The Washington State crowdfunding billBy http://profile.typepad.com/1237764140s22740 // April 3, 2013 in Crowdfunding
Inspired by a GeekWire guest post written by my friend, the startup attorney Joe Wallin, several Washington State legislators have introduced a bill that would permit startup companies in the state to crowdfund small investments, up to $1 million in the aggregate each deal, from Washington state residents.
The "finding" section of the bill, laying out its rationale, is interesting:
"Sec. 1. The legislature finds that start-up companies play a critical role in creating new jobs and revenues. Crowdfunding, or raising money through small contributions from a large number of investors, allows smaller enterprises in Washington to have access to the capital they need to get new businesses off the ground. However, state securities registration can be prohibitively expensive for the small offerings that crowdfunding facilitates, and the use of crowdfunding for business financing in Washington is unnecessarily restricted by state securities laws. It is the intent of the legislature to help new businesses access equity-based crowdfunding as a financing tool, democratizing venture capital, and facilitating investment by Washington residents in Washington start-ups. Accordingly, to promote the formation and growth of smaller Washington enterprises and the job formation that accompanies such growth, and to permit such businesses to raise capital unencumbered by unnecessary government regulation, the legislature finds that crowdfunding should be permitted, subject to certain restrictions to protect the interests of Washington investors, in accordance with section 2 of this act."
Amazing stuff. You'd have to imagine, were this bill to become law in Washington State, it would serve as a draw for first-time entrepreneurs, and it might do something to stem the exodus (perceived or imagined) of startups in the state that find they cannot raise seed capital.
Every American interested in investment crowdfunding - not just in Washington state, but across in the entire United States - should read this bill. (You don't have to be a lawyer to understand what it says.) Imagine every state had a simple exemption like this. (If there is to be a meaningful, national, federal crowdfunding exemption, there needs to be a do-over.)
For those who want to democratize startup investing - to widen the crowdfunding circle, if modestly, to include non-accredited investors - state by state may be the way to go.
Photo: MathTeacherGuy / Flickr.