Category Archives: Crowd Fund Investing

Our IndieGoGo Campaign – Hey U.S. Senate, We’re Coming to Talk to YOU!

BREAKING NEWS …. Our Bill, HR 2930 passes with almost unanimous, rare bipartisan support!  This is a HUGE achievement for every struggling entrepreneur and innovator out there that is looking for capital!

BUT we aren’t done yet!  “If and when” the Senate picks this up IS YET TO BE DECIDED?!?!

WE CAN’T WAIT!  

So help is fund and hold our RALLY IN WASHINGTON,DC on November 17th to keep the positive momentum going!  This coincides perfectly with Global Entrepreneurship Week and a one-day meeting the SEC is having that day on Small Business Capital Formation.  OUR FACES NEED TO BE SEEN AND OUR VOICES HEARD!

We’ve launched a campaign on Indiegogo to help fund the rally and WE NEED YOUR support!  So please contribute!  And if you are in or near Washington on November 17th, Please COME TO THE RALLY!

Click the image below or here to go to the Indiegogo campaign:

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House approves bipartisan SEC bills; GOP, Dems still bicker – The Hill’s Floor Action

House approves bipartisan SEC bills; GOP, Dems still bicker – The Hill’s Floor Action.

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President Obama Endorses Our Framework and HR 2930!

When we crafted our framework for Crowdfund Investing in February, 2011 we thought we had a .1% chance of updating the security laws to make equity-based crowdfunding legal.  Now we have HR 2930, the Entrepreneurial Access to Capital Act whose roots come from 2 hearing we’ve had on Capitol Hill and our entire framework!

And this just in from the White House … aaaaaaaah … day by day we get closer to helping entrepreneurs get access to capital to innovate and create jobs!

A TON of thanks for Rep. Patrick McHenry for taking on our cause!!

The Startup Exemption Team!

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Congress is Polling Your Opinion on HR 2930 … Click to Vote

Major backers of our bill: US Chamber of Commerce, National Taxpayer Union, Small Business & Entrepreneurship Council (SBE Council). Add your support!

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Another Step Closer to Crowdfund Investing (CFI) Reality

Yesterday, October 27, 20011, our bill HR 2930 was amended in the Full Financial Services Committee. It now pretty much matches everything we have been advocating for in Washington! From here it goes to the floor of the US House of Representatives.

Sherwood Neiss, chief advocate of the Startup Exemption said, “What an amazing milestone. Several democrats also signed on showing further bipartisan support for entrepreneurship, innovation and JOBS!”

The Startup Exemption formulated only 10 months ago with a goal to update the security laws to use the tenants of crowdfunding to get capital flowing to entrepreneurs. In that short period of time, they acquired thousands of follows on their petition, blog and twitter feed. They were part of 2 congressional hearing in Washington, DC. They were consulted and included in President Obama’s American Jobs Act and were the backbone for HR 2930, what they like to call the Crowdfund Investing Act.

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Crowdfund Investing ITSELF Is an Investor Risk Mitigation Strategy

There has been a lot of progress to date in our effort to make Crowdfund Investing (CFI) legal. The proponents, including the President who included our framework in the American Jobs Act as well as leading Republicans on the Hill who introduced HR 2930, otherwise known as the Crowdfund Investing Act, get it.

  • Capital is hard to come by.
  • Wall St isn’t focused on entrepreneurs.
  • The banks aren’t lending and private money is only for a select few.
  • Since donation-based crowdfunding is working, let’s apply those tenants to equity-based crowdfunding and get capital flowing to entrepreneurs; also known as our nation’s net job creators.

The model we propose is itself, a self-vetting mechanism that utilizes the Internet, and the wisdom of crowds to help mitigate risk for investors. CFI isn’t free money. In a time of recession folks are even more cautious about their money and no one is going to look at this as a way to make a quick buck, entrepreneur, investor or crook. The crowd is more skeptical than ever before. And only those entrepreneurs that are transparent and accountable will be successful in raising capital, forming businesses and hiring Americans.

However the naysayers are surfacing.

  • A number of them can be dismissed because they do not want another competitor in the capital markets. (Our response to them is, step up to the plate and fund our nation’s entrepreneurs at the same degree or better than prior to the financial meltdown).
  • Another group are just naysayers with no solution, just vague fear mongering with little data.
  • And the final group is the conspiracy theorists that believe (with no hard data) it will open the floodgates to fraud. We adamantly refute this.

