Startup Exemption

Entries tagged as ‘Congressman McHenry’

Crowdfund Investing: 13 Lessons from the Guys Who Brought Crowdfunding to Washington

December 20, 2011 · Leave a Comment

Image from crowdsourcing.org

This article was originally published on crowdsourcing.org.

A year ago, Jason Best, Zak Cassady-Dorion and I were deep in the trenches either trying to launch, grow or expand our entrepreneurial endeavors. There was a common thread to all our stories: capital was scarce. The trickle-down effect of the global recession was having a negative impact on our ability to innovate. Without access to capital, how could we grow and hire? If jobs were the economic stimulus needed to lift our nation out of the recession, then someone needed to address the capital crisis facing entrepreneurs and small businesses, our nation’s job creators.

With that, we sat down and crafted a framework to allow an entrepreneur to raise a limited amount of equity capital from his friends, family or community using the tenants of crowdfunding. We then embarked upon changing outdated security laws, which were written for a period in time that did not reflect today’s technology, the internet or the flow of information. We further vetted our framework at a symposium we held in San Francisco attended by security lawyers, academics, investors, crowdfunding platforms and entrepreneurs. Buy-in was building from the community at large.

With the help of Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, Washington started to listen. President Obama came out in favor of our proposal to make equity-based crowdfunding legal, then the House drafted the first bill — H.R. 2930, the Entrepreneur Access to Capital Act — and, in a rare burst of bipartisan support, passed it 407-17. Now there are two bills in front of the Senate. All signs are pointing to some version of crowdfunding for entrepreneurs being legal the beginning of 2012.

While we aren’t done yet, our story is one of trial and perseverance, of old vs. new. Many people have asked us what we’ve learned along the way, so here are 13 lessons from our journey to get this legislation passed…

1) Giving up is not an option.
2) When you’re in a recession and you have a solution to the jobs crisis, people listen.
3) There is power in a few voices. Showing up in Washington is more than half the battle. Making your voice heard does resonate and people on Capitol Hill can and have been incredibly gracious with their time, experience and knowledge.
4) The people trying to run the government aren’t bad people. As a matter of fact, the majority of people there work insanely hard for the good of our nation, but the bureaucracy makes it difficult to understand and the media spins public perception of our elected officials.
5) On the Hill, both sides need to feel like they are winning. In order to get to the end goal, you need to present Washington with 100% of something that will be reduced to 25%, whereby each party can add back bits and pieces, bringing it up to 85% or so. We might not get 100% of what we want, but both parties will feel satisfied that they did their job.
6) Fear is the enemy of progress. The special interests have spent countless hours and dollars to derail the discussion from entrepreneurship, opportunity and jobs to focus on fraud. Fraud sells like sex and their message resonates with the media even though it defies logic. We haven’t shut down the markets because of fraud.
7) It is true, money and special interests (lobbies) control Washington in an unhealthy way and eerily so. They don’t try too hard to hide who they represent. You quickly come to understand how the special interests can be nice to your face and stab you in the back. If only you could have been present for some of the nice chats we’ve had with the special interests only to see what they espouse in the media.
8) Believe it or not, there is logic to some of what the opposition has to say. Fraud is an important point. Social media and crowd vetting has shown how we can mitigate this.
9) It is easier for the opposition to focus on the past than craft a working solution for the future. The opposition isn’t focused on helping the American economy and creating jobs. They don’t claim to be. And yet no one asks them, if you see the problems in the capital markets firsthand, why don’t you see the solutions as well?
10) In America, one’s right to use one’s money as he see fit is trumped by the government’s right to tell you how you can invest it. Isn’t there a first amendment case here?
11) Lobbying is exhausting; it takes a lot of patience and you have to get comfortable educating and repeating the same information over and over.
12) Nothing in life is free. This has cost us a lot of personal time, energy and money. We are grateful to people that have supported our struggle and are dismayed by those who stand to benefit the most but not participated materially or financially. It is no wonder why special interests succeed with the endless flow of capital to their coiffeurs. Couch surfing — thank you various D.C. friends — is exhausting and eating up your own financial resources is painful.
13) And once more: giving up is not an option.

