Crowdfunding among us

This week I'm preparing to speak at two events about crowdfunding: today, at the Bellevue Rotary, at the kind invitation of Bob Berry and David Laub; and Thursday, at the Northwest Regional Meeting of the Angel Capital Association, together with Dan Rosen, Sarah Dickey, Gary Kocher and Joe Wallin.

I think I may have found an angle from which to approach the subject as a speaker: crowdfunding is both a promise of something yet to come, and something already flourishing among us.

McHenry pointed out - President Obama signs JOBS Act Rose Garden April 2012The crowdfunding flourishing today is either rewards based, or limited to accredited investors. Both strategies end-run the same impediment: you can't sell stock to the public without registering with the SEC.

Title III of the JOBS Act is supposed to change that, by permitting an entrepreneur to skip the IPO and go straight to the public, and/or letting the public fund local businesses and find and participate in "hot startups."

There's a simple way to test the viability of Title III crowdfunding: look at the usability features of current crowdfunding sites, and mark the functions that would and would not be allowed under Title III. This does not involve guesswork about the as yet to be published rules to implement Title III crowdfunding! No, we already have plenty detail in the legislation itself. (True, some crowdfunding advocates are hoping against hope that the SEC regulations will somehow contradict and undo the legislation; but the hierarchy of codified law doesn't work that way.)

An irony that's emerging in this story as it develops: Rep. Patrick McHenry may turn out to be the legislative parent of investment crowdfunding after all, through his sponsorship of Section 201(c) of the JOBS Act, the angel platform exemption from federal broker-dealer registration requirements. But the Senate thoroughly gutted his crowdfunding-for-everyone bill.


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