Guest post submitted by the team at LegalizeCrowdfunding.org.
Sherwood Neiss had no idea LegalizeCrowdfunding.org was going to be the rallying call for all cash strapped entrepreneurs a year ago. Back then he was just a frustrated entrepreneur when he showed up at his second Miami’s Startup Weekend event. He’d won the prior one with an idea to use smartphones for instant polling. “Nothing like the high of winning a Startup Weekend event only to have that bubble burst when you realize there’s no money out there to fund it,” says Neiss. And he’s not alone. Millions of ideas never get launched, not because they weren’t good but because there’s no money to fund them.
So he along with 2 entrepreneurs (Jason Best and Zak Cassady-Dorion) set out to change this. Using the fundamentals of Crowdfunding, they matched it up with the principles of seed financing to develop a framework to allow entrepreneurs to raise up to $1M from their friends, family & community. They called it ‘Crowdfund Investing.’
To see if the idea had merit, they competed in the next Startup Weekend event to build a Crowdfund Investing platform so that Startup Weekend winners could crowdfund money right at the event and have working capital from Day One. Low and behold, they won.
Then the uphill battle in Washington, DC began. Since taking money from unaccredited (aka non-millionaire) investors over the Internet is illegal they had to convince the SEC to update the Security Laws to allow for this small window of seed financing. What they faced was a deeply entrenched and heavily funded bureaucracy that refused to change.
This didn’t stop them. They were called and testified in two House hearing, got President Obama to include their Crowdfund Investing framework in the American Jobs Act. Got the U.S. House of Representatives to vote 96% in favor of their legislation. (The President also endorsed this Republican-led bill in the House,). And now they have 2 bills before the Senate.
But the Lobbyists and Special Interests (mainly made up of the SEC, State Regulators and Broker/Dealers) are waging a full frontal assault to stop them. In an almost Stephen Colbert irony, the opponents are afraid if this tiny window of community-led financing is legalized it will question their entire relevancy. That’s correct. If the ability of State Regulators to oversee the crowd’s ability to make a decision of whether they think an idea is worthy of putting a few dollars behind it is taken away from them, then they are afraid that their role in policing the entire private markets is irrelevant.
Meanwhile back in reality, entrepreneurs, according to the SBA and Kauffman Foundation, created the bulk of the net new jobs over the past 30 years. Businesses create jobs. Jobs create spending. Spending gets us out of the recession. “However unless we can get capital flowing, we won’t be able to create jobs,” says Jason Best. “And if the traditional means of financing aren’t working, why not look to crowdfunding and let the community step in? It doesn’t do away with the regulators but provides an on-ramp to more sophisticated financing when the crowd finds and backs the winning ideas.”
For Sherwood, Jason & Zak they believe the will of the entrepreneur can win over the deep pockets and curried favors of the Special Interests and opposing lobbyists in Washington. And Senators are listening. In order to show them the impact that legalizing crowdfunding can have, the three entrepreneurs have launched LegalizeCrowdfunding.org to quantify how many entrepreneurs could benefit. How many jobs they can create in their first year and the economic impact this would have.
If you are a Startup Weekend participant or winner, sign up. Share your story. Collectively we can solve this problem and help foster entrepreneurship. But it won’t happen without your support!
More information about Sherwood Neiss, Jason Best and Zak Cassady-Dorion and their struggle to legalize crowdfunding can be found at www.startupexemption.com.