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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 links are to projects on prominent crowdfunding platforms IndieGoGo and Kickstarter.

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.

The Atlantic quotes the White House post co-author Tom Kalil who added further comments in a call with reporters.

“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.

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  • NRS

    Crowdfunding has been happening in the midwest for over a decade. The first ethanol plants were built, going through the state securities divisions, with 600-1000 owners and investments of $10,000+. Companies like POET and Val-Add Service Corp have raised hundreds of milions in capital through public intra-state offerings.

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Ross Dawson is globally recognized as a leading futurist, entrepreneur, keynote speaker, strategy advisor, and bestselling author. He is Founding Chairman of AHT Group, which consists of 3 companies: consulting, publishing, and ventures firm Advanced Human Technologies, future and strategy firm Future Exploration Network, and events company The Insight Exchange.

Ross is author most recently of Getting Results From Crowds, the prescient Living Networks, which anticipated the social network revolution, the Amazon.com bestseller Developing Knowledge-Based Client Relationships, and Implementing Enterprise 2.0. (click on the links for free chapter downloads). He is based in Sydney and San Francisco with his wife jewellery designer Victoria Buckley and two beautiful young daughters.

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