Tag Archives: jason best

Why Crowdfunding & the JOBS Act is a Win for Entrepreneurs and Investors

28 Mar

As published in Inc.com: http://www.inc.com/sherwood-neiss/why-you-can-feel-good-about-the-jobs-act.html 

The crowdfunding provisions have more than enough protections for investors, and they’ll give entrepreneurs the capital they need

CrowdFund investing (aka equity-based Crowdfunding) is about to become the law of the land. Opponents have spent months screaming about how it would be an open invitation for investment fraud and a menace to small investors if it passed. Now that it has passed, it’s time to set those fears to rest. Crowdfunding will become a great source of funding for entrepreneurs and fully transparent way for investors to get in on the ground floor of what will be the greatest businesses of the future.

Every entrepreneur, at one time or another, has felt the pinch of the capital markets. Inspired by the success of donation-based crowdfunding, social media as marketing tool, and the principles of seed financing, the three of us—Jason Best, Sherwood Neiss and Zak Cassady-Dorion—decided to create a solution. The result is a framework that allows an entrepreneur to raise a limited amount of capital from his friends, family and customers on SEC-registered websites with prudent investor protections.

Why is CrowdFund Investing so necessary? With the collapse of the markets in 2008, the traditional means of financing startups and small businesses—credit cards, home equity lines, bank loans and venture capital—disappeared.Banks stopped lending and venture capital shifted away from seed stage investments to larger, more secure deals. What was left was a funding void for businesses looking to raise $250,000 or less in seed or early-stage funding. According to the SBA, this round is the most critical capital a young company can get. Lack of it is the #1 reason why startups fail in the first 5 years.

Only entrepreneurs with clean records need apply

We carefully crafted our framework to protect investors, drawing on similar programs exempt from SEC rules.  It is a rule under which entrepreneurs (who pass fraud/background checks) and small businesses with revenues of less than $5M (that aren’t foreign corps, public or investment companies) could raise up to $1M by either selling Common Stock or using revenue based financing on SEC-registered websites.

The law manages investors’ expectations

Investors would have to pass a quiz proving that they understand there is no guarantee of return, that they could lose their entire investment and that their liquidity/return is limited to any dividends, sale, public offering or a merger of the company. Once they understood that, the amount they could invest (i.e., risk) would be limited—between $2,000 and $10,000, depending on their income.

Standardized forms (generic term sheets & subscription agreements) based on industry best practices would be used to maintain transparency and reduce time and expense for all parties. Post-funding, standardized and automated reporting for use of proceeds would be required on a quarterly basis by entrepreneurs so people would know what is going on. All of this would be overseen by a Self Regulatory Organization (SRO) that reports to the SEC on what is taking place on CrowdFund Intermediaries with the goal to protect investors.

Platforms would provide the SEC real-time offering reports that include information on: deals funded, entrepreneurs’ names, social security numbers, addresses, date of births, amount of capital raised, list of investors and individual dollar amount contributed. This way regulators would know who is crowdfunding, who is backing them and how much they’ve raised.

Social media would enforce integrity

And most importantly social media would control the process. Entrepreneurs would only be allowed to solicit people in their social network using Facebook, Twitter, Linkedin, etc. Platforms would use social media tools to create a deal room for each idea where interested investors can publicly pick apart the entrepreneur, the idea, the business model and the investment opportunity. And most important, no money would be exchanged until the entire crowd decided to fund the entrepreneur and the entrepreneur’s funding target was 100% met. So if you say you need $50,000 to expand your business, you only receive the money when you have secured commitments for the entire $50,000.

Not so easy, right?

If implemented as designed, these protections would allay everyone’s concerns.  Entrepreneurs would get the capital they need. Investors would get the disclosues they need to make informed decisions. Regulators would stay informed on what is happening in the capital markets.

Think it can be gamed? Well consider this. You know those eBay ratings that guide your decision to send $1,000 across the country in exchange for a product? You are going to see similar ratings for both entrepreneurs and investors on CrowdFund Investing sites. Know those comment fields with the like buttons on Facebook? You are going to see those on the communication panel where interested investors will require answers of an entrepreneur and those answers will be rated and further discussed (just because that’s how we like to do things in an open dialog on the internet today).

