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Entrepreneurs Watch As Crowdvesting Bill Stalls In Senate

Posted by timothy on from the please-fill-out-form-1099-qed dept.

cayenne8 writes "The JOBS Act bill, passed in the house, has stalled in the senate. One section of this bill, which would legalize 'Crowdsourcing' in the U.S., as it is in other countries, allowing companies and startups (like indie film makers) to solicit investments for profit over the internet. This differs from sites like Kickstarter, which allow you to only donate money, in that this bill will allow the common citizen to invest for potential profit ($10K or 10% of income for investor limits) in new ideas and companies."

5 of 182 comments (clear)

  1. Actually, it's now been passed with amendments by webplay · · Score: 5, Informative

    http://www.nytimes.com/2012/03/23/business/senate-passes-start-ups-bill-with-amendments.html?_r=1&hp

    1. Re:Actually, it's now been passed with amendments by Anonymous Coward · · Score: 3, Informative

      The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000.

      So for those of us in the $50k-$100k category that limits the investment to $2,500-$5000 instead of $5,000-$10000.

      Doubles the number of investors needed.

      A bit odd, that, since 10% of yearly income, while significant, isn't exactly something that should break you financially. Seems a bit overcautious.

  2. Re:When was it made illegal? by blakelarson · · Score: 5, Informative

    Crowdsourcing in general is illegal because of hucksters tricking people out of their investment dollars. Only when you have a detailed, SEC-approved prospectus can you sell shares publicly as a C-corp. This is an expensive endeavor for small operations. So they raise "private" money, but mostly from accredited investors, who are supposedly rich enough to not do stupid things with their money. Or at least have the resources to sue the people running the company. Kinda arbitrary. But the key is that a company cannot publicly solicit investors. I think that crowdsourcing is a great idea, but we need to be sure to cover the potential for abuse. There's a reason the laws are in place. I'd love to be able to raise some cash this way.

  3. Re:Boom & Bust by LehiNephi · · Score: 4, Informative

    I suspect you're not familiar with the specifics of the bill--it limits how much an individual can invest in such a company--only up to 10% of their income or $10k (whichever is less) in the less-restrictive version of the bill. It ain't gonna make any investor go bankrupt who isn't headed there already.

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  4. Re:When was it made illegal? by Anonymous Coward · · Score: 5, Informative

    That is exactly what the Senate amendments to the bill address: http://www.crowdsourcing.org/editorial/a-look-at-the-proposed-amendments-to-the-crowdfunding-bill/12669

    The gist of the amendments (which I believe just passed) tighten up the certification and disclosure rules, the requirements for investors (based on annual income), and some important arcana on who is allowed to advertise these things (e.g., no pump-and-dump schemes.) The amendments strike me as a fairly good idea-- if you're asking for a half a million dollars from random people you don't know, then, yes, you're gonna get a CPA to certify and publicize your finances.

    With those amendments, the overall idea also strikes me as a good idea. Sanity seems to have prevailed, assuming the House approves the amendments.