News from the Small Business & Entrepreneurship Council
FOR IMMEDIATE RELEASEÂ Â Â Â Â Â Â CONTACT:Â Karen Kerrigan
February 29, 2011Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (703)-242-5840, email@example.com
Small Business Groups Urge U.S. Senate Leaders to Quickly Move Forward on Crowdfunding Legislation
Washington, D.C. —Â Today, a coalition of the nation’s most influential organizations representing small business owners and entrepreneurs is urging U.S. Senate leaders to work together to bring crowdfund investing legislation to the Senate floor for a vote. In a letter addressed to Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY), the groups note that crowdfund investing legislation passed the U.S. House 407-17, and President Barack Obama has expressed his support for the legislation through a Statement of Administration Policy as well as in his Startup Legislative agenda recently delivered to Capitol Hill.
Crowdfund investing platforms will allow entrepreneurs who lack access to funding networks the opportunity to bring their business ideas directly to investors through regulated, online platforms.Â As the groups note in the letter, “Americans will have the opportunity to invest in small businesses in their local communities, or support entrepreneurs in rural areas where business formation is critical to sustaining those communities.”Â The letter points out that capital access remains a serious challenge for startups and growth-oriented businesses, and without “adequate sources of capital, the economy will continue to underperform, and the recovery will remain less than robust.”Â Funding streams “remain cautious, locked or tentative,” write the groups.
Two crowdfund investing bills have been introduced in the U.S. Senate.Â Majority Leader Reid announced yesterday that the U.S. Senate will address the package of capital formation bills that overwhelmingly passed the U.S. House.Â With respect to crowdfund investing legislation, state regulators have engaged in a campaign of “fear and fraud,” which has deprived Senators from learningÂ the factsÂ about how crowdfunding currently works through gift-based platforms, and how technology Â — and a new regulatory framework – will play a central role in rooting out potentially bad actors on crowdfund investing platforms.
As the groups note in their letter:
“On these platforms, investors will dynamically engage with other investors to vet business ideas and fund those businesses that have significant promise. Â Crowdfund investing platforms will be open and transparent, and operate under a new regulatory framework. The platforms will protect investors by utilizing proven technologies and tap into ‘the sunshine’ of social media.Â This is what has made gift-based crowdfunding so successful, and why crowdfund investing has been a major success in other parts of the world.Â Entrepreneurs looking to raise capital will be required to provide significant financial information to potential investors, as well as withstand the scrutiny of the crowd in regards to the feasibility of their business plans and models.
The small business groups are optimistic about the legislation’s fate. In the letter, they communicate a belief that “a consensus is achievable for advancing legislation that enables effective crowdfund investing platforms for small businesses while protecting investors.”Â Â Majority Leader Reid saidÂ the Senate Banking Committee will hold an additional hearing on the package of capital access bills next week, which the groups hope will include expert witnesses on crowdfunding so that Senators can be properly informed aboutÂ existing platforms, and how the new space willÂ protect investors.
The groups underscore the importance of the need to work together to enact solutions that will help small business owners invest, grow and create jobsÂ “Capital is the lifeblood of our economy, and without it small business owners and entrepreneurs simply cannot generate the new jobs, breakthrough innovations and economic impact that are necessary for bringing our nation back to sustained growth,” the groups conclude in the letter.
The letter was signed by Harry Alford, President & CEO, National Black Chamber of Commerce; Kristie Arslan, President & CEO, National Association for the Self-Employed; Roger Campos, President & CEO, Minority Business Roundtable; Allen Gutierrez, National Executive Director, The Latino Coalition; Barbara Kasoff, President & CEO, Women Impacting Public Policy (WIPP); Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council; and Todd McCracken, President, National Small Business Association.
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The SoHo Loft Capital Creation Event Series Announces the Agenda for the Capital Creation and Crowdfunding Conference
in Los Angeles
BriefingWire.com, 2/24/2012 – Roswell, GA, Feb. 24, 2012 — Today the SoHo Loft announced the agenda for its upcoming Capital Creation and Crowdfunding Conference, the definitive forum for learning about the rapidly evolving marketplace for private company stock. The two-day event will be held in Los Angeles, CA on Tuesday, March 13th and Wednesday, March 14th.