Now take any fraud example you can think of and run it through this scenario. How many con artists want to register with the SEC?  How many want to target those closest to them? (That’s how crowdfunding through social media works: You are limited by soliciting your social media connections.) Yes, once the law is implemented a bad guy could cold-call an investor and claim to be crowdfunding the next Facebook. But that would be fraud, just as it is today, and the perpetrator could go to jail. The CrowdFund Investing framework restricts all communication to crowdunding intermediary sites, and in doing so provides the tools to protect investors. In 5 years, chances are the SEC will be using these tools to crack down on larger scale fraud.

Now that the JOBS Act has passed, we are moving to the next phase of development on a two-track strategy. First we’ll help build a self-regulating organization, like Nasdaq, to be the voice of the Crowdfunding industry and work with the SEC to regulate funding platforms and keep investors educated.

Second, we’ll work with the SEC on their rule-making progress. It is vitally important that entrepreneurs and small business people stay tuned in. The SEC will begin with 90 days of rulemaking, and then open their draft rules for 90 days of comments. These comments are very important to the process. Entrepeneurs have the most to gain (and lose) so we must continue to fight for rules that provide fair balance between the needs of investors and entrepreneurs.

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The New Crowdfunding Law: What Does it Mean?

24 Mar

March 23, 2012
FOR IMMEDIATE RELEASE

  3 Entrepreneurs, 579 days, 1 Crowdfunding Law

Now, What Does it All Mean?

(Washington, DC) - The Jumpstart Our Business Startup Act (JOBS Act), H.R. 3606, passed the U.S. Senate on March 22, with overwhelming support (73-26). So what will the impact be, particularly as it relates to the CrowdFund Investing measure, for America’s entrepreneurs and small businesses?  According to the three entrepreneurs who developed the crowdfunding framework, which was the basis for the legislation, it means a new source of funding, more jobs and a greater chance of success for small businesses.

The U.S. House passed the Jobs Act on March 8 (390-23), and the U.S. Senate amended the legislation before its passage on March 22.  House Majority Leader Eric Cantor (R-VA) said he plans to schedule a vote on the amended package early next week. This means the legislation could be signed by President Barack Obama next week, if the House passes the Senate amended bill (which it is expected to do).   

More small businesses will get funded

“With the passage of this legislation, entrepreneurs will be able to post their businesses on SEC-registered CrowdFund Investing (CFI) websites and the community will step in to fund only those ideas they have fully evaluated and made an informed decision about,” says Jason Best co-author of the CrowdFund Investing Legislation that passed both chambers.   Entrepreneurs will use Facebook, Twitter and other social media tools to reach out to their customers and say, “If you like our business so much, why not become an investor?”

Investors (who must first take a short quiz to make sure they understand that investing in a business is a highly risky endeavor with no guarantees) will pick apart the entrepreneur, the idea, the business model and the investment opportunity in an open manner with other members of the community.  Until 100% of a funding target is met, no money will be transferred, but once it is, an entrepreneur will have not only cash, but also a loyal customer/investor base.

With the collapse of the markets in 2008, the traditional means of financing for startups and small businesses – credit cards, home equity lines, bank loans and venture capital – disappeared.  Interest rates increased, home equity lines disappeared, and banks stopped lending to Main Street.  Venture capital shifted to larger, more secure deals.  A funding void ensued ($0 to $250,000 in financing) that no one has yet filled.  According to the Small Business Administration (SBA), this is the most critical seed and early-stage growth capital necessary for success and the number one reason why startups fail in the first five years. 

More startups and successful businesses means more jobs

More jobs will be created once startups and entrepreneurs have access to capital. According to the Kauffman Foundation, the majority of new jobs in the U.S. over the past 30 years have come from small businesses that are less than five years old.  Sherwood Neiss who co-authored the crowdfunding framework with Best observed: “We are entrepreneurs who prior to the 2008 financial collapse were able to access capital to launch Inc500 businesses that created over 150 direct and countless more indirect jobs.”

According to Neiss, “cash is king” and following the 2008 collapse it became exceedingly scarce.  “We were left trying to figure out how to launch new businesses and create jobs without access to capital. So we merged the principles of seed financing and crowdfunding together to develop a framework.”

