Tag Archives: entrepreneurs

Our Congressional Testimony: Reversing the Decline in Capital Formation

Posted on May 9, 2011 | Leave a comment

“Reversing the Decline in Capital Formation”

 

Testimony of

 

Sherwood Neiss

Entrepreneur

Sherwood Speaks, LLC

Miami Beach, Florida

May 10, 2011

Before the

Committee on Oversight and Government Reform

United States House of Representatives

The Honorable Darrell Issa, Chairman

The Honorable Elijah Cummings, Ranking Member

Introduction:

 

Chairman Issa, Ranking Member Cummings and members of the Committee, thank you for holding this hearing today and allowing me to share an entrepreneur’s perspective on improving capital formation through regulatory modernization.  My intention is to explain why outdated securities laws — put in place before the Internet age — need to be modernized and overhauled, and how these reforms can boost our struggling economy.  By revamping the Security and Exchange Commission’s (SEC’s) position on solicitation and accreditation, we can open the doors to small business growth and prosperity.  Allowing for an exemption for Crowd Fund Investing, which includes protections for investors, will spur innovation among your constituents, create jobs, increase consumer spending, and reinvigorate our economy. Continue reading →

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Posted in Crowd Fund Investing, Funding Gap, Investment, Jason Best, Petition, Sherwood Neiss, Woodie Neiss, Zak Cassady-Dorion

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Peer-to-Peer Community Investment Presented as a Solution to the Capital Crunch for Startups & Small Businesses

Posted on May 9, 2011 | Leave a comment

Washington, DC –On May 10th the Government Oversight and Reform committee is meeting to discuss Capital Formation and Investor Protection.  Namely, they are meeting to review aspects of our country’s securities laws that inhibit capital formation.  One of the most important aspects of the meeting will focus on access to capital for startups and community-based businesses.

Sherwood Neiss a Small Business and Entrepreneurship Council member in conjunction with SBEC’s President, Karen Kerrigan, crafted a framework called Crowd Fund Investing (CFI) that was presented to the SEC for review and is building support among Americans.

Even though Crowd Fund Investing (CFI) is taking place in the U.K., Holland, India & China, in the U.S. it is not permitted because it breaks the Security & Exchanges’ accreditation and solicitation rules. According to Neiss, “These rules were written at a time when only 4% of Americans invested in the markets.  Today we have technology that has leveled the playing field and increased investor sophistication making these rules outdated.” Continue reading →

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Posted in Crowd Fund Investing, Funding Gap, Investment, Jason Best, Sherwood Neiss, Woodie Neiss, Zak Cassady-Dorion

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O’Reilley’ Radar Blogs About Crowd Fund Investing

Posted on May 7, 2011 | Leave a comment

** From http://radar.oreilly.com/2011/05/crowdfunding-exemption.html **

Improving the landscape for organic startups

A congressional committee will hear a “crowdfunding exemption” proposal next week.

by: Paul Spinrad

Next Tuesday, May 10, entrepreneur Sherwood Neiss will be testifying before U.S. Congressman Darrell Issa and the House Committee on Oversight and Government Reform to advocate a regulatory change that I have been working to support: a small offering exemption, aka “crowdfunding exemption.” It’s a simple change that the SEC has the authority to make, and which I believe would spur grassroots innovation and empowerment the way the NSF’s revision of the internet backbone’s Acceptable Use Policy did back in the early 1990s. (Remember that one?)

The background (which I didn’t know until fairly recently), is that any investment where the return does not depend on the investor’s active, day-to-day involvement is considered a security. And securities, no matter how small, are either regulated by the SEC or state securities departments. There are no de minimis exceptions; shares in a lemonade stand would require registration, which I’m told costs $50,000-$100,000 or more (federal) or $20,000-$50,000 (state), mostly legal fees. For VC-free startups based on people doing things that they care about, these costs are prohibitive. Continue reading →

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Posted in Crowd Fund Investing, Funding Gap, Investment, Jason Best, Petition, Sherwood Neiss, Woodie Neiss, Zak Cassady-Dorion

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How to Provide Investor Protection in Crowd Fund Investing

Posted on April 13, 2011 | 4 comments

Creating prudent investor safeguards is an important part of enabling a vibrant and effective crowd fund investing ecosystem.  With this in mind, we propose a series of steps to increase transparency and accountability while limiting the opportunity for fraud and abuse.

How to Provide Investor Protection in Crowd Fund Investing

 

Creating prudent investor safeguards is an important part of enabling a vibrant and effective crowd fund investing ecosystem.  With this in mind, we propose a series of steps to increase transparency and accountability while limiting the opportunity for fraud and abuse.

