March 8, 2012
Faced with regulatory and financial barriers to accessing mainstream investment capital, many entrepreneurs have turned to crowdfunding platforms such as KickStarter and IndieGoGo to raise hundreds of thousands of dollars in donations. These small-dollar donations demonstrate that regular non-wealthy folks want to support local entrepreneurs in their community. If entrepreneurs could also offer investment opportunities to the crowdfunding "crowd", they could potentially access millions of dollars of investments from their communities and networks that already support their businesses, without the financial and logistical challenges of regular securities registration.
H.R. 2930, the Entrepreneur Access to Capital Act, which would exempt crowdfunded investments from state and federal securities registration, introduced by Rep. Patrick McHenry (R-NC) overwhelmingly passed the House last November (407-17) with White House support. Two other crowdfunding bills are in the Senate Banking Committee: S. 1971 (Scott Brown, R-MA) and S. 1970 (Jeff Merkley, D-OR).
These crowdfunding bills can be traced back to the Sustainable Economies Law Center's July 2010 rulemaking petition to the Securities and Exchange Commission (SEC File No. 4-605), which petitioned the Commission to create a registration exemption for crowdfunded investments. Our work caught the eye of small business advocates, who in turn created online petitions, testified at Congressional hearings, and lobbied Congress to introduce a crowdfunding bill.
The current crowdfunding bills, which enjoy bipartisan support, are now stalled in the Senate. Small business advocates have learned that the Senate wants to see more public interest in these proposals before moving forward. To demonstrate public interest (as well as the power of crowdfunding), SELC's allies have launched a campaign to take out a full page ad in the Washington D.C. newspaper Politico, which is distributed in printed form to Congressional staffers and other DC types. For more information or to participate in this crowdfunding effort, click here.