The framework will allow friends and family to invest up to $1 million into an entrepreneurial enterprise, but individual investments are capped below $10,000.  The capital will either go directly into hiring people or into the purchase of products or services. 

More successful enterprises, and a healthy entrepreneurial ecosystem

The crowdfunding platforms will lead to more community investing and more successful local businesses because people will have a vested interest in the success of these entrepreneurs.

“Five years from now we are going to look back on the impact CrowdFund Investing has had on the world,” remarks Zak Cassady-Dorion Co-Founder of Startup Exemption. “We are going to see more vibrant communities where the residents aren’t just consumers but are also owners helping to drive the success of their local entrepreneurs and communities.” 

And why is this important?  “Because a strong entrepreneurial ecosystem depends on access to capital.  Freeing up new sources of capital – as the JOBS Act will do through crowdfund investing – will strengthen our nation’s small business sector, and add to their job creating capacity. Being accountable to community investors will enhance success,” says Karen Kerrigan, president & CEO of the Small Business & Entrepreneurship Council (SBE Council).

As for investor protection, says Neiss, “Under the CrowdFund Investing model, we believe it is going to be easier to expose fraud with social networking and the real-time Web.  At the community level the people investing will be investing in people and businesses they know or have carefully evaluated.  With the transparency of the social Web, fraud can be exposed before it can take place.  We have seen this work on donation-based sites to great effect.”  

About  STARTUP EXEMPTION: 

Startup Exemption is the name Sherwood Neiss, Jason Best and Zak Cassady-Dorion created to describe their CrowdFund Investing (CFI) framework.  The framework is an exemption under Regulation D Securities Offerings that would allow startups and small businesses to raise a limited amount of seed and growth capital from their social networks using SEC-registered websites.  Their framework was the basis for the three Crowdfunding bills considered by Congress and was endorsed by the President.  It passed the US House in November, 2011, 407-17 and the US Senate on March 22, 2012 as part of the JOBS Act 73-26. The path from idea to law in 579 days can be found at: http://www.startupexemption.com/.

Contact Information:

Sherwood Neiss                                       Jason Best

(202) 247-7182                                 (415) 999-2271

Available  7am to 7pm M-F (ET)           Available  7am to 7pm M-F (PT)

sherwood@startupexemption.com   Jason@startupexemption.com

Other Links:

About The Small Business & Entrepreneurship CouncilSBE Council is a nonprofit, nonpartisan advocacy organization dedicated to protecting small business and promoting entrepreneurship. For more information, please visit: http://www.sbecouncil.org/.

Contact Information:  Karen Kerrigan, (703) 242-5840, kkerrigan@sbecouncil.org

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Crowdfunding Industry to Unite Behind Regulatory Organization to Protect Investors

23 Mar

PRESS RELEASE

March 23, 2012, 2:29 p.m. EDT

Crowdfunding Industry to Unite Behind Regulatory Organization to Protect Investors

WASHINGTON, DC and NEW YORK, NY, Mar 23, 2012 (MARKETWIRE via COMTEX) — With the passage of the JOBS Act, the Crowdfunding Industry is uniting behind a Self Regulating Organization (SRO) to monitor and oversee this new marketplace and ensure investor protection. The Crowdfund Intermediary Regulatory Association will commit to providing investor protection and market integrity through effective and efficient regulation of those within the crowdfunding industry. CFIRA will create rules, oversight and a united voice for the CrowdFund Investing platform companies as the industry is formed. CFIRA announced today that the founding partners will be:

  • Startup Exemption, The CrowdFund Investing authors that wrote the framework for the Crowdfund legislation passed by Congress.
  • The SoHo Loft Capital Creation (TSLCC) Events, the definitive event platform for the private markets aimed at facilitating capital
  • formation and job creation.
  • Gate Technologies & GATE Impact, a platform and electronic marketplace and that provides regulatory compliant private market transactions.

CFIRA is a membership organization that includes members of the CrowdFund Investing and donation-based crowdfunding community as well as representatives of related industries including angel and venture capital firms. CFIRA will provide intermediaries with regulation, reporting, and compliance oversight and will provide investors with educational tools to help make more informed decisions about the opportunities and risks of CrowdFund Investing. CFIRA is committed to working with the SEC to create reasonable and appropriate regulations and oversight to reduce fraud and protect investors.