Helping Fund the Fight to Make Crowdfund Investing LEGAL

Changing the Security Laws isn't easy and it sure isn't cheap. Everything that you see here costs us money. If you support our cause, if you wish to see it legal for entrepreneurs to go to their friends, family and community to crowdfund money, then help us fight the cause with a small donation. You have no idea how much every dollar helps us achieve this goal!
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Categories: crowdfunding · Sherwood Neiss
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Post Rally Update

November 22, 2011 · Leave a Comment

We have a problem and we need YOUR HELP. Everyone we met with last week after the rally said the same thing:  “If you don’t get this bill passed in the Senate by the end of the year, you will have no chance of passing it at all because 2012 is an election year.”  If you read no further, please click this link to identify your Senators, call them and tell them “I support HR2930, the Crowdfunding Bill as a solution to getting capital flowing to community entrepreneurs so that we can create jobs!” It may sound crazy but grass roots calls are powerful.

12 months ago, everyone said allowing an entrepreneur to go to his friends, family and community to raise small amounts of capital to fund their startup or small business would never be made legal.  After the last 9 months of work, we have proven there IS a market for Crowdfund Investing (CFI) and that President Obama, the US House of Representatives, the Small Business and Entrepreneurship Council and the US Chamber of Commerce all agree. Crowdfund investing is a part of the solution to the jobs crisis.

Now the problem, the SEC, State regulators and special interests with DEEP pockets and tons of influence are throwing a full-frontal assault at the Senate to stop our progress and they are using fear mongering by spreading nonspecific threats of fraud!

They are marketing “fraud” because, like sex, it sells newspapers.  They want you to focus on some seemly scary generic issue from the past rather than focusing on how today’s technology, Internet and social media can identify winning ideas and fund them. They don’t want you to focus on how crowdfunding by nature will expose fraud and they are avoiding the basic way all investors are taught to protect themselves against loss, DIVERSIFICATION.  WHY?  To protect their turf and dollars.

How can they claim their number one concern is ‘investor protection’ when they haven’t brought anyone to justice for the financial meltdown?  According to their argument, the financial markets should have ceased to exist with the 2008 financial meltdown because of fraud and loss of investor confidence. However, the markets DIDN’T stop functioning because people understand the risks and rewards of investing, especially over the long-term.  Why then, do special interests treat CFI any different?  CFI will do a much better job at backing winning ideas with money, experience, knowledge, marketing power and investor protection than any one investment an individual makes in a Fortune 500 company or someone they don’t know who comes to them with a Reg D offering.

Fraud historically has been one-to-one.   The principals of crowdfunding are based on many-to-many communication in an OPEN DIALOG where NO investor will partake if an entrepreneur hasn’t won over the confidence of the crowd.  We’d love to think that crowdfunding has the ability to finance 100% of the ideas, but history shows that only 40% of the ideas will be successful in raising money via CFI. Not every idea is great and the crowd is able to determine this.  That’s what we call investor protection at work.

They tell us to our faces they are willing to work with us but their quotes in the media reveal the opposite.  They need to join the Internet Age.  The way we did things in the past is NOT the way we will do them in the future.  They need to look at how we mitigate fraud through crowd-vetting.  Understand that social media is based on connectivity and trust.  And using the principles of crowdfunding we can get a limited amount of capital from our friends, family and community to innovate, create jobs and not be left behind China!

