States Pave Way to Equity Crowdfunding as the SEC Stalls

This post is written by Anna Duning at Engine, a public policy organization supporting tech entrepreneurship. Original post appeared on their blog.

As the Securities and Exchange Commission continues to stall in finalizing the long-anticipated crowdfunding and investment rules for startups and entrepreneurs, states have steadily been enacting their own laws to spur intrastate economic activity and open new avenues to capital. Maine is the latest state to pass a new crowdfunding law, which went into effect January 1, joining 13 other states that have passed crowdfunding legislation since 2012. These laws enable entrepreneurs building businesses in their state to raise capital in the form of equity or debt in a company, giving investors ownership in the businesses they choose to support.

Jess Knox, president of Olympico Strategies, a startup consulting group in Maine, believes laws like this one support the growth of the state’s budding innovation ecosystem. The new crowdfunding legislation complements Maine’s Seed Capital Tax Credit, a program designed to encourage private equity investments in eligible Maine businesses. Crowdfunding now opens investment opportunities for all of Maine’s 1.3 million citizens. “There are people who invest in their community in a variety of ways,” said Jess, and equity crowdfunding, “reduces barriers to people to become investors in their community and their state.”

Meanwhile, entrepreneurs and small business advocates in Minnesota are working with state officials to pass equity crowdfunding legislation there as well. The grassroots movement has named the legislative proposal, MNvest, which was recently introduced in the Minnesota state legislature. The group of business and community leaders behind MNvest believes their new law will  “allow ordinary Minnesotans to own a stake in emerging Minnesota businesses.” And from our travels to Minneapolis this fall, we saw for ourselves the thriving community of young technology companies there.

Plenty more states are joining the trend too: Virginia’s House of Delegates passed a bill last week, sending the proposed crowdfunding legislation to the state’s senate. Arizona and Colorado lawmakers recently proposed similar bills and Washington D.C. just authorized its first equity crowdfunding offering after finalizing rules in November.

Ultimately, however, many of these new financial tools are limited in their scope, because most state crowdfunding regulations restrict companies and their investors to the states in which they live and do business. Further, as one corporate lawyer and startup adviser explains, utilizing these intrastate funding tools may preclude businesses from pursuing some of the new funding opportunities provided by the JOBS Act such as general solicitation and a new SEC exemption for raising funds, Regulation A+. While Maine’s new law does allow entrepreneurs to raise money from investors outside the state, the SEC exemption the statute relies on can require issuers to provide the state with lengthy disclosure documents. Thus, while companies may be afforded broader reach, that could come with much higher costs.

Despite the inherent limitations of intrastate funding, these laws demonstrate the appetite for expanding capital opportunities for emerging businesses across the nation. Traditional sources of capital investment are often out of reach for burgeoning entrepreneurs outside the coasts or established tech hubs like Austin. While venture capital soared in 2014, the highest amounts of investment are nonetheless concentrated in these areas. These laws also indicate a willingness to allow middle-income Americans to take part in the growth of our startup economy. Without final rules on the JOBS Act from the SEC, startup investing nationwide remains limited to accredited investors, individuals with a networth of at least $200,000.

We hope officials in Washington are paying attention to the flurry of state-level activity and take the hint. Capital access is critical to sustaining the startup economy. Their lack of action leaves much-needed sources of capital untapped.

Arne Duncan Guest Moderates Edtechchat on Monday, October 28

We are excited that on Monday Oct 28, from 8-9 pm EST, the US Secretary of Education Arne Duncan (@arneduncan) will be guest moderating #edtechchat as part of Connected Educator month.

We are excited and honored to have him join us and are looking forward to what will certainly be a stimulating and fast-paced chat!   Secretary Duncan wants to engage more directly with educators and to support educators becoming more connected. This is the first time a Secretary of Education has moderated a twitter chat, so we’re making history!

However, we are aware that, given Secretary Duncan’s role, some educators may wish to use this week’s chat as a forum to vent some of their frustrations about being an educator and any shortcomings they see with our educational system. Therefore, in the spirit of encouraging good digital citizenship, we’d like to outline some guidelines for next Monday’s #edtechchat.

  1. Before participating in Monday night’s #edtechchat, please read Tom Whitby’s post, Duncan’s DilemmaPay special attention to the points that Tom raises in the final paragraph. Don’t slam the door on the possibility of ongoing dialogue with Secretary Duncan before it has even begun.
  2. #Edtechchat discussions are constructive spaces where we share ideas, best practices, and experiences, and this week is no different. The #Edtechchat team (which consists of Susan BeardenTom MurraySharon PlanteAlex Podchaski, and me) is always grateful to the guest moderators who take time out of their busy schedules to join us. We expect participants to treat them with respect and this includes this week’s guest, Arne Duncan.
  3. #Edtechchat is a fast moving, high volume chat even on a “slow” night, and we expect Monday’s chat to exceed our previous participation records. As a chat co-moderator, I speak from experience when I say that it is impossible for anyone to read every tweet and keep up with the conversation without reviewing the chat archives (posted weekly at This includes Secretary Duncan. Please don’t expect him to respond to your tweets or be offended if he doesn’t. I expect that he will be as overwhelmed by the pace of the conversation as the moderation team is each week! As moderators, we will be retweeting the questions as well as tweets/resources that we find particularly meaningful or helpful.
  4. Keep your expectations realistic! It is a huge step for Secretary Duncan to engage directly with educators in this forum and, as Tom Whitby pointed out in the post referenced above, not without risk for him and his team. My hope for this chat is that perhaps, if Secretary Duncan has a positive experience interacting with rational, articulate and professional educators, he might be interested in continuing to dialogue with the Connected Educator community. That’s all. I don’t expect it will lead to a sea change in US education policy, and neither should you.
  5. No matter what your position on Secretary Duncan’s policies, model the principles of good digital citizenship during the chat. Take the high road. Be respectful of others, even if you disagree.  Let’s show Secretary Duncan that the Connected Educator community is a class act, a community of intelligent, thoughtful professionals who work together to improve education for all kids. Civility and respectful dialogue is a rare commodity in Washington these days. Let’s prove to him, by how we handle the discussion on Monday night, why we deserve a seat at the table when it comes to educational policy discussions.