Liz Gannes

Recent Posts by Liz Gannes

With a Little Help From My Friends Investors: House Passes Crowdfunding Bill

The U.S. House of Representatives this week passed a variety of measures intended to make it easier for small businesses to raise money. The most notable of the bills, which have had wide bipartisan support, would create an SEC exemption for crowdfunding.

The crowdfunding bill, called the Entrepreneur Access to Capital Act, would allow companies to give out equity stakes in exchange for investments of up to $2 million.

The stakes wouldn’t count against the SEC’s famous 500-shareholder rule. And individual investors would be capped at putting in $10,000 or 10 percent of their annual income.

So, potentially, a start-up raising funding on a service like Kickstarter could make its donors true investors, rather than just giving them acknowledgment or some reward in exchange for their money.

Crowdfunding for start-ups is something people have tried to do before, but ever so carefully. For instance, a soon-to-launch company called Wahooly promises to help start-ups give out equity in exchange for social media marketing. Wahooly’s current model — which it says is designed to work with current SEC rules — is to become a shareholder in each participating start-up and then split any proceeds with its brand-advocate users.

Meanwhile, the House on Thursday also passed a bill called the Access to Capital for Job Creators Act that would remove a ban on start-ups soliciting accredited investors for capital.

And earlier this week it passed a bill allowing companies to do small public offerings of up to $50 million without registration requirements.

All the bills now have to pass the Senate before they can be signed into law.


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