We need more of your support to stop the nonsense.  We need your financial support to help offset the costs (travel, marketing, additional rallying, etc) of getting the message to the Senate (Jason, Zak and I as well as Karen Kerrigan of the SBE Council have been incurring all the costs on our own). We also need you to call your Senators and tell them you are in favor of the Crowdfunding bill that went thru the house, HR 2930.  We aren’t looking for long-term financing.  This bill either passes by the end of the year or dies for good as everyone in Washington told us.  Remember January 1st is the beginning of an election year.  The special interests are banking on the fact that we don’t have the interest, support or money of those that this would most benefit.  We need to prove them wrong!

Please donate here:

Helping Fund the Fight to Make Crowdfund Investing LEGAL

Changing the Security Laws isn't easy and it sure isn't cheap. Everything that you see here costs us money. If you support our cause, if you wish to see it legal for entrepreneurs to go to their friends, family and community to crowdfund money, then help us fight the cause with a small donation. You have no idea how much every dollar helps us achieve this goal!
$1,185Raised10,000Target
Choose donation amount:
Latest donations:
  • 2015/03/06 12:27 AM Chris Scheppler donated $ 10.00
  • 2013/04/12 5:22 PM Shaan Sharma donated $ 10.00
  • 2013/02/07 1:27 AM Daniel Cavallaro donated $ 25.00
  • 2012/12/14 4:20 AM James Wheeler donated $ 25.00
  • 2012/08/28 12:59 PM Daryl Bryant donated $ 100.00
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Categories: crowdfund investing · crowdfunding · Jason Best · Sherwood Neiss
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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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Post Rally Update – Progress and Backlash by Special Interests

November 19, 2011 · Leave a Comment

Dear Crowdfund Investing (CFI) Followers,

The rally was a HUGE success.  How do we know?  The regulators have launched a full-frontal assault against us in the Senate and are trying to kill Crowdfund Investing for good in the next 6 weeks.  Here’s what you need to know in 3 sections: 1) What you can do now, 2) What’s happening next week (SENATE HEARING Dec 1st!) and 3) Highlights from last week:

WHAT YOU CAN DO NOW:

o   Click this link to identify your Senators, call them and tell them “I support HR2930, the Crowdfunding Bill as a solution to getting capital flowing to community entrepreneurs so that we can create jobs!” It may sound crazy but grass roots calls are powerful.

o   We need your financial support to help offset the mounting costs (travel, marketing, additional rallying, etc.) of getting the message to the Senate.

o   We need you to recruit other supporters!  Please send this to your friends, family and community and say, “I NEED YOU TO HELP ME STOP THE REGULATORS THAT REFUSE TO JOIN THE INTERNET AGE.  WE HAVE A SOLUTION TO THE JOBS CRISIS BUT THE REGULATORS ARE STAGING A TURF WAR THAT DRAMATICALLY HINDERS ENTREPRENEURSHIP. ONLY THE VOICE OF THE PEOPLE CAN CHANGE THE LAW TO MAKE IT EASIER FOR ENTREPRENEURS TO ACCESS CAPITAL, INNOVATE, AND HIRE AMERICANS!”

WHAT’S HAPPENING NEXT WEEK:

o   The Senate Banking Committee is holding a hearing on December 1st for which they still haven’t guaranteed us a seat at the table (crazy how you can bring this stuff to Washington and not be included in the hearing on the subject).

o   We plan on hosting a luncheon for Senate Staffers the beginning of December to walk them through how CFI works and answer any questions/fears they might have about letting entrepreneurs raise capital from their social networks.

o   We MUST push for a vote before the end of the year!  If we do not get a vote by the end of 2011, it is unlikely the laws will change because next year is an election year.

HIGHLIGHTS FROM LAST WEEK:

–       NPR, The Wall Street Journal and Fast Company covered the event.   Much thanks to everyone who came to the rally, everyone who sponsored the rally and Representative McHenry & Maloney for speaking at the rally.

–       We confronted our most vocal opponents at the SEC Small Business Capital Forum.

o   Heath Abshure (Arkansas Securities Dept.) told us while they are in favor of crowdfunding (funny how this isn’t what he says in the media) their number one concern is ‘investor protection’ and market confidence.

o   We responded with 2 questions that fell on blank stares:

1) If investor protection is so important, why haven’t they brought anyone to justice for the 2008 financial meltdown?  