In this remarkable moment in history, the U.S. regulatory environment, its capital markets and the innovation that drives those markets are simultaneously on the threshold of dramatic change. We are currently witnessing the embryonic period of a cutting-edge stock market just as we usher in a new era of mass media. At the same time, new legislation aimed at facilitating capital formation is being introduced to support this modern infrastructure. There has never been a more opportunistic time to capitalize on change.
TSLâ€™s Capital Creation and Crowdfunding Conference provides attendees with key insight into the direction of the U.S. capital markets during this period of regulatory transformation and the rapid progression of the developing ecosystem. Attendees will get a fresh look at how capital formation is changing as well as learn where new growth opportunities exist, how social media is transforming Wall Street and most importantly, how to capitalize in this changing paradigm.
Attendees will also get to know the players who are shaping the Private Company Marketplace (PCM) including the private shares desks and exchange platforms, crowdfunding experts, secondary private share buyers and angels, private stock analysts, legislators and seasoned entrepreneurs. There will also be ample networking sessions to exchange ideas, discourse and opportunities.
DAY ONE: CROWDFUNDING – TUESDAY, MARCH 13TH
Â· 1pm â€“ Registration, pre-networking, Demos
Â· 130pm – Opening Remarks and Introduction
Â· Employing Crowdfunding to Enhance Capital Formation and Create Jobs
Â· Rep. Patrick McHenry to discuss his bill, HR 2930 also known as the â€œCrowdfunding billâ€
Â· â€œHow you can make a difference and be heardâ€ by Jason Best, Co-Founder and partner of Startup Exemption
Â· 3 to 330pm â€“ Coffee Break: Snacks and Networking Under the Buttonwood Tree
Â· The Capital Markets of Tomorrow – Meet The Pioneers of Crowdfunding
Â· 330 to 415pm Panel: â€œLegalize itâ€ â€“ The transforming regulatory landscape to introduce a new asset class
Â· Panelists include:
1. Jason Best, Co-Founder of Startup Exemption
2. Jouko Ahvenainen, Co-founder of Grow VC
3. Richard Salute, Capital Markets and SEC Practice Director with J.H. Cohn
4. Mitchell Littman, Esq., founding partner of Littman Krooks LLP
Â· 415pm to 445pm Panel: The relationship between Angels and Crowdfunding
Â· Panelists include:
1. Julia Dilts, Co-Founder and CEO of Maverick Angels
2. Charles Sidman, Managing Partner of ECS Capital Partners and Angels
3. Wil Schroter, Serial Entrepreneur & CEO of Virtucon Ventures
4. Candace Klein, Founder and CEO of Bad Girl Ventures and SoMoLend
5. Connie Koch, President of the Southern California Region of Keiretsu Forum
Â· 445pm to 515pm Panel: Establishing the Infrastructure to enhance Crowdfunding:
Â· Panelists include:
1. Gene Massey, CEO of MediaShares
2. William Davis, President of Gate Impact
3. Alon Hillel-Tuch, Co-Founder of RocketHub
4. Steven A. Cinelli, Founder, CEO, PRIMARQ Inc.
Â· 515 to 545pm â€“ Coffee Break: Snacks and Networking Under the Buttonwood Tree
Â· 545pm to 7pm â€“ Presentations:
Â· 545pm: Case Study: One start-upâ€™s experience utilizing Crowdfunding
Â· 605pm: â€œModels and approach to building the new sustainable finance sectorâ€ by Jouko Ahvenainen, Co-founder of Grow VC
Â· 625pm: â€œTransforming an Idea into a Businessâ€ by Julia Dilts, Co-founder and CEO of Maverick Angels
Â· 645pm â€“ Closing Remarks, Meet our Sponsors
Â· 7pm â€“ Cocktail Party, Extensive Networking
To register for tickets, please visit http://tslccla.eventbrite.com/. Only ticket holders will be permitted into the event. Press Passes will be provided to qualified members of the media at no charge. To receive Press Passes, please contact firstname.lastname@example.org. To view detailed bios of our distinguished speakers, please visit http://www.thesoholoft.com/our-network/speakers-2/
ABOUT THE SOHO LOFT CAPITAL CREATION EVENTS:
The Soho Loft Capital Creation (TSLCC) Event Series is the only global event platform where accredited investors; accomplished angels; microfinancing groups; CIOs of investors; select merchant and investment bankers; VCs; family offices; incubators; private equity firms; pre-IPO mutual funds; secondary stock buyers, sellers and equity analysts from across the world assemble in order to exchange ideas, discourse and opportunities that will help reshape the capital markets and stimulate economic growth. Our mission is to bring awareness and drive capital to the private company marketplace (PCM) as well as to help develop its infrastructure so that it can mature into a viable and functional institutional marketplace that facilitates capital formation, innovation, expansion and job creation. For additional information please visit us at http://thesoholoft.com and www.facebook.com/TheSohoLoftevents.
