The Crowd Comes Out to Hear about the State of Equity-Based Crowdfunding and the Need for the SEC to Release its Rulemakings

By SBE Council at 27 February, 2013, 9:11 am

On February 19, SBE Council hosted its members, leaders of the venture capital and crowdfunding sectors for a full day of advocacy, briefings and meetings on the state of equity-based crowdfunding.  The briefings provided an in-depth review of the build-out, technology and investment that has been deployed by entrepreneurs in preparing for equity-based crowdfunding.  Delays by the Securities and Exchange Commission (SEC) in implementing the rules of the Jump Start Our Businesses Startup Act (JOBS Act), signed by President Obama in April of last year, are hurting entrepreneurs and undermining the health of a well-prepared industry that is ready to serve small businesses and the people who will invest in promising enterprises.

The day-long event began at the National Press Club and moved to a luncheon briefing at the U.S. Capitol with congressional staff and policy leaders.  The afternoon was spent in meetings with White House and Securities and Exchange Commission (SEC) staff. (Read the media release on the full-day event here.)

Video of the media event at the National Press Club can be accessed by clicking here.

The JOBS Act, one of the few bipartisan achievements of the 112^th Congress, made equity-based crowdfunding legal. The SEC, however, has missed important deadlines in issuing rules that will govern this promising and transformative marketplace for entrepreneurs and investors.

“The capital needs of entrepreneurs remain just as critical as when the JOBS Act was signed last April,” said Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, at the press conference. “Now the SEC must take the next step and finalize its rulemakings to ensure the JOBS Act can fulfill its promise of helping to fund promising businesses, and bring the economy back to robust levels of growth and job creation.”

Thought leaders of the Crowdfunding Professional Association (CfPA) offered their expertise and insight at the various meetings and briefings events.  All speakers noted the importance of getting main street businesses and entrepreneurs the capital they need to grow, compete and strengthen the economy. Demos of the technology and platforms were also on display at the various meetings.  The group also addressed the growth of equity-based crowdfunding internationally, which jeopardizes U.S. leadership in this innovative space.

Along with Kerrigan, the leadership group included:

• Sherwood Neiss, CfPA Chair and Principal of Crowdfund Capital Advisors
• Candace Klein, CfPA Co-Chair and CEO of Somolend,
• Ryan Feit, CfPA Chair and CEO of Seed Invest, Equity Platform
• Vince Molinari, CfPA Chair and CEO of Gate Technologies
• Sara Hanks, CEO of Crowd Check
• Chris Tyrell, Principal, Nehemiah Investments
• Chance Barnett, CEO of Crowdfunder
• Kim Wales, Chair of the CfPA and CEO of Wales Capital
• Doug Ellenoff, Partner at Ellenoff, Grossman & Schole.
• Judy Robinett, Angel Investor and VC Advisor.
• Jason Best, CfPA Co-chair and Principal of Crowdfund Capital Advisors

In this piece “Will the SEC Kill Crowdfunding”, Chance Barnett points out that crowdfunding is a solution that will create jobs for our economy by helping small businesses access the capital they need.  He notes the long delays at the SEC, as well the biases of the former Chair which impacted the pace of JOBS Act rulemakings.  Unfortunately, writes Barnett, the U.S. is now lagging globally in getting equity-based crowdfunding off the ground: “Other countries are off and running with equity crowdfunding, such as the United Kingdom, Australia, Sweden, Norway and Finland. Why is the U.S. still stuck in first gear and lagging behind the pack? Aren’t we innovators and leaders in entrepreneurship?

Highlights of media coverage of our daylong outreach can be found here:

SEC delay on crowdfunding threatens job creation, leadership globally, activists say, UpStart Journal

Crowdfunders Urge SEC to Hand Down Rules for Public Comment, Washington Post

Crowdfunding Stakeholders Leave DC Optimistic, Wanting Action, Crowdfunding Insider

Crowdfunders Step Up Lobbying for SEC Rules, Entrepreneur

The Future of Crowdfunding, Bloomberg Television

Select quotes from the group at the media event:

Douglas S. Ellenoff, Partner at Ellenoff, Grossman & Schole: “We are here because we want to see the proposed rules.”   Ellenoff also developed an acronym for equity based crowdfunding as designed by the JOBS Act: CREDIBLE…Caps on investment, Registration of intermediaries, Education for investors, Disclosure of all details, Information about risks, Background checks, Lively social media, Entrepreneurs limited to $1 million.”

Sara Hanks, CEO of Crowd Check, on the issue of fraud and background checks: “The investor and entrepreneur should be on the same side. The best protection is information.”

Judy Robinett, Angel Investor and VC Advisor: “We put a man on the moon. Certainly we can learn how to do this and move forward.”

Jason Best, CfPA Co-Chair and Principal of Crowdfund Capital Advisors: “Entrepreneurship is uniquely American.”

Candace Klein, CfPA Co-Chair and CEO of Somolend: “When you look at countries that are already allowing equity-based crowdfunding, the instances of fraud are next to none.”

Chance Barnett, CEO of Crowdfunder: “Crowdfunding 2.0 is about driving investment from online to offline building relationships.” “Investing is really about creating a long-term relationship.”

This crowdfunding day represents the first in a series of efforts that SBE Council and our members and partners will participate in to build awareness of the importance of the JOBS Act to small business and economic growth, and the need for the SEC to do its job and release the rules of this critical bipartisan law.

Karen Kerrigan, President & CEO