Lots to catch up on. First, if you want to meet and scheme with all the cool kids of crowdfunding, come to the Crowdfunding Bootcamp & First Annual CFPA Convention
in Henderson NV (near Las Vegas) this October 9-11. I'm really looking forward to it! Lots of people doing diverse and interesting things with crowdfunding will all be there -- it's a great opportunity. Meanwhile, if you haven't already, please fill out the CFPA survey
After receiving pressure from state regulators and others, the SEC has delayed
its lifting of the general solicitation
ban (originally scheduled for July 4th) to allow for a full public comment period. This moves the general solicitation rulemaking more toward the timeline of the rest of the JOBS Act, and means that you won't start seeing ads for securities that only accredited investors can buy. ("Ask your broker-dealer for more information about Cialis.")
Chance Barnett of Crowdfunder has been writing a nice series for Forbes online called "Crowd Intelligence
." His latest post lists the "10 Most Influential People in Business Crowdfunding." Good idea-- I've spoken with many people in the business world who have never heard of crowdfunding and certainly don't know about the JOBS Act, but are very interested when I explain it. Since there will probably be no strong news peg on crowdfunding until the SEC publishes its regulations (or crowdfunding gets mentioned in the presidential campaign), there's no reason to run an article, but columns like this flag the topic as worthy of attention nevertheless, and let a publication cover it in a way that doesn't look like either old news or pure speculation.
Joe Wallin of Startup Law Blog proposes
that Washington State
needs its own crowdfunding law (for intrastate offerings) because of all the problems with the federal law. It would be great if Washington or any other state (California, Colorado, Vermont?) got something like this going. The SELC petitioned
Washington State for a crowdfunding exemption last year, so hopefully the movement will continue.
Back in May, the Kauffmann Foundation came out with a report
on the sorry state of Venture Capital
, subtitled "We Have Met The Enemy And He Is Us." Among the report's findings: since the mid-1990s, only a small fraction of VC firms beat the public markets in return on investment (as would the top 5% of random-picking chimps, I would add). VC firms are essentially conning the huge institutional investors who manage endowments, pension funds, etc. to take nearly all the risk of the private investments they select, while paying the VC firms the same regardless of fund performance and not asking any questions. One reason the VCs can get away with this is that the big funds typically have diverse portfolios, and a dedicated manager oversees the VC slice of the pie -- so if that person questions the value of investing in VC funds, they'd be out of a job.
Life Sciences investment consultancy S. Jordan Associates (Scott Jordan) wrote a white paper
arguing that crowdfunding has great potential for startups in healthcare
. He argues that healthcare attracts investors with philanthropic as well as financial goals, and that both of these can be answered through investment crowdfunding. "Investors at the lower end of the spectrum ($1,000 - $5,000) may see investments as glorified donations; a way to further a good cause. [...] This will be important especially for those companies looking for effective treatments in fields where there are no therapies available (i.e., Alzheimer’s disease, Huntington’s disease)." The report cites both crowdsourcing.org's May 2012 "State Of The Industry" report
(which this blog should have mentioned sooner) and the Kauffmann report on VC.
GATE Technologies is building out their GATE Global Impact
network to be a trading platform for crowdfund investments
. Their focus will be on global emerging markets, at least initially. This is hugely important news that I'll discuss more later.
crowdfunding platforms will be operating in the U.S. next year? I'm often hearing about new donation- and perks-based crowdfunding platforms, as well as funding portals that plan to include unaccredited investors once the SEC's rulemaking is complete. Triple Pundit
has a list, as does Strategy Of Innovation
. Here's my list of nearly 90, which does not include accredited-only sites like AngelList. Any others? Any corrections? Which of these will still be around in 2015?
A Kickin Crowd, Appbackr, Appleseedz, Appsplit, Arctic Island, ArtistShare, BeFounders, Biracy, Buzzbank, Cielex, Cofundos, ConfidentCrowd, Conzortia, Crowdcube, Crowdfunder, Crowdfunding Offerings, Crowdnetic, Crowdrise, Crowdtilt, Digital Garage, Earlyshares, EquityNet, FeedTheMuse, FirstGiving, Fundable, FundaGeek, FundedByMe, Fundly, FundMyWish, FundRazr, FundRise, GetItDone, GoFundMe, GOOD Maker, GreenUnite, GrowVC, InitialCrowdOffering, inlu, ioby, Kapipal, HelpersUnite, iCrowd, Indiegogo, Invested.in, Kickstarter, Kiva, Launcht, Localstake, MicroAngels, Microryza, Motaavi, MyMicroInvest, OnSetStart, Original Projects, Pearfunds, Peerbackers, PeoplesVC, Pitchstar, PleaseFund.Us, Pledgie, PledgeMusic, Popularise, Pozible, ProHatch, PropertyPeers, Rally, Razoo, Return On Change, Rockethub, RockThePost, Seedinvest, SellaBand, SoKap, SoMoLend, SonicAngel, START.ac, SymBid, Thrillcapital, Twask, Ulule, Wefunder, We The Trees, WhenYouWish, 33Needs, 40Billion, 8-Bit Funding
SEC comments and meetings.
