PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The Triumph of Regulation Crowdfunding: A Call to Strengthen Our Entrepreneurial Ecosystem

By at 20 March, 2024, 5:54 pm

SMALL BUSINESS INSIDER

By Sherwood Neiss –

In the decade since the JOBS Act of 2012 introduced Regulation Crowdfunding (Reg CF), we’ve witnessed a transformative shift in startup financing. This innovative funding mechanism has democratized access to capital, empowering a diverse array of entrepreneurs and invigorating the American economy. The success stories are numerous, with over $2 billion invested across thousands of companies, nurturing innovation, fostering job creation, and driving economic growth.

For instance, restauranteur Hawaiian Bros was able to raise over $3 million through Reg CF, enabling it to expand its operations and create and support an estimated 7,200 new jobs. Similarly, Boxabl secured over $16 million in funding. Boxabl, much like Ford in its pioneering days of assembly line manufacturing, is revolutionizing the housing industry by standardizing and streamlining the production of foldable, transportable homes, thereby making housing more accessible, efficient, and scalable. Their technology is a breakthrough that has the potential to revolutionize the housing industry.

Reg CF has proven to be a vital tool for small businesses, offering a lifeline to many during economic uncertainties. It’s a testament to the resilience and ingenuity of the American entrepreneurial spirit. The process allows startups to secure funding while building a community of supporters, all under a regulatory framework designed to protect investors and promote transparency.

As we look to the future, it’s crucial that we build on this success.

Strengthening Reg CF and Access to Capital

The introduction of the “Expanding Access to Capital Act” (H.R. 2799) and its passage by the U.S. House represents a pivotal opportunity to enhance and expand the impact of Reg CF.

(Read SBE Council’s Statement of Support for H.R. 2799, which covers its key measures here.)

H.R. 2799 is designed to further democratize access to capital, enabling more small businesses to secure the funding they need to innovate, expand, and compete in a global marketplace. By supporting this legislation, Congress can ensure that more small businesses have the resources they need. It’s not just about funding; it’s about fostering a robust ecosystem where startups can thrive, innovate, and contribute to a vibrant and inclusive economy.

The data speaks volumes. Investment in Reg CF offerings has shown consistent growth ($19.6M in 2016 to over half a billion in 2023), signaling strong investor confidence and a thriving market for early-stage investment. The average raise amount ($173K in 2016 to $437K in 2023) and the success rate of campaigns (51% in 2016 to 63% in 2023) have steadily increased, indicating a maturing market that attracts serious entrepreneurs and committed investors.

However, the potential for Regulation Crowdfunding is far from fully realized. With Congressional support for H.R. 2799, we can unlock new opportunities for growth, innovation, and job creation. H.R. 2799 is a forward-looking initiative that adapts our regulatory framework to the evolving needs of the modern economy. It recognizes the increasing importance of alternative financing mechanisms in a digital age and seeks to enhance the effectiveness and reach of Reg CF, ensuring that the United States remains a global leader in entrepreneurship and innovation.

Supporting H.R. 2799 is more than a legislative action; it’s a commitment to the future of American entrepreneurship. It acknowledges the role small businesses play in driving innovation, creating jobs, and enhancing our global competitiveness. By backing this bill, Congress can provide a catalyst for sustained economic growth and a more prosperous future for all Americans.

The success of Regulation Crowdfunding underscores the importance of innovative financial mechanisms in supporting economic growth and entrepreneurship. Now is the time for Congress to act, and for the Senate to follow the lead of the House by advancing H.R. 2799. The bill will not only boost the availability of capital for startups and small businesses, it serves to reaffirm a commitment to America’s small businesses and an inclusive and vibrant economy. Let’s seize this opportunity to strengthen our entrepreneurial ecosystem and pave the way for the next wave of American innovation and prosperity.

Sherwood Neiss is a principal of Crowdfund Capital Advisors, and one of the three key players in introducing the idea of regulated crowdfunding to Congress and the White House and subsequent passage of the JOBS Act of 2012.

 

 

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