A coalition of the nation’s most influential small business organizations have in past months been urging Senate leaders to work together to pass crowdfund investing legislation, which would essentially legalize a new type of funding source. Startup crowdfunding is an innovative approach to securing job-creating private capital that many believe will provide the economic stimulus to boost small business growth in the U.S. A different but similar crowdfunding bill already passed in the House in November by a vote of 407 to 17.
If it goes into law, this bill will allow individuals to invest up to $1,000 in a particular company, with businesses able to raise up to $1 million a year in this way. Through this system, entrepreneurs who lack direct access to traditional funding networks will be able to bring their business ideas directly to investors via regulated online platforms. This opens up many more avenues of financing for business owners, addressing a key issue in small business environments: that capital access can pose a serious problem for both startups and growth-oriented businesses. The way the law stands now, only “accredited” investors can put money into startup companies.
A major proponent of crowdfunding legislation, U.S. Senator Scott Brown, recently spoke at an event organized by Cambridge startup WeFunder.com, which is the driving force behind an online petition that has collected over 2,500 signatures asking Congress to legalize the crowdfunding initiative and which has also already built out a site to be launched if the funding bill does indeed pass. In addition to a forum on the issue, WeFunder also hosted a panel that looked into many of the potential issues surrounding crowdfunding, including fraud, transparency, and potential impact on entrepreneurs. The conclusions of the panel were mixed, with most optimistic about limiting fraud but less sure about potential returns to investors.
Alspach, Kyle. “Scott Brown: Crowdfunding for Startups Would Mean Economic Stimulus.” Boston Business Journal. 3/5/12. (3/8/12.) http://www.bizjournals.com/boston/blog/startups/2012/03/scott-brown-crowdfunding-for-startups.html?page=all
Frick, Walter. “Is Crowdfunding Going to Pass Congress? WeFunder Panel Continues the Legislative Push with Guest Scott Brown.” BostInno. 3/5/12. (3/8/12.) http://bostinno.com/2012/03/05/is-crowdfunding-going-to-pass-congress-wefunder-panel-continues-the-legislative-push-with-guest-scott-brown/
The Small Business and Entrepreneurship Council. “Small Business Groups Urge U.S. Senate Leaders to Advance Crowdfunding Legislation.” BusinessTrends Blog. 2/29/12. (3/8/12.) http://sbecouncil.blogspot.com/2012/02/small-business-groups-urge-us-senate.html