National Council of Entrepreneurial Tech TransferÂ Presents
Crowdfunding Webinar Mini-Series
Register for this free series here:
(or go to: https://www2.gotomeeting.com/register/415957282)
A rare glimpse of Crowdfund Investing. Â This free webinar will focus on different aspects on what Crowdfunding is, to what it looks like today, how it differs from Crowdfund Investing, what framework for Crowdfund Investing is to the legislative process in Washington DC, the hurdles to becoming law and dealing with everyone from leading Representatives and Senators all the way up to the White House.
ABOUT THE PRESENTERS:
Jason Best is a Co-Founder of Startup Exemption andÂ brings over 10 years of executive management experience at 2 SaaS healthcare businesses (one of which he co-founded) in the bay area. Â His work there included starting a business from the ground-up during the dot com crash, building broad coalitions of US medical societies in support of Internet-based physician-patient communication and changing FDA regulations to enable physicians to receive electronic medication and device warnings instead of paper. Â This change dramatically increases patient safety while reducing time and costs for physicians and the pharmaceutical industry.
He is a successful entrepreneur and consultant to technology companies on business development and strategy issues to enable companies to grow quickly and effectively.Â In both 2010 and 2011, his work in strategy development, building scaleable processes, partnership development and branding/marketing, led to one of his clients, Kinnser Software, being named by Inc. Magazine as one of the 500 fastest growing private companies in the USA.
In Dec 2010, he also Co-Founded A Single Production Company, a documentary film company based in Bangkok Thailand. Â He has served as the Executive Producer for its first feature â€œThe Cheer Ambassadorsâ€. Â The film will premier at the Bangkok World Film Festival in January 2012. Â He is also working on a program with local entrepreneurs and educators to create a moreÂ entrepreneurialÂ Web development industry in Thailand.
Jason earned his MBA from the Thunderbird School of Global Management, the worldâ€™s top international MBA program as well as a BA from William Jewell College, ranked by Forbes and US News and World Report as one of Americaâ€™s best national liberal arts colleges.Â He has lived and worked in Europe, South America and Asia. Â He grew up in Louisiana and is now based in San Francisco, California to be near snow skiing, the ocean and wine country.
Chances are this entrepreneur has already helped you, your child, someone very close or even your pet.Â As a 3-time INC500 winner whose company won E&Yâ€™s Entrepreneur of the Year, Sherwood understands the keys to entrepreneurial success from concept to company to sale.
Sherwood Neiss started his post-MBA career on Wall Street and moved to Silicon Valley where by his 29th birthday reached the personal and financial goals he set for his 30th year.Â Wondering what to do next and also left struggling with a debilitating family dilemma, he used his entrepreneurial drive to help turn his family adversity into a multi-million dollar company that today is helping millions of sick children, animals and adults get better by being more compliant with their medicines.
Sherwood Neiss co-founded FLAVORx (www.flavorx.com) the company makes 42 yummy flavors that take the yuck out of medicine.Â His structured approach helped not only build a business model that threw off millions of dollars in cash but also helped grow the business from one pharmacy to over 80% of the pharmacies in the United States.Â Â He raised millions of dollars in capital and saw the culmination of his endeavors with the sale of the company in 2007.
Sherwood is an avid public speaker.Â He speaks at universities and seminars around the world about what it takes to be an entrepreneur, how to fund your idea and build a winning company.Â He testified at three Congressional hearings; Â one on the impediments to capital formation under Sarbanes-Oxley and two regarding access to capital for entrepreneurs and Crowdfund Investing.Â His SOX testimony was one of the reasons the Small Business Exemption to section 404(b) audit requirements was passed in July 2010.
