason Best · Sherwood Neiss · Woodie Neiss · Zak Cassady-Dorion
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Jason Best of the Startup Exemption on Nightly Business Report about Crowdfund Investing

November 8, 2011 · Leave a Comment

Video here. Forward to 9 minute and 25 second part to begin segment.

Crowd Funding for Start Ups
Tuesday, November 08, 2011

SUSIE GHARIB: Another source of funding for small businesses is crowd funding. It’s a way for startups to use the Internet to raise relatively small contributions from a large number of people. The only problem is that securities’ regulations severely limit the ability to crowd fund. But as Darren Gersh reports, Congress is on the way to changing that.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Find a friend with extra bars of gold in the basement — that’s the traditional way entrepreneurs fund a business. But for those who don’t have a rich uncle, there is what’s called crowd funding. Crowd funding is a strategy to raise small sums of money from many people, even people all over the country.

JASON BEST, CO-FOUNDER, STARTUPEXEMPTION.COM: It really democratizes the ability to raise funds for your business.

GERSH: Jason Best is lobbying Congress to pass legislation making it legal to crowd fund. The bill he backs allows entrepreneurs to raise up to $1 million, $2 million if companies provide audited financial statements. Entrepreneurs would not have to go through the expensive process of registering their shares with the Securities and Exchange Commission or state regulators. In a given year, investors can pitch in a total of up to $10,000 or 10 percent of adjusted gross income, whichever is smaller.

BEST: This is an opportunity for entrepreneurs and small business people, whether they are in Arnold, Nebraska, Detroit, Michigan or Miami, Florida, to be able to raise capital for their ideas and to build their businesses.

GERSH: To combat the kind of fraud that brought down Enron, Congress has tightened accounting rules, making it harder for companies to go public. Entrepreneurs like Idealab’s Bill Gross say crowd funding will provide cash before venture capital and the chance at an initial public offering comes along.

BILL GROSS, CEO IDEALAB: At this first stage, when a company is just getting going, this could be a big boost to getting a company to go from, say 10 people or five people to 50 people and to first revenues or even first profits. And I think that’s going to be really helpful to the economy.

GERSH: But state securities regulators like Heath Abshure say crowd funding will lead to crowd fraud.

HEATH ABSHURE, ARKANSAS SECURITIES COMMISSIONER: The fact is, it is a wide open gate that a lot of folks can run through and some of those folks, we don’t want them running through the gate.

GERSH: But supporters say the Internet will help police the crowd.

BEST: Anything that happens is posted to the web almost in real time. Anything that goes wrong or right is posted to the web in almost real time. And so, the crowd will be a great enforcement tool, along with regulators at the state and Federal level.

GERSH: The idea of crowd funding is attracting an unusual crowd in Washington. The president, House Republicans and House Democrats are all on board. Now, the idea just needs to find a backer in the Senate. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.

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