First, naysayers need to understand the framework and rules under which we are proposing CFI to take place. An entrepreneur wishing to raise capital would have to:

  • Submit to a background/fraud check (name, address, social security and date of birth) to ensure he hasn’t committed fraud.
  • He would have to pitch his idea on SEC-registered Crowdfund Investing platforms.
  • These platforms will be required to perform the fraud checks and contain an investor education component.
  • Investor education and terms of service will warn investors to only invest in people they know, products or services they believe in, entrepreneurs whom they can talk to about the idea and only those ideas that have the greatest number of 1st degree connections. eg: You can feel confident backing an entrepreneur with 89% first degree (meaning they know him personally) investors that represent at least 89% of the committed capital. However, you should be skeptical of an entrepreneur that only has 24% first-degree backers and they have only ponied up 10% of the amount needed. All of this is easily tracked and graphically displayed with standard web tools.
  • The platforms will enable open dialog where potential investors can pick apart the idea, the entrepreneur’s experience, the business model and the amount of equity offered. The entrepreneur will have to respond to each of the comments to the satisfaction of the crowd. The crowd will vote on the answers by using the “like” button. A higher number of likes the more confidence investors will have again. If an entrepreneur doesn’t answer the questions to the satisfaction of the crowd he/she won’t be funded, period. Again all of this can be tracked and graphically displayed for potential investors to see.
  • Our proposal is an all or nothing financing window. If a fraudster is trying to bilk people out of $1M and he hits a funding target of $999,999.00 he won’t be funded and no money will be exchanged. Anyone who is trying to raise capital will have to set small milestones and raise smaller amounts of capital, hit their milestones and go back for more with proof that they’ve achieved what they said they were going to do.
  • Of course, they will have to be transparent and communicate with their investors or again they won’t have the confidence going forward to raise additional money.
  • Another trigger will be the percent of 1st round investors that come back for a second round. The higher that percent the more confidence. The lower, the less likely they will raise additional funds.

So still think fraud can take place with all these triggers? If so, give us the example and let’s work it thru the model.

ps – Remember, this exemption is not be available to foreign issuers, investment companies, and public companies.

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Crowdfunding Has its Day on The Hill

 

Sherwood Neiss, Chief Advocate of the Startup Exemption testifies September 15, 2001 in front of a Congressional Committee on the ways in which we can get capital flowing to entrepreneurs, spur innovation & create over 500,000 companies and 1.5M net new jobs over the next 5 years.

1) Sherwood Neiss’ testimony: http://1.usa.gov/oHrFy5

2) Video of Crowdfunding hearing: http://bit.ly/raknZY

3) List of panelists including their respective testimonies: http://1.usa.gov/oVD9OX

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Dylan Ratigan Interviews Startup Exemption Chief Advocate, Sherwood Neiss

September 14, 2011 Interview

Sherwood Neiss being Interviewed by Dylan Ratigan

On September 14, 2011, Dylan Ratigan interviewed Startup Exemption Chief Advocate, Sherwood Neiss.  The interview took place in advance of the 9:30am hearing on September 15th on Capitol Hill regarding Crowdfund Investing.

Sherwood spoke to Dylan about the importance of young businesses asjob creators, the need for capital to help fund these companies and how the Startup Exemption is a framework under which the SEC can allow equity-based crowdfunding to take place.

Sherwood discussed how under the Startup Exemption framework entrepreneurs that pass the muster of the crowd can raise equity capital.  How the model accounts for investor protection and how by working together not only can we get capital flowing but we can help those entrepreneurs with the best ideas succeed.

The Startup Exemption was just endorsed in President Obama’s American Jobs Act and it has been promoted by Republican leaders of Congress as a way to promote business and capital formation for our nation’s net job creators.

The framework for the Startup Exemption has the ability to create 500,000 new companies over the next 5 years employing over 1.5M Americans.

To watch the interview click here.

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Obama Evokes the Startup Exemption in American Jobs Act!

Last night President Obama delivered a speech to the nation in front of both houses of Congress.  During his speech he laid out his plan to create jobs and jumpstart our economy.