Most recently Sherwood won the November 2010 & May 2011Â Startup Weekend Challenges in Miami to use smartphones for instant polling & for an equity based crowdfunding platform.Â Currently he advocating for the SEC to update the securities laws to make it legal for groups of people to pool small dollar amounts of money together to invest in startups aka â€œCrowdfund Investing.â€
When not working, Sherwood is an avid traveler.Â He lived in Japan for a year and post-sale of FLAVORx took his second backpacking trip around the world.Â In addition to speaking at universities and businesses around the country he invests in real estate in the U.S. and Brazil, is part of a Private Equity group in Los Angeles, is working on a clean tech project in Puerto Rico and is involved with several other start-up ventures.
WEBINAR DURATION: Each session is a 90-minute webinar with 60 minutes of presentation and 30 minutes of Q&A.
COST: Free, but registration required by clicking on register the Register button above.
HOW TO PARTICIPATE?: This webinar is online. You need a computer with web access for the visual/audio. You may also dial-in using the audio-only telephone number. The call in details and instructions on how to join the webinar will be sent to you via email after you register. Once registered to the webinar you will receive a reminder email 24 hours before the start of the webinarÂ with instructions on how to join.
QUESTIONS TO SPEAKERS: Q&A is conducted by a chat box to the speakers.
WHO SHOULD PARTICIPATE IN THE WEBINAR?: National and international media, federal and state government officials, venture capitalists, angel investors, Global 1000 companies, industry representatives, university officials, entrepreneurs and individual investors.
SLIDES AND VIDEO: The slide presentations and video recording will be available on this page. If you are unable to join the live webinar, you may view the recorded video that will be posted within 24 hours after the scheduled webinar ends.
If you have questions about this webinar, please email NCET2’s Research Commercialization and SBIR Center at email@example.com
Our own real-world Stephen Colbert skit is playing out before our eyes.Â Security Regulators are up in arms about the prospect that the average American can decide if he or she is smart enough to invest $10, $100, $1,000 or $10,000 into an entrepreneur they know, via would be SEC-registered websites, that would allow entrepreneurs (who had cleared background and security checks) to raise money from their friends and family.Â Hence they are spending millions of dollars on lobbyists and staffing Senate hearings with opponents to derail Republicanâ€“led legislation that the House of Representatives passed with 96% approval. (Yes this is the same House that rarely passes things with such bi-partisan approval). This was also endorsed by a Statement of Administrative Policy by our Democrat President Â –all of which is meant to help keep America competitive, spur innovation, encourage entrepreneurship and create millions of jobs.
There are two bills before the Senate.Â Senator Reid must act to bring a Crowdfunding Bill much like the House version to the floor to vote on.Â Entrepreneurs, The US House and The President get it.Â Jobs wonâ€™t come if we donâ€™t provide the capital.Â Letâ€™s not look to past to get us out of this problem.Â Letâ€™s look to the future and the success of Crowdfunding globally.Â If 96% of the House thought it was worthwhile, shouldnâ€™t we expect the same from the Senate?Â Are we really going to let Special Interests that care more about their own power than our future economic prosperity kill crowdfunding legislation in the Senate?
Even before the equity-based crowdfunding site Profounder had a chance to show to the U.S. (ps -this is already legal and flourishing in the UK) the power of harnessing a few dollars from the crowd to spur innovation, encourage entrepreneurship and create jobs, they have shut their doors.Â In a statement to their followers they said, â€œthe current regulatory environment prevents us from pursuing the innovations we feel would be most valuable to our customers, and weâ€™ve made the decision to shut down the company.â€
An inside-Beltway battle is being fought between the people trying to propel our country forward, Americaâ€™s job creators, and those holding us back, Regulatory agencies including groups like the North American Securities Administrators Association ( www.nasaa.org )..Â They are more concerned with clinging to outdated laws written 78 years ago than the economic needs of our country.Â Current regulations, were written before most homes had radios, much less the Internet.Â This was during a time when your â€œsocial networkâ€ was a stack of business cards that you could write letters to send via the US Post Office.Â Â Now, this deeply entrenched bureaucracy prevents entrepreneurs from using the Internet and social media to go to their friends and family for investments.