2) If fraud leads to the collapse of the markets due to lost confidence, why haven’t the financial markets ceased to exist with the 2008 financial meltdown?

o   NOTE: If the broader markets are where the fraud is being perpetrated why isn’t the SEC focusing their energies on combating and stopping fraud there while letting the crowd take over in their community?

–       We met with 9 Senate offices.

o   Republicans are in favor of the legislation from a Jobs perspective and cutting the bureaucratic tape which inhibits access to capital for entrepreneurs.

o   Democrats (including the President) are in favor of Jobs and democratizing the financial market so that not only the rich are allowed to participate.

o   Both sides understand that the Internet has fundamentally changed the way we do business and hence it only makes sense that it should change the way we also do financing in the future.

–       HOWEVER, State Regulators and special interests are throwing a full-frontal assault to stop our progress and KILL CROWDFUND INVESTING.

o   They are using nonspecific cases of fraud to halt our progress because fraud, like sex and war, sells newspapers.

o   They are doing this because they think we are encroaching on their territory and money.

o   They are detracting from the conversation (JOBS via access to capital) without taking time to understand the advances in technology, the Internet, and how social media has led to transparency and accountability.

o   They want you to think there will be millions of cases of fraud when the bigger issue is failure. The hedge against failure is portfolio diversification.

o   Less than 40% of CFI ideas will ever be funded, and those that are funded, will be by people who know the entrepreneur (true investor protection at work).

o   They want you to focus on fraud because they don’t understand that Crowdfund Investing is based on many-to-many communication between an entrepreneur and many investors in a open dialog as opposed to one-to-one fraud.

o   They want to distract you from the benefits of this bill because they know that January 1st starts an election year and this bill will die if it isn’t passed into law before then and focus shifts to election politics.

Entrepreneurs, ideas, capital, businesses and jobs.  You can have many entrepreneurs with thousands of ideas but you’ll NEVER HAVE ONE BUSINESS NOR JOB WITHOUT CAPITAL.  We need to pick up where Wall Street and the Banks have left off.  The Regulators are standing in the way simply because they don’t stand to earn a commission.  Join the cause.  Spread the word and let’s get Joe the Entrepreneur back to Innovating so that we can create JOBS and get us out of this recession!

Sincerely,

Sherwood, Jason & Zak

 

 

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Categories: Jason Best · Sherwood Neiss · Woodie Neiss · Zak Cassady-Dorion
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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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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

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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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Categories: Crowd Fund Investing · Jason Best
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Congress is Polling Your Opinion on HR 2930 … Click to Vote

November 2, 2011 · Leave a Comment

Major backers of our bill: US Chamber of Commerce, National Taxpayer Union, Small Business & Entrepreneurship Council (SBE Council). Add your support!

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Categories: Crowd Fund Investing · Sherwood Neiss · Woodie Neiss
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Another Step Closer to Crowdfund Investing (CFI) Reality

October 27, 2011 · Leave a Comment

Yesterday, October 27, 20011, our bill HR 2930 was amended in the Full Financial Services Committee. It now pretty much matches everything we have been advocating for in Washington! From here it goes to the floor of the US House of Representatives.

Sherwood Neiss, chief advocate of the Startup Exemption said, “What an amazing milestone. Several democrats also signed on showing further bipartisan support for entrepreneurship, innovation and JOBS!”

The Startup Exemption formulated only 10 months ago with a goal to update the security laws to use the tenants of crowdfunding to get capital flowing to entrepreneurs. In that short period of time, they acquired thousands of follows on their petition, blog and twitter feed. They were part of 2 congressional hearing in Washington, DC. They were consulted and included in President Obama’s American Jobs Act and were the backbone for HR 2930, what they like to call the Crowdfund Investing Act.

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