Funding sources are hard to find, and without capital businesses in the initial phases of development find it difficult to move past the idea stages. “While Americans currently have trillions of dollars sitting on the sidelines in money market accounts, countless brilliant ideas, technology, research and innovation have been squandered for lack of investment, with ongoing consequences for our health, our economy and our society. We need to encourage investment in entrepreneurs and innovation in every way possible and provide a fast track system to launch viable new ventures.” I said this several years ago to many government officials and it looks like some of them are finally listening to all of us who have been fighting to get a crowdfunding bill passed.
You can learn more here at http://www.startupexemption.com-the creators of the framework for the bill that passed the house by 407 to 17. So as the senate moves toward (we hope) the passing of the Jobs Act, which also passed the house with overwhelming bipartisan support, (that has the Crowdfunding bill in it), one thing is certain: its passage will provide startups and early stage small businesses with expanded access to capital.
This bill will create a regulatory framework to let private businesses use crowdfunding to raise up to $2 million annually from investors pledging no more than $10,000, or 10 percent of their annual income, opening up far more resources to entrepreneurs, promoting entrepreneurship, sparking innovation, accelerating economic growth and creating jobs,
What will happen next?
Most agree that current laws prohibiting crowdfunding exist to protect investors from scams, but those laws were written 80 years ago, before the Internet and social media were around to disclose negative information about a business project instantly to interested investors. Crowdfunding comes with crowd feedback. Public forums make the environment more transparent and fraud-resistant, helping to vet and weed out the shady characters that operate all over the world, even in the public markets.
The inevitable proliferation of thousands of crowdfunding sites and millions of participants will impel reasonable levels of investor protection. Participating startups will have to provide a detailed business plan, complete and transparent due diligence, great execution and popular emotional appeal to be seen and considered by investors able to make informed decisions, and they will also need to provide this same kind of disclosure and reporting to the SEC and state regulators.
Crowdfunding sites will need to implement a proper, standardized, due diligence reporting system to handle the coming demands for transparency and due diligence. And once funded those new entrepreneurs will also be expected to have the ability to communicate their progress on the cloud to a large group of people who will now be shareholders in their companies.
As crowdfunding takes hold, entrepreneurs will begin to use it as the go-to source for initial stages of capital formation. The flood of crowdfunding capital for startups will expand the pool of viable startups qualified for consideration from Angels, VCs and Bankers.
These professional investors will bring a more exacting analysis to the table, giving entrepreneurs an even greater reason to be prepared with complete, compliant and transparent due diligence information.