The U.K. has just updated their security laws to allow their citizens to finance their nationâ€™s job creators much in line with what ProFounder was trying to do.Â What the UK realizes, is with the advances in technology and the Internet, there is power to a group of interconnected people vetting an entrepreneur in an open and transparent platform where they can decide if she or he is worthy of funding.Â As of last week, it was going so well that the UK Government began to offer tax credits to their citizens to encourage investment.
The financial markets in the US for entrepreneurs and small businesses are STILL FROZEN.Â With all the talk about it, the reality for most small businesses is they have no access to working capital.Â Â Â Access to capital is the number on concern according to a recent study by the Small Business & Entrepreneurship Council.Â Allowing Main Street to step in and fill the void left by Wall Street, the banks and Venture Capital can only help propel our country forward.Â We need to stand together.Â We need to legalize Crowdfunding. Â If you are an entrepreneur register at LegalizeCrowdfunding.org now!
Sherwood Neiss and Jason Best are Co-FoundersÂ for the Startup Exemption, which brought the idea for â€œCrowdfund Investingâ€ to Washington a year ago.Â They have recently launched LegalizeCrowdfunding.org to quantify the impact the legalizing crowdfunding can have on our nation.Â
The Future of Startup Financing: A North American TeleForum on $$$ Crowd funding
Register On-Line to Reserve your spot on the Call
Join a group of your colleagues in Canada and the U.S. on Tuesday, March 6th beginning at 11:00 am EST for an important Teleforum Conference Call on the future of seed and growth financing for start-ups and entrepreneurs.
The briefing team will be lead by the founder of the Crowd funding movement, Sherwood Neiss, Chief Advocate for The Startup Exemption. Mr. Neiss will describe the advances in technology, the Internet and Social Media to allow an entrepreneur to raise a limited amount of capital from his friends, family & community under a framework that provides for investor protection.
Also attending the call to provide background and guidance will be members of the CATA Crowd funding Action Committee (see below), including, Tom Houston, Partner, FMC Law, Andrea Johnson, Partner, FMC Law, Peter Andrews, Regional Director, Corum Group, Steven Hurwitz, Partner, Choate, Hall & Stewart LLP, John Reid, CATA, CEO, Gary Stairs, CEO, Chair and CEO of Stellar RHL., Michael Turner, VP, Wesley Clover, Jordan Smith, B.Sc., Senior Manager, Deloitte and Paul Dombowsky, CEO, Ideavibes.
Crowd funding is local vesting and community vetting where only the winning ideas receive not only funding but shared knowledge, experience and marketing power. Crowd funding makes it easier for business to obtain investment by selling stock to small investors. A new Bill is currently in the U.S. Senate to exempt crowd funding from State regulation of securities offerings.
CATA has launched an advocacy Campaign to encourage Canadian legislators to adopt approaches similar to the U.S. approach.
“We don’t want to have this launched in the U.S. and then have to play catch up,” said CATA president John Reid.
Gary Stairs, President of Fredericton-based Stellar-RHL and Chair of i-ATLANTIC, noted, “New Brunswick and its sister provinces have developed models of collaboration between experienced investors, young entrepreneurs, universities, and government. Todayâ€™s new capital formation pathways that allow businesses to be crowd funded can really catch fire in this ecosystem. Regrettably we are blocked by regulations.”
Andrea Johnson, Partner, FMC law and securities expert said, “I believe the Canadian government is very behind in this and should be pushed harder because access to capital is a big issue. Making it easier for start-ups to get that money is important.”
CATA is lobbying provincial securities regulators to make similar changes here. While the new American legislation would be overseen by a single national watchdog, the U.S. Securities and Exchange Commission, Canada still has no national regulator, after a Supreme Court decision recently declared such a body unconstitutional.
The U.S. Perspective:
Mr. Neiss, who has raised more than $100-million in funding capital, notes that “I’ve testified in front of Congress twice now and our framework is the framework for all the Bills before Congress. We are on the ground lobbying in Washington, DC. We also have the support of President Obama.”
“I believe the Canadian government is very behind in this and should be pushed harder because access to capital is a big issue. Making it easier for start-ups to get that money is important,” said Johnson.
The TeleForum will be MC’d by Bill Hutchison, Chair of i-CANADA, and Barry Gander, Co-Founder of i-CANADA, a movement to create an Intelligent Nation through the adoption at the community level of ultra-high-speed networking. “This new avenue for capital, plus our growth ecosystem, could make investments in start-up ventures gain speed,” said Mr. Hutchison. “Thousands of new jobs will be created in the process.”