“Empowering Entrepreneurs to access limited amounts of capital to innovate and create jobs is an important part of this organization’s strategy,” said Jason Best, Co-Founder of Startup Exemption.

“With uniform rules developed by the Industry that include social media, intermediaries will provide a regulated environment for CrowdFund Investing to take place with transparency and investor protection,” added Sherwood Neiss.

“Both the legislation and the industry acknowledge the need for proper oversight to maintain efficient and effective marketplace. Particularly given the new nature of crowdfunding, delivering education that informs investors on the risks and opportunities of investments is the only way a viable industry can be created,” stated David Drake, Co-Founder of The SoHo Loft Capital Creation Events.

“Organizations like these are good for our economy, good for the industry, and an essential part of our approach toward a secure and transparent marketplace that works for all Americans,” concluded Vincent Molinari CEO of GATE Technologies.

Inspired by the JOBS Act, CFIRA is an industry-led effort that allows CrowdFund Investing intermediaries to register to oversee their operations in a way that is akin to other SROs that oversee the financial markets.

About Startup Exemption Startup Exemption is the name Sherwood Neiss, Jason Best and Zak Cassady-Dorion created to describe their CrowdFund Investing (CFI) framework. The framework is an exemption under Regulation D Securities Offerings that would allow startups and small businesses to raise a limited amount of seed and growth capital from their social networks using SEC-registered websites. Their framework was the basis for the three Crowdfunding bills considered by Congress and was endorsed by the President. It passed the US House in November, 2011, 407-17 and the US Senate on March 22, 2012 as part of the JOBS Act 73-26. The path from idea to law in 579 days can be found at: www.startupexemption.com .

About The SoHo Loft Capital Creation Events The SoHo Loft Capital Creation (TSLCC) Event Series is the only global event platform where accredited investors; accomplished angels; CIOs of investors; merchant and investment bankers; VCs; family offices; incubators; private equity firms; pre-IPO mutual funds; equity analysts; entrepreneurs; legislators and legal and tax professionals from across the world assemble in order to exchange ideas, discourse and opportunities that will help reshape the capital markets and stimulate economic growth. Our mission is to help develop the infrastructure of the rising private markets so that it may mature into a viable and functional institutional marketplace that facilitates capital formation, innovation, expansion and job creation. For additional information please visit us at http://thesoholoft.com and www.facebook.com/TheSohoLoftevents .

About Gate Technology GATE Technologies is an innovative financial technology company creating a new market infrastructure for bringing efficiency, transparency to the unstructured global alternative asset markets. The company offers fully automated, customizable solutions for qualified investors with value-added content and analytics, transparent execution, and dematerialized settlement, clearing, and depository functions. GATE Developing Markets will work together to create the first global common infrastructure for illiquid securities, with a goal of enabling all market participants. www.gatetechnologies.com

About GATE Impact GATE Global Impact LLC is the impact investing-focused subsidiary of GATE Technologies, LLC., GATE Impact provides market infrastructure and related services for the emerging impact investment industry — public and private investments with a sustainable social and/or environmental component that also generate a healthy rate of financial return. www.gateimpact.com

Vincent Molinari
Vmolinari@gatetechnologies.com
631-692-9350

Jason Best
jason@startupexemption.com
415.999.2271

Sherwood Neiss
sherwood@startupexemption.com
202.247.7182

SOURCE: GATE Technologies

mailto:Vmolinari@gatetechnologies.com
mailto:jason@startupexemption.com
mailto:sherwood@startupexemption.com

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Crowdfunding Industry Establishes Standards to Help Protect Entrepreneurs and Investors and Spur JOBS Act

21 Mar

Crowdsourcing.org and Crowdfunding Industry Experts Launch Crowdfunding Accreditation for Platform Standards (CAPS) Program

LOS ANGELES, CA, Mar 21, 2012 (MARKETWIRE via COMTEX) — Today, the JOBS Act took one step closer to becoming law. On the heels of the JOBS Act passing the Senate cloture vote by a wide margin (with two amendments pending) — which will allow companies to offer securities to non-accredited investors via crowdfunding platforms — the launch of the Crowdfunding Accreditation for Platform Standards (CAPS) program is the first significant milestone adopted by the industry. The CAPS program establishes standards for crowdfunding operations and aims to protect investors from fraud. As the industry begins the process of creating a self-regulatory framework, CAPS — which will govern the accreditation of crowdfunding platforms — will be a key pillar within this framework.

