Nearly $100 million in seed money was pledged last year to startups and creative projects through the crowdfunding platform Kickstarter.com–just one of many websites now dedicated to matching projects with people who have some means and desire to support them. What Kickstarter donors got in return were things like “thank you” credits in films, DVDs, tee-shirts, flowers, cookies, and concert tickets. Federal and state securities laws prohibit these startup operations from offering equity to their investors. The good feeling that comes from supporting innovation seems to be the main reward for many people who hand over cash to support the schemes of others online.
But what if there was potential for a financial return on these crowdsourced investments? If startups could offer stock to their small-stake supporters, some (including Amy Cortese in this New York Times Op-Ed) predict that the practice of crowdfunding would explode, opening up far more resources to entrepreneurs, spurring innovation, and creating jobs.
That’s exactly what the Entrepreneur Access to Capital Act (HR 2930) aims to achieve. The bill, which Forbes contributor Scott Edward Walker explained in detail here last month, has the support of President Obama and was passed by an overwhelming majority in the House in November, but has been hung up in the Senate ever since.
Portfolio.com and Reuters reported on Tuesday that Senate majority leader Harry Reid announced plans to push the legislation forwardRead the rest at Forbes
Crowdfunding Set to Explode with Passage of Entrepreneur Access to Capital Act
by Adrienne Burke
(h/t Scott Fullwiler via Twitter)
Sounds like a great idea, but what about the inevitable flood of scams? The SEC apparently thinks so, too.
1 comment:
There's an interesting site here in the UK called Crowdcube, which is already providing a platform for businesses to crowdfund their enterprises by selling off equity to micro investors. One business managed to raise £1m in finance through this method, and the minimum investment is only £10. The model has great potential I think
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