CATA North American Teleforum l on the Future of Start-up Financing
Who Should Participate
– Entrepreneurs seeking start-up and growth funding
++ Action Items: How do I sign up?
Sign up online at:
Please note that spots on this call are limited.
Your local call in number and access code will be sent to you via email. Callers have local dial in numbers in all major Canadian and U.S. cities and free access worldwide using Skype.
Note that the Call-in Registration fee is $45 for for Non Members; CATA members (no charge) have preference as we limit caller numbers to encourage active discussion. Fees are reinvested in our Competitive Innovation Nation research programs. Questions: firstname.lastname@example.org
A Special Background Note on Sherwood Neiss
Sherwood Neiss started his post-MBA career on Wall Street and moved to Silicon Valley where by his 29th birthday reached the personal and financial goals he set for his 30th year. He used his entrepreneurial drive to help turn a family adversity into a multi-million dollar company that today is helping millions of sick children, animals and adults get better by being more compliant with their medicines. Sherwood co-founded FLAVORx (www.flavorx.com ) the company makes medicine flavourful. His structured approach helped not only build a business model that threw off millions of dollars in cash but also helped grow the business from one pharmacy to over 80% of the pharmacies in the United States. He raised millions of dollars in capital and saw the culmination of his endeavors with the sale of the company in 2007. He speaks at universities and seminars around the world about what it takes to be an entrepreneur, how to fund your idea and build a winning company. He testified at three Congressional hearings; one on the impediments to capital formation under Sarbanes-Oxley and two regarding access to capital for entrepreneurs and Crowd fund Investing. His SOX testimony was one of the reasons the Small Business Exemption to section 404(b) audit requirements was passed in July 2010. Most recently Sherwood won the November 2010 & May 2011 Startup Weekend Challenges in Miami to use smart phones for instant polling & for equity based crowd funding platform. Currently he advocating for the SEC to update the securities laws to make it legal for groups of people to pool small dollar amounts of money together to invest in startups aka “Crowd fund Investing.”
Great progress has been made to legalize Crowdfunding in the US with 3 bills before Congress.Â We have seen Crowdfunding gain traction in the US with 2 donation-based projects raising over $1.5M eachÂ on Kickstarter.Â In addition, the UK is accelerating itâ€™s push to encourage Crowdfunded Investments by offering a new tax credit.Â Now is the time to push Crowdfund Investing legislation over the finish line here.
As we move the Crowdfund Investing legislation forward it is important to keep the following in mind.Â 1) It has to be written so a market can successfully be formed, within the confines of the regulations.Â (i.e., Trying to crowdfund $250,000 in increments under $1,000 is going to be nearly impossible if entrepreneurs are forced to raise 100% of their funding request in order to be funded).Â 2) It has to be easy to understand from an entrepreneurâ€™s, an investorâ€™s and intermediaries point of view.Â 3) It needs to be fair, without needless bureaucracy and costs where the advances in the Internet and technology can offer enhanced security and streamlined process and 4) It needs to be done in a way that our Nationâ€™s Job Creators can start capitalizing on its effectiveness NOW… without getting bogged down by lengthy SEC rule making.
In order to help advance this legislation, the Startup Exemption,which represents over 5,000 active crowdfunding followers (including entrepreneurs, investors, intermediaries, security lawyers, authors, and security experts) sought a consensus on the 3 bills.Â The goal was to take the best of them and consolidate it into one that would provide access to capital without undue bureaucracy.Â It is important to keep in mind that the technology built into todayâ€™s Internet can allow both the transfer of information between entrepreneurs and potential investors as well as intermediaries and regulatory agencies without lengthy and costly bureaucracy — all in a transparent and accountable fashion.
TheÂ Kauffman FoundationÂ for Entrepreneurship hit the nail on the head. â€œStartups arenâ€™t everything when it comes to job growth.Â Theyâ€™re the only thing.â€ Other than a good idea, the most critical thing to launching job-producing businesses isÂ capital. Historically, capital to fund the nationâ€™s job creators came from Angels, Private Equity and Venture Capital.Â But a new downward financing trend is emerging and the results are potentially devastating.