More than 400 crowdfunding platforms were operating in January 2012. As industry leaders recognized that investors would need help and more information when funding ventures through these platforms, the CAPS program was created to ensure a secure and reliable experience. Now CAPS-accredited platforms will display the CAPS badge on their sites to demonstrate they have been accredited based on qualification criteria in four areas:

 

  • Operational transparency
  • Security of information and payments
  • Platform functionality
  • Operational procedures

 

“Now that crowdfunding legislation is gaining momentum in Washington, the future of the industry will be determined by its ability to create a consistent and safe environment,” said founder of Crowdsourcing.org Carl Esposti. “As the intermediary between investors and entrepreneurs, crowdfunding platforms owe fundraisers and investors a high degree of transparency and the ability to facilitate secure transactions to reduce the risk of fraud. If the industry can deliver in these areas, the potential is unlimited, and crowdfunding can effectively become the backbone of both SME financing and philanthropic donations.”

The CAPS Council, the governing body of CAPS with currently 11 crowdfunding experts, has taken the initiative to establish these accreditation criteria to ensure crowdfunding platforms adequately protect fundraisers and investors. Members of the CAPS Council include:

  • Carl Esposti, founder of The Industry Website Crowdsourcing.org
  • Sherwood Ness & Jason Best, founding members of the Start-up Exemption, and leading lobbyist and advocate for crowdfunding
  • Kevin Lawton, author of Crowdfunding Revolution

Following an initial private invitation-only launch, eight organizations — Crowdcube, Grow VC, Crowdfunder, GreenUnite, HelpersUnite, Symbid, Give A Little and Fundrazr — have been accredited by the CAPS program and another 20 organizations are currently undergoing the process. More than 200 crowdfunding platforms are expected to apply for accreditation in 2012.

“Crowdfunding is the future of seed and growth financing for startups and entrepreneurs,” said Sherwood Ness, founding member of the Startup Exemption. “It uses the web, social media and advances in technology to allow an entrepreneur to raise a limited amount of capital from his friends, family & community under a framework that provides for investor protection. Establishing high platform standards is the clear next step to not only protecting investors but also to ensure continued success and growth of the industry.”

Journalists interested in speaking to a CAPS Council member or learning more about the program can contact Jennifer Moebius at jennifer@moebiusink.com.

About  STARTUP EXEMPTION:

Startup Exemption is the name Sherwood Neiss, Jason Best and Zak Cassady-Dorion created to describe their CrowdFund Investing (CFI) framework.  The framework is an exemption under Regulation D Securities Offerings that would allow startups and small businesses to raise a limited amount of seed and growth capital from their social networks using SEC-registered websites.  Their framework was the basis for the three Crowdfunding bills considered by Congress and was endorsed by the President.  It passed the US House in November, 2011, 407-17 and the US Senate on March 22, 2012 as part of the JOBS Act 73-26. The path from idea to law in 579 days can be found at: www.startupexemption.com.

Contact Information:

Sherwood Neiss                                          Jason Best

(202) 247-7182                                          (415) 999-2271

Available  7am to 7pm M-F (ET)                 Available  7am to 7pm M-F (PT)

sherwood@startupexemption.com             Jason@startupexemption.com

Other Links:

About Crowdsourcing.org

Founded in 2010, the industry website Crowdsourcing.org is a neutral organization dedicated solely to crowdsourcing and crowdfunding. As one of the most influential and credible authorities in the crowdsourcing space, Crowdsourcing.org is recognized worldwide for its intellectual capital, crowdsourcing and crowdfunding practice expertise and unbiased thought leadership. Crowdsourcing.org is an initiative by massolution, a unique research and advisory firm specializing in crowdsourcing and crowdfunding solutions for private, public, and social enterprises. More information at www.crowdsourcing.org .

