Most of us agree that fostering an environment conducive to job creation should be a top priority among our elected officials. California needs more jobs to improve our state’s economy and our quality of life. CrowdFunding marketing
One good way to realize that goal is to find ways to encourage and support innovative entrepreneurs who want to start new companies or expand existing small businesses, both commonly seen as important sources of new jobs.
There is no shortage of creativity or drive within this population. What is in short supply is the financing necessary to turn ideas into a business. Most individuals pursuing their entrepreneurial dreams simply don’t have access to traditional money
That is where a pending piece of state legislation sponsored by the advocacy organization Small Business California and authored by Assemblyman Al Muratsuchi, D-Torrance, comes in.CrowdFunding advertizing
Assembly Bill 2096 adopts the popular online fundraising technique known as crowdfunding and takes it one step further. Like its national cousin the Jumpstart Our Business Startups (JOBS) Act of 2012, AB 2096 would allow early-stage companies to raise up to $1 million by soliciting small investments from a large number of individuals in exchange for a share of the business. Only companies in California and California residents could participate.
In other words, unlike the crowdfunding that is taking place now in which participants donate money to fund something — a feature film, for example — AB 2096 would legalize equity crowdfunding, which would involve purchasing a piece of the business. Equity crowdfunding would be regulated by state securities laws and enforced by the state Department of Business Oversight, charged with protecting the interests of investors.Kickstarter Marketing
Along with providing much-needed funding for startups and emerging small businesses, AB 2096 would create opportunities for small investors. For example, young tech-savvy individuals who possibly are in the best position to understand and judge a peer’s technology-based business idea would be able to invest in a nascent company they believe in.
Allowing entrepreneurs (or their agents) to solicit small investors directly has caused some to worry about the potential for defrauding less sophisticated investors or those more vulnerable to sales pitches, especially our senior citizens. That is why AB 2096 specifically was written to provide more investor protection than the federal JOBS Act, which also will legalize equity crowdfunding once the Securities and Exchange Commission finalizes a set of rules to implement it. For example, AB 2096 limits how much money an individual can invest in a year through equity crowdfunding. Also, unsolicited telemarketing calls will be prohibited.
Exactly when the SEC will complete the federal crowdfunding rules – originally due in January 2013 – is becoming less and less clear. The commission’s staff is struggling to do its job because of problems with the JOBS Act itself. This uncertainty has prompted a number of states to pass their own crowdfunding bills similar to AB 2096 as a way to jumpstart their economies right away.Indiegogo Marketing
AB 2096 would be a courageous step for our state Legislature to take. It will open new doors for small investors who have not been able to invest in early-stage companies like wealthy venture capitalists have. And it will open up new growth opportunities for small businesses and startups, igniting the spark of innovation that always has been part of California’s DNA, and which is needed now to help fuel California’s economy and create new jobs.
Mark T. Hiraide is a South Bay corporate and securities lawyer who drafted AB 2096 for Small Business California. Mike Grimshaw is co-founder of the South Bay Entrepreneurial Center, an adjunct professor of business and public policy at Cal State University, Dominguez Hills, and executive-in-residence of business and entrepreneurship at Marymount California University.crowdfunding websites
Posted from: http://www.dailynews.com/opinion/20140731/crowdfunding-bill-good-for-business-state-guest-commentary