 

Investor Risk Proposed Rules to Mitigate Investor Risk
How do you prevent large scale fraud? Limit the maximum amount any one entrepreneur/company can raise via crowd fund investing platforms to an aggregate of $1 million
How do you keep large corporations from using this as a loophole for cheaper financing? Limit the types of companies that can utilize the platform to those that are less than 50 employees (and not a majority owned or wholly owned subsidiary of another entity) with less than $5 million in revenue in the previous calendar year
How do you prevent someone from swindling all of Grandma’s retirement? Limit the amount that anyone can invest to either $10,000 or 10% of their prior year’s Adjusted Gross Income (whichever is lower)
How do you prevent limited disclosure requirements from increasing risk? Have the crowd vet the entrepreneur.  Create a standards based set of data that each entrepreneur must complete in order to attempt to seek funding.  Then enable a communication channel for investors and entrepreneurs to communicate about their questions, ideas and solutions.  Investors only invest in entrepreneurs that have complete information and a product or service that the investor believes in.  Connecting this service to social media groups whereby the entrepreneur and investors are part of the same group, the investors can ask questions of the entrepreneur and the entrepreneur can solicit the investors for help, experience, contacts, etc.  Investors can rate the entrepreneur following their investment and entrepreneurs can rate investors.
How do you protect against professional scam artists? Just like when financing a major purchase or renting an apartment, Crowd Fund Investing entrepreneurs must agree to credit checks that match their name, social security number and receive a credit score that the crowd can view.  Make the initial money loans that the entrepreneur is personally responsible for.  If he/she defaults it appears on their credit report.
How do you prevent someone from attempting to raise funds without proper planning? Crowd Fund Investing must be an all or nothing platform.  If the entrepreneur doesn’t raise all the requested funds within the specified timeframe, the funding round closes and the investors keep their money.  By limiting the amount of money individuals can contribute, an entrepreneur has to be careful about how much money he is asking for (if he asks for too much and doesn’t reach his funding target, he doesn’t get funded).
What about nondisclosure/lack of transparency? Make the entrepreneurs fill out standards based information about themselves and how they will use the capital.  Have them attach links to their “social proof” from various online communities (LinkedIn, eBay, Amazon, Facebook, etc) profiles that show how the “crowd” views them.  Most of these investments will be made to individuals that are already known to the investors via social media platforms.  Investors will be provided with standards based agreements and this information will be stored within the community, and a data set of relevant investor and entrepreneur data will be transferred to the SEC on a quarterly basis. Examples of this dataset might include:  company name, entrepreneur name, funding rounds attempted, funding rounds successful, number of investors, total investment raised, investor names, etc.
How do you prevent people from “underwriting” & “reselling” the securities? Restrict the shares and mandate that shares must be held a minimum of 1 year by the acquirer.  Let people know that they are buying restricted shares and there is no secondary market to them.  Make sure they understand that unless the company is sold, merges or goes public they will not see a return. (Shares can be transferred to family)

 

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Posted in Crowd Fund Investing, Funding Gap, Investment, Jason Best, Petition, Sherwood Neiss, Woodie Neiss, Zak Cassady-Dorion

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Whoopi and Neiss in the WSJ

Posted on March 23, 2011 | Leave a comment

Today the Wall Street Journal picked up the story of the startup exemption.  As more people hear about this exemption being pushed forward the more people that realize it is a tangible solution to getting money flowing in our economy.

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Posted in Funding Gap, Investment, Petition, Sherwood Neiss, Woodie Neiss, Zak Cassady-Dorion

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The US Takes Steps to Improve the Economy by Focusing on Startups

Posted on March 23, 2011 | 2 comments

Senators John Kerry, D-Mass., and Richard Lugar, R-Ind. are leading the way to ease immigration requirements for foreign entrepreneurs with their “Startup Visa” bill. There are many different requirements to qualify for the Startup Visa, but most importantly the foreign entrepreneur must directly create jobs for Americans.  Essentially, what this is saying is that foreigner entrepreneurs will be allowed to come and work in the US if they have a direct and major impact on the US economy.

These visas will not effect the overall immigration quotas in the US, they will simply be using unused visas. Entrepreneurs, small businesses and startups are the way we are going to grow our economy to get out of this recession.  The UK has already realized this and have passed a Startup Visa of their own recently. It is important to note that the crowd funding exemption we are talking about here at Startup Exemption is already allowed in the UK.  If the US does not move fast we are going to get left behind while entrepreneurs, money, and jobs flow overseas to the UK and other more forward thinking countries.

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Posted in Funding Gap, Investment, Woodie Neiss, Zak Cassady-Dorion

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Miami Beach Entrepreneur & Whoopi Goldberg Team up to Help Entrepreneurs Access Capital

Posted on March 18, 2011 | Leave a comment

Want to know how we are going to kick start our economy?  Follow successful entrepreneur and Miami Beach resident, Sherwood (Woodie) Neiss and you’ll see.

Woodie is another one of those “Type-A, I can do anything I put my mind to” personalities.  He is an ambitious entrepreneur who just won Miami’s “Startup Weekend” with an idea to use smartphones for instant polling.  He was also in the June, 2006 INC cover story “From the Heart” where he helped start and grow a 3-time, INC 500 company that solved the problem of getting kids to take yucky tasting medicines.  (He successfully exited from that company in 2007).

According to Neiss, the traditional means of startup and growth capital are no longer available to entrepreneurs.  “This capital is critical for startups and small businesses to grow and hire Americans,” he says.  While government is focused on trying to fix the current system, he thinks the solution goes back to our roots.  Roots?  Yes indeed, but not the kind you find on vegetables.

“You see,” says Neiss, “when our Nation was born there weren’t big corporations, large banks or even private equity & venture capital.  For example, there were businesses like the blacksmith and his customers who needed tools.  Customers purchased his products, which paid for his employees and helped fund his growth.   And they were his neighbors.  Only today do we identify a problem; then come up with a solution (aka product) and think, “ok now let’s find some Venture Capital.” Continue reading →

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