Public comments to the SEC on investment crowdfunding keep rolling in. The American Sustainable Business Council (ASBC) submitted a great one recommending
a two-tier approach that specifically recognizes small local investments
. I sent one in myself "seconding" the ASBC's proposal and also offering a general approach and specific content for the online qualifying exam
that CF investors will need to pass before investing. The SEC met with Mark Perlmutter of MicroAngels
, who told them about the Australian Small Scale Offerings Board
(ASSOB), which is AFAIK the first investment crowdfunding platform, and showed them prospectus examples from DPOs (direct public offerings) that he has worked on. The SEC also met with Andy Green
, legislative counsel to Sen. Jeff Merkley
, who put his comments on the legislation in a letter to President Obama
. And the SEC talked with Jared Cohen, General Counsel and Vice President of Operations at Kickstarter
The International Crowd Funding Association (ICFA
) now has a website
, and I learned what they mean by "over compliance," which confused me
before. According to ICFA Co-Chair Berny Dohrmann
, who is also the Founder of CEO Space, over-compliance is "a standard [...] where your appearance is as important as your legal compliance [...] I don't want you to comply with the law when you're going through our programs -- I want you to over-comply. You never take money from anyone without an investor questionnaire and a subscription agreement where you say, you understand, this is a startup company, stuff happens, it's higher risk." Furthermore, according to the ICFA
, "The market is increasingly applauding the OVER COMPLIANCE standards ascribed to."
Interestingly, CEO Space representative Dave Phillipson disagrees
on the value of a crowdfunding industry association. In response to the CFPA survey's
posting on LinkedIn, Phillipson discouraged people from participating by writing, "It's senseless to take the time. Crowdfunding isn't legal yet. Such associations are likely to be shut down [...] There is nothing that others will do for crowdfunding, by filling out the suggested survey. There is nothing that an avante garde 'Association' can do either."
According to Dohrmann
, "The ICFA [is] led by the law firm of former SEC Commissioner Roel Campos
." This law firm is Locke, Lord LLP
, which has a DC office. The SEC logged a meeting
with Campos and Sprowtt representative Mike Jones [an erroneous listing for Mark R. Jones?] on August 9th. I called Locke, Lord's DC office to ask about the ICFA and was transferred to the voicemail of the office manager. I followed up with an email, but have not heard back yet.
In a March 16 article I first read just recently, Cydney Posner of Cooley LLP quotes Lynn Turner
on TheCorporateCounsel.net regarding some of the sausage-making behind the JOBS Act's Senate passage
. My understanding is that the only part of the bill that changed in the Senate was the crowdfunding section (Title III), for which an adaptation of Merkley's Senate bill S.1970 was swapped in for McHenry's original H.R.2930. Turner however describes the changes in a different way:
[S]ome thought the Dems would introduce their own version of the bill, but Harry Reid in a nod of the cap to the venture capitalist and bio tech lobbyists (and their campaign contributions) decided that he would go with the House Republican's bill. While an amendment would be offered making it look like investors protections requested by the state regulators, the SEC and many investor and consumer groups would be entertained, that is merely a facade - a token effort which was dead on arrival before it was even introduced.
Perhaps the funniest thing, is that only people in Congress are calling this a jobs bill. It has become widely referred to in the media as "The Bucket Shop Reauthorization Act of 2012." Most of the people that the Dems did call to testify have said it will not create new jobs, (except perhaps among law enforcement agencies and prison guards)!!!"
Business conference and webinar producer Infocast
was planning to host a JOBS Act Investment Summit in Santa Clara this past July 25-27, but the event was postponed
until after the November election. "rescheduling this Summit after the election will enable Infocast to provide attendees with greater clarity and the quality to which we strive."
Finally, I've done a long-overdue website update on the framing content for crowdfundinglaw.com, to be more current and less cryptic about myself:
- I changed the name from "Change Crowdfunding Law" to "Crowdfunding Law" -- because the law got changed, as intended. Now this mailing list / blog is about what's happening as a result.
- I changed the tagline. Until now, it was "Campaign for an SEC regulatory exemption covering public securities offerings with individual investment capped at $100, and the people who love them." That's how the movement started back in 2010, but it's ancient history now. New tagline: "Catalyzing and tracking the investment crowdfunding revolution, from idea (2009) to reality (2013)."
- Added to the "About This Blog" section: "Newcomers to this blog can read here, from the bottom up, the strange-but-true story of how I and a small group of others changed U.S. securities laws to democratize entrepreneurship, and how we plan to make it all work out nicely for everyone."
- Added to the "About Me" section: "You may know me through MAKE magazine, Wired magazine, The VJ Book, The Re/Search Guide to Bodily Fluids, Boing Boing, Infobahn, ViewStar, Advanced Decision Systems, Joe Schmoe, The Mighty Vegetable Sled, Blue Larue, Columbia, Palo Alto HS, Paul Revere Jr. High, Brentwood Elementary, San Francisco, Oakland, Palo Alto, Pacific Palisades."