According to theÂ Silicon Valley Watcher, â€œthe latest report on trends in US Venture investments shows a massive decline of 40% in seed investments in US startups in the final quarter of 2011, and a much larger drop of 48% for the entire year.â€
While there was an overall decline in funding across software, Internet and IT services, by far the largest drop was in seed funding for startups, which almost halved in 2011.
As traditional VC firms have moved into later stage funding, Angels and Private Equity have moved into the space they once occupied.Â The result is aÂ larger void at the Seed Capital stage.Â Without capital to fund startups, the outlook for the nationâ€™s entrepreneurs is grim.
â€œCapital is necessary to fund innovation, which leads to businesses that create jobs.Â Without capital there will be no jobs,â€ says Sherwood Neiss,Â entrepreneur and Chief Advocate for the Startup Exemption, (the group that brought equity-based crowdfunding (aka Crowdfund Investing) to Washington).Â So just like any good entrepreneur that identifies a problem, they come with a solution â€œIf we allow the average American to step in and crowdfund the ideas they deem worthy, then we can get capital flowing.â€
The idea has merit.Â Donation-based crowdfunding has shown that winning ideas can secure adequate seed financing.Â Two examples stick out.Â On Kickstarter 13,512 people donated almost $1M to two entrepreneurs to develop the Nano Watch.Â They now employee 10 people and believe that TikTok has led to an additional 45 support related jobs for the company.Â In the UK, The Rushmore Group, raised Â Â£1M from 143 Investors on a Crowdfund Investing platform.Â The expansion capital will create over 30 full time jobs, many more part-time jobs and additional support jobs.Â â€œThese two examples,â€ Neiss says, â€œshow the power that crowdfunding can have in creating jobs.Â Crowdfunding is much akin to community financing where an entrepreneur will pitch his idea to his or her social network.Â Provided that the idea has merit, the entrepreneur is seen as trustworthy, the business model makes sense and the investment opportunity is worthwhile, people will invest.â€
Back to the Kauffman study.Â A major finding is that start-up firms (those younger than one year old) create an average of 3 million jobs annually, while existing firmsÂ loseÂ 1 million jobs each year.Â This is predicated upon capital available.Â If Congress legalizes Crowdfund Investing, with the departure of VCs from the startup space, the future of seed and expansion capital stands to look like the chart to the right.Â With countries like UK leading the pack, it is just a matter of time before the US follows suit.Â That or we risk seeing our economy decline as entrepreneurship and innovate fall victim to the Valley of Death.
In a press release issued by the White House today to celebrate the 1-year anniversary of Startup America, President Obama again called on Congress to pass a Crowdfunding Bill that would allow entrepreneurs to Crowdfund Investments to launch new businesses and create jobs.
The announcement comes after the State of the Union Address in which President Obama made reference to easing the regulatory burdens on startups, small businesses and entrepreneurs.
The currentÂ regulatoryÂ system requires that entrepreneurs seeking to raise capital go through lengthy and costly Â procedures.
These procedures are necessary for businesses that are raising larger, more traditional means of financing but for ideas coming from college business plan competitions or Startup Weekend Challenges they are a deterrent.
Since small businesses are our nation’s net job creators, we need to do everything in our power to get them the capital they need so that they can innovate and hire.
Crowdfund Investing is a zero-cost solution to the jobs crisis. Â It doesn’t require government spending but easing of regulations that were written over 80 years ago. Â These regulations while good in there intent are holding back the creative force of America’s entrepreneur. Â Only with the advances in the Internet and Technology can easing regulations allow the crowd to step in where Wall Street and the Banks have left off.
In tonight’s State of the Union Address the President said the following to a loud round of applause: “It means we should support everyone who wants to work and every risk taker and entrepreneur who espires to become the next Steve Jobs. Â After allÂ innovation is what America has always been about. Â Most new jobs are created in startups and small businesses. Â So let’s pass an agenda that helps them succeed. Â Tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow. Â Expand tax relief to small businesses that are raising wages and creating good jobs. Â Both parties agree on these ideas. Â So put them in a bill and get it on my desk this year!”
Crowdfund Investing is the zero-cost government initiative he is discussing that can create millions of jobs! Â The President gets it. Â The House of Representatives gets it! Â Now we have 2 bills in the Senate. Â Let’s get this on the desk of the President NOW so that we can get back to innovating and creating jobs!