Media Contact
Jennifer Moebius
Email Contact
Phone: +1-617-922-8004

www.twitter.com/Crowdsourcing_

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An Update from the Startup Exemption Team

1 Mar

To view the original version of this post, click here:
An update on the Process to Legalize Crowdfunding from the guys who brought Crowdfund Investing to Washington, DC

Dear Crowdfunding Followers,

Here’s the latest from the guys leading the charge to legalize Crowdfund Investing (CFI) in Washington, DC.

LegalizeCrowdfunding.org goes live.
Already 138 entrepreneurs have registered to create 2,500+ jobs, which will have over $100M in stimulus! Let’s show Washington, DC the power of Crowdfund Investing! If you are an,

  1. Entrepreneur: Register to show how many people you need for your business (eg: jobs you will create) and the economic impact it will have.
  2. Investor: Register to show the impact your dollars will have stimulating our economy.
  3. Crowdfunding Supporter: Send an email to your Legislators, Tweet and Post about the site!

Endorse Crowdfund Investing!  SBE Council plans to send this group letter to U.S. Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) in the coming week.  If you would like to sign onto the letter and add your name to the growing list of groups representing small business owners and entrepreneurs that are urging the U.S. Senate to take action, please send your name, affiliation and email contact information to SBE Council at info@sbecouncil.org.

Status of Legislation

  1.  The Good: As it stands we have 3 bills before Congress.  HR 2930 passed the House with an overwhelming 96% approval – Yes that’s true bipartisan support.   President Obama came out and endorsed the Bill with a Statement of Administrative policy and also included our framework in the Startup America Legislative Agenda.  Things have slowed down in the Senate but to help move things along we went back to Washington and presented them with some Commonsense Consensus ideas that pull the best of the 3 bills into one.
  1. The Bad: NASAA’s opposition to crowdfunding is also in opposition to the needs of our economy, entrepreneurship and jobs.  NASAA argues that they are best suited to regulate simple, transparent markets for businesses on Crowdfunding Intermediaries.  This would create 50 different markets for Crowdfunding, rendering Crowdfund Investing dead on arrival.  This is part of the reason it is so hard for small businesses to raise money today; different bureaucratic, costly rules for each states.  Since CFI is based on community financing, we believe the crowd can do a better, faster, cheaper and more efficient job of determining which ideas, if any, should be funded and with how many dollars.  It is that simple.  Leave the heavy-handed, traditional regulation and oversight for the larger businesses that can access traditional capital.  We advocate state regulation preemption, while preserving the enforcement power of the states to pursue fraud when it occurs.

Would you like us to speak to your organization/group about Crowdfunding?  We are finding there is much confusion about what Crowdfunding is, how Crowdfund Investing differs, how investors are protected and what CFI means for our economy.  Please contact us to discuss your event and how we can participate in sharing this information.   Here are a few of our upcoming events:

  1. Feb 29th - Crowdfunding & Startup Investing
  2. Mar 6th - The Future of Startup Financing: A North American TeleForum on Crowd funding
  3. March 13th – The Soho Loft Crowdfunding Conference, Los Angeles, CA
  4. March 20th – TiE Arizona @ Thunderbird, Glendale, AZ
  5. March 28th – 30th MIT Global Startup Workshop - Istanbul, Turkey
  6. April 19th The Crowdfunding Conference, 2012 - New York City

Loudsauce Campaign:  Our
friends at Laudsauce have launched a campaign to place a one-page ad on the back of Politico.    Politico is seen by 32,000 eyes in DC so let’s show all those folks working on Capitol Hill how Crowdfund Investing Equals JOBS.

Fund the fight:  None of this is happening for free.
If you haven’t yet, please donate $50 to help us get this legislation across the finish line!  Every $50 donation will get your name listed in the ‘I support Legalizing Crowdfunding’ section of the website.

Crowdfund Investing Blog Posts:  If you haven’t had a chance to see any of our recent posts, here they are:

Contact us:  Got a comment?  Need to speak to us?  Here’s how …
Sherwood Neiss, sherwood@startupexemption.com, 202-247-7182
Jason Best, jason@startupexemption.com
Zak Cassady-Dorion, zak@startupexemption.com

 

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

20 Dec

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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