Earlier this year I wrote how the US SEC was opening the gates to crowdfunding and a new structure of capitalism with mooted regulatory changes.
Now the US President’s proposed Jobs Bill is explicitly focusing on crowdfunding as a mechanism to support entrepreneurs and startups.
A post on the White House’s Office and Science Technology blog titled The President’s American Jobs Act: Fueling Innovation and Entrepreneurship co-authored by U.S. Chief Technology Officer Aneesh Chopra focuses on five highlights of the jobs bill in supporting entrepreneurs.
The first point says:
Boosting access to capital for high-growth companiesAmerica’s most innovative companies need equity capital to grow and hire faster. …. It also means responsibly allowing startups to raise money through “crowdfunding” – gathering many small-dollar investments that add up to as much as $1 million. Right now, entrepreneurs like these bakers and these gadget-makers are already using crowdfunding platforms to raise hundreds of thousands of dollars in pure donations – imagine the possibilities if these small-dollar donors became investors with a stake in the venture.
The problem, as I explain in my earlier SEC article is that regulation in most developed countries prohibits equity investment in companies without prohibitively costly and difficult safeguards. Freeing up those regulations for small investment could create an extraordinarily rich and liquid ecosystem for startup funding.
“We’re looking for ways to “reduce the regulatory burden on the ability of high growth entrepreneurs to raise capital and go public,” he said. “We’ll work with the SEC to develop a crowdfunding exemption for companies looking to raise $1 million dollars or less.”
Kalil, responding to a follow up question from a MAKE Magazine editor, said that they have seen the tremendous success of platforms like Kickstarter, where small firms could raise money as grants. The top ranked idea from the White House online consultation was to allow small business to be able to raise up to one million dollars or $10,000 for an individual though a similar method, he said, in a way exempt from Security and Exchange Commission regulations. It’s a really interesting idea, Kalil said, and “we want to work with SEC” to move it forward.
Talk can take a while to become reality, particularly when regulation is involved, and the U.S. SEC is notoriously highly risk-averse. However momentum is clearly mounting behind crowdfunding. It is an idea whose time has come.