He had the following to say: “Everyone here knows that small businesses are where most new jobs begin.  And while corporate profits have come roaring back smaller companies haven’t.”  “Ultimately our recovery will be driven not by Washington but our businesses and our workers.  We can help.” “I agree there are some rules and regulations that do put an unnecessary burden on businesses at a time when they can least afford it.” So “we are … planning to cut away the red tape that prevents too many rapidly growing startup companies from raising capital and going public.” “We should have no more regulation than the health, safety and security of the American people required.  And every rule should meet that commonsense test.” “We should be in a race to the top and I believe we can win that race.” “And it has been the drive and initiative of our workers and entrepreneurs that has made this economy the engine and envy of the world.”   “Members of congress it is time for us to meet our responsibilities”

Today his Jobs Act was released with the following paragraph pursuant to his speech.

Reducing Regulatory Burdens on Small Business Capital Formation: As part of the President’s Startup America initiative, the Administration will pursue efforts to reduce the regulatory burdens on small business capital formation in ways that are consistent with investor protection. This includes working with the SEC to explore ways to address the costs that small and new firms face in complying with Sarbanes-Oxley disclosure and auditing requirements. The administration also supports establishing a “crowdfunding” exemption from SEC registration requirements for firms raising less than $1 million (with individual investments limited to $10,000 or 10% of investors’ annual income) …. This will make it easier for entrepreneurs to raise capital and create jobs.

The bolded line comes directly from what the Startup Exemption has been advocating within its networks in Washington, DC!  Sherwood Neiss, the entrepreneur and Chief Advocate for the Startup Exemption said, “It is AMAZING to see Washington come together over this issue.  Crowdfund Investing (CFI) is an AMERICAN opportunity.  It has the ability to get capital flowing to our nation’s struggling entrepreneurs so that they can grow and hire.   Our zero-cost government initiative has the ability to create over 500,000 companies and 1.5M net new jobs over the next 5 years.”

President Obama is pushing congress to enact the Jobs Act.  If passed, the crowdfunding changes advocated by the Startup Exemption will be the first changes to the security laws in the past 20 years.

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Legalize Equity-Based Crowdfunding to Create Jobs

Next week President Obama will be talking about a plan to create jobs in America.  Finally a subject both parties should be able to agree upon; jobs! The premise behind his action is correct, however his focus is not.

While we are in favor of improvements that advance our education system and infrastructure to keep us competitive in the world, the real long-term opportunity to pull us out of this recession lies in the hands of our nation’s entrepreneurs and the confidence we as a nation have to help them succeed.

Both the SBA and the Kauffman Foundation for Entrepreneurship will tell you that the bulk of net new jobs (those jobs created less jobs lost) during prior recessions came from small businesses and entrepreneurs.

So logically, helping foster the entrepreneurial engine in the USA will foster innovation, businesses and jobs; undoubtedly in a multiple of what our government can do through public stimulus.

However, the traditional capital that our nation’s entrepreneurs used prior to the financial meltdown has disappeared – I know I tried to raise capital for 2 ideas I have and I’m a seasoned three-time INC500 entrepreneur.

There’s a solution gathering support and it only exists today because of advances in the Internet and Technology.  It is based on Crowdfunding where entrepreneurs pitch their ideas to average Americans and let them decide which ideas they would back with a few dollars in exchange for an equity stake in the company.

This form of investment is illegal in the USA because it breaks 80 year-old Security Laws on public solicitation and accreditation.  However, American’s today are more sophisticated than they were 80 years ago, they have seen the financial crisis firsthand and are more skeptical than ever before freely giving away their hard earned cash.  Go ahead, try and ask a group of 1,000 people for $50 each and see how successful you are.

If we can update the security laws to make equity-based Crowdfunding (aka Crowdfund Investing) legal, then we can put the power in the hands of the American people to decide which of their community entrepreneurs they want to back and those that they do not.  The ones that rise to the top will not only have access to a small amount of critical seed capital that doesn’t exist in the markets, but knowledge, experience and marketing power from their supporters.  Think about it. If you own Apple stock chances are you have an iPhone and rave about it.  Subsequently, if you want to back your friends Korean BBQ Food Truck or Internet Startup, chances are you will not only be a consumer but an advisor and marketing agent for them as well.

Direct ownership will not only increase the chance of success (as social networks have time and again shown the ability of the crowd to rally behind an idea) but first-hand ownership will help entrepreneurs succeed thru shared knowledge and experience.  More small successes will lead to an increase in consumer confidence, which is a direct economic indicator.

We are on the verge of a double dip recession.  No one trusts our government.  Let’s put something on the table that is good for the country that both side should be able to agree upon; a zero-cost framework that provides a limited amount of capital flow to entrepreneurs that has the ability to stimulate innovation and jobs, in a fashion that both mitigates risk and provides for investor protection.

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