imgSteve Wozniak3

This is a Game Changer: The CrowdFunding Bill

A hat tip to my good friend, Eric Jackson, over at CapLinked for bringing this to my attention.

The following information is from Scott Walker, Esq.:

On November 3rd, the U.S. House of Representatives passed H.R. 2930 (the “Entrepreneur Access to Capital Act”), a crowdfunding bill that will allow startups to offer and sell securities via crowdfunding sites like Kickstarter and social networking sites like Facebook and Twitter.  As I discussed in my post, “FAQ: What the new U.S. crowdfunding bill means for entrepreneurs,” this is a game-changer for startups and lifts certain securities law prohibitions that have been on the books since the 1930’s.  Since I wrote that post, I have received numerous emails and phone calls regarding the House bill, which I will address below.

Are There Any Differences Between the House Bill and the Senate Bill?

Yes, there are four significant differences:

  • The Senate bill only permits the issuance of securities “through a crowdfunding intermediary” (like Kickstarter).  Accordingly, startups would not be permitted to raise funds via social media sites like Facebook, Twitter or LinkedIn (as permitted under the House bill).
  • Under the Senate bill, each investor is limited to investing up to $1,000 per year per company; the House bill permits an amount equal to the lesser of (i) $10,000 or (ii) 10% of the investor’s annual income.
  • Similar to the House bill, the Senate bill caps the total amount of capital that may be raised during any twelve-month period at $1 million; the House bill, however, raises the cap to $2 million if the issuer provides potential investors with audited financial statements.
  • Finally, the Senate bill permits some form of registration by the State in which the company is organized and/or “any State in which purchasers of 50 percent or greater of the aggregate amount of the issue are…residents.”  The House bill preempts State law and, accordingly, there is no State registration requirement.

You have to read the rest. Venture fundraising is about to be completely turned on it’s head. In the right hands (and inevitably there will be a lot of scams here) this is going to open up a whole new world of opportunity for the proverbial “two guys in a garage” everywhere.

Crowdfunding Update: FAQ’s For Entrepreneurs

8 thoughts on “This is a Game Changer: The CrowdFunding Bill

  1. Mike

    being a registered rep for many years, i applaude the idea of democratizing capital. i greatly fear the scams that will arise. and the nest eggs that will be eaten by these vultures. i wonder if the scam cost will outweigh the liberalizing benefits. i guess the state of the “regulated” markets is such these days, the regular investor is no worse off in an un-regulated market.

  2. Anonymous

    What I hope will happen is, you’ll see sites like Kickstarter becoming the Amazon of venture funding. It’s my hope that money flows will be focused with these established sites (and reputable newcomers) and hopefully people will more protected as such. But this is venture capital, so it has significant risk obviously. And it will have success…

    TikTok is the posterboy for how this will work…
    http://www.fastcodesign.com/1663858/kickstarters-biggest-success-ever-nano-wristbands-raise-1m-jump-to-apple-store

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  4. Rakeyell69

    There is already a regulatory framework in place for issuing securities. While it may be onerous, it guarantees some degree of investor protection. What you have here is the government handing out special favors to their friends and their pet projects.

  5. Scott Bell Post author

    ‘Guaranteeing’? I don’t think so. I also don’t see the ‘special favors’ connection…

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