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Happy First Birthday JOBS Act

By Ryan Caldbeck

It’s hard to believe that it was almost one year ago (April 5,2012 to be precise) that President Obama signed the JOBS Act into law. At the time, Obama noted, “Because of this bill, start-ups and small business will now have access to a big, new pool of potential investors—namely, the American people. For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in.” Equally hard to believe for me personally is that it’s been almost one year since we launched CircleUp, which has quickly grown into the largest equity-based crowdfunding website in theUS.

However, while the one year anniversary of the JOBS Act is upon us, the law’s key provisions, namely Title II (general solicitation) and Title III (equity crowdfunding for unaccredited investors) are still not written. As a quick refresher, the general solicitation provision will allow companies raising money to broadly advertise their raise to customers, consumers, suppliers, etc. Unaccredited equity-based crowdfunding will allow investors making less than $200,000 per year to invest a limited amount of money into private companies in exchange for equity.

With unemployment still well above 7%, we recognize the urgency of implementation of the JOBS Act; it will provide a much needed boon to the U.S. economy by giving early stage companies access to capital. We are also fervent believers that the financial services industry needs disruption. The primary technology still used in most private company capital raises is email and Microsoft Excel. Fundraising usually takes the lion’s share of an entrepreneur’s’ attention for 6-12 months at a time when her company needs her attention the most.

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CrowdClear Launches New Regulatory-Compliant Platform for Crowdfunding Sites

CrowdClear, a provider of technology, regulatory and compliance services to crowdfunding portals, today announced the launch of its highly scalable, regulatory-compliant technology platform. A division of Bendigo Securities, LLC, a registered broker-dealer, CrowdClear provides funding portals with all of the technology and services to offer Regulation D securities to accredited investors.

Using CrowdClear, leading funding portal RockThePost launched its investment platform this week, connecting high quality entrepreneurs with accredited investors interested in new startup opportunities. RockThePost has been in the reward crowdfunding space for over two years, raising hundreds of thousands of dollars for startups and registering more than 6,000 companies on its portal.

“CrowdClear is positioned to disrupt the world of early stage financing by helping to bring investors and issuers together in a scalable, regulatory-compliant manner,” said Robert Simmons, CEO of CrowdClear. “We support Regulation D transactions today, with an eye toward supporting future crowdfunding transactions.”

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Crowdfunding Coming Of Age In Cleantech

By Dallas Kachan

With early stage capital for cleantech innovation becoming increasingly scarce, crowdfunding sites like Kickstarter, Indiegogo and a new crop of clean/green ones are beginning to emerge as significant sources of funding for selected next-gen clean technologies.

Hurdles remain, particularly for investors seeking returns, but I’m more optimistic about these sites’ usefulness to cleantech entrepreneurs than I used to be.

Asked a year ago by a publication about how significant crowdfunding was likely to become in fostering disruptive cleantech innovation, I wasn’t exactly effusive. As GE’s Ecomagination Magazine wrote, “’When it comes to the tens and hundreds of millions of dollars needed for new breakthrough science, that still best comes from institutional investors,’ says Kachan. Kachan says big investors like to get seats on a company’s board and hope to get a sizable chunk of profits. Clearly, someone who plunks down a small pledge on Kickstarter has different motivations.”

Today, a year later, a lot has changed. Cleantech venture investment worldwide in 2012 was two thirds of what it was the year previous, with early stage funding particularly hard hit. And now with good, relevant success stories like Adapteva and BioLite, at least some startups are starting to find today’s crowdfunding options emerging as a source for the equivalent of friends & family seed capital. While it’s unlikely to ever produce the millions that institutional or corporate deep pockets will continue to provide, it may—just may—serve entrepreneurs seeking early stage money in a time when early stage money has become harder to come by than ever.

And then there’s new, fledgling policy support. In America, today is coincidentally the one-year anniversary of House passage of a bill known as the JOBS Act, which is intended to make it easier for companies to raise money through crowdfunding. Charities have used crowdfunding for years to raise money. The new bill is to streamline the process of companies raising up to $1 million a year in equity, not the simple donations as in today’s crowdfunding, but U.S. Securities and Exchange Commission (SEC) regulations to govern the process are still forthcoming as of this writing. Today, small businesses wanting to raise money from more than 500 investors have to go through a long and often expensive process of registering documents with the SEC.

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LAUNCH Festival to Attempt First Live Crowdfunding Event

For the past few years Jason Calacanis’ LAUNCH festival has been one of the premier venues to — you guessed it — launch a hot new startup in the hopes of attracting serious investment dollars.

When the JOBS Act was signed into law last year, Calacanis saw an opportunity to broaden the potential sources of those investment dollars by incorporating a real-time, live crowdfunding campaign into the annual event.

LAUNCHFest 2013 kicks off Monday, and we still don’t have an official equity crowdfunding system in place for non-accredited investors, but Calacanis and Company have found a way to move forward with their live crowdfunding experiment anyway.

MicroVentures, LAUNCH and SourceBits teamed up to develop a special app for the festival, which runs March 4 – 6 in San Francisco.

“At the event, accredited investors can use the app to show interest in investing in the 50 startups (launching) on stage. If you make a commitment, it’s a non-binding show of interest,” explains Calacanis via an e-mail. “Your contact information is sent to the startup, and you two can get coffee in one of our Davos-style offices.”

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What Entrepreneurs Need To Know About Equity Crowdfunding

This guest Q&A is by David Drake, founder and CEO of LDJ Capital and The Soho Loft. He recently sat down with Chance Barnett, CEO of CrowdFunder, which enables businesses to raise equity and revenue-based financing.

Drake: How do you feel about the progress the crowdfunding for equity portion of the JOBS Act has taken to date and where are the three industry areas for this new regulation?

Barnett: When I sat down with you at the SEC April 20 to our pleasure and surprise both leadership and the staff expressed their sincere desire and interest to meet the staggered rulings throughout the 270 days timeline.Unfortunately the big boss was not present.  While key staffers have worked diligently on crowd funding they have also drafted proposals for commenting on regulation D 506 c which removes the general solicitation ban. Neither of those rulings are making the deadline the SEC had. In an ideal world Walters Chair of SEC would accelerate the ruling on these underlying JOBS Act bills.

What could you ask readers to do to accelerate implementation of the rules?

Reach out to your congressmen and ask how they care for job creation, capital access for small business owners by writing the SEC.

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While waiting for SEC regulations, crowdfunding leaders focus on investor education

By Mohana Ravindranhath

Some crowdfunding industry leaders are using the lull before the fundraising practice is publicly viable to develop educational material for people who may soon be making their first investments.

The Securities and Exchange Commission is currently drafting rules to allow start-ups to sell stakes in their companies to the general public, potentially raising large sums from crowds of small investors.

Until now, selling equity stakes has been limited to so-called accredited investors, people who presumably have the wherewithal and sophistication to know what they are getting into.

Crowdfunding opens the field to the general public, and critics worry the newcomers may not adequately understand the risks involved in sinking money in a untested company.

Enter crowdfunding supporters such as the Crowdfunding Professional Association, a trade group for entrepreneurs, lawyers and investors. The organization is preparing to launch a Global Crowdfunding Education Network, intended to provide online classes and legislative updates for investors and entrepreneurs looking to participate in crowdfunding.

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