A Sneaky Way to Deregulate

SLAPPING a catchy acronym like the JOBS Act on a piece of legislation makes it more difficult for politicians to oppose it — and indeed that’s what happened with the Jumpstart Our Business Startups Act. Unveiled a year ago by House Republican leaders, the proposal was rushed into law with large majorities just two months later; its provisions are gradually taking effect. Its enticing acronym notwithstanding, the JOBS Act has little to do with employment; it’s a hodgepodge of provisions that together constitute the greatest loosening of securities regulation in modern history. Most troublesome is the legalization of “crowd funding,” the ability of start-up companies to…

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Health Research Benefits from Crowdfunding

indiegogo

Ever the innovator, UCSF is using a new fundraising method to advance health sciences research. Crowdfunding, which aims to raise small amounts of money from many individuals online, has exploded in recent years, fueled by an exceedingly online society. Tuhin Sinha, associate director of strategic development in UCSF’s Office of Innovation, Technology and Alliances (OITA), took notice of the growing crowdfunding trend a few years ago and helped form a partnership with Indiegogo, a leading crowdfunding platform. “There are many projects that aren’t necessarily appropriate for a big NIH grant or anything that requires a lengthy application process,” said Sinha. “This gives our faculty more control…

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Regulators, consumer groups worried about equity crowdfunding

Crowdfunding has come to the rescue for hundreds of thousands of startups looking for capital in a tight credit market. Soon, a new dimension to online fundraising, known as equity crowdfunding, will be available to investors, and that has regulators and consumer advocates on edge. Regulations to be released by the Securities and Exchange Commission (SEC) sometime this year could open the door to swindlers and expose naive investors to the complicated world of securities, said Keith Woodwell, Utah Division of Securities director. “We’re worried about fraud,” Woodwell said. “Investing in startups is the most risky type of investment there is. The problem we fear is…

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The Disruptive Power of Equity Crowdfunding

Online marketplaces have already eliminated so much inefficiency in our world. Dating (OK Cupid, Match.com), restaurant reservations (OpenTable), buying most physical goods (eBay) and countless other marketplaces serve both sides of the marketplaces (i.e. buyers and sellers) and provide value- typically making it more efficient to transact (or date!). Other marketplaces are eliminating inefficiency we didn’t even know existed. Uber and other taxi utilization apps are bringing efficiency to the $10 billion taxi market. That market is dwarfed by the size of the market for individual equity investments in private companies, which is $50 billion per year. The market for individual equity investments into private companies,…

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What Entrepreneurs Need To Know About Equity Crowdfunding

Private Equity

The truth is crowdfunding for equity won’t be around till 2014. Accredited investors are the only game in town for security transactions. We are now getting our hunting gear ready. The more public message is that this is a more crowd funding like environment prior to ruling on the SEC rules where we circulate offerings to accredited investors. Accredited investors are the best “trial group” to solicit as FINRA and SEC would agree.

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Crowdfunding concerts: How fans can get their heroes to play in their hometowns

Crowdfunding Concert

At the climax of the film Wayne’s World 2, Wayne and Garth manage to book their dream roster of bands and bring them to their home town – Aurora, Illinois. It sounded like a far-fetched fantasy at the time. But 20 years later, this kind of dream could soon become reality for superfans. New online methods of crowdfunding concerts are allowing fans to club together, buy tickets, and get the acts of their dreams to come and play in their own hometowns – whether it’s in Illinois, Ipanema or Ipswich. Crowdfunding has revolutionised recorded music, with Amanda Palmer raising a staggering £750,000 last year through Kickstarter.…

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How Crowdsourcing Could Save the Department of Energy

Open Innovation

In the fall of 2011, the Department of Energy’s Inspector General issued a sobering report calling for a major restructuring of operations. In a stunning revelation, the report showed that 35 percent of the $10.4 billion needed to run DOE’s sixteen national laboratories each year was spent on overhead costs, not research. Recommending a consolidation of lab operations, Inspector General Gregory Friedman called the current situation “unsustainable in the current budget environment.” The report couldn’t have come at a worse time for the DOE. One month earlier, Solyndra had gone bankrupt and the Department was frantically trying to defend itself against allegations of corruption. After a…

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While waiting for SEC regulations, crowdfunding leaders focus on investor education

Some crowdfunding industry leaders are using the lull before the fundraising practice is publicly viable to develop educational material for people who may soon be making their first investments. The Securities and Exchange Commission is currently drafting rules to allow start-ups to sell stakes in their companies to the general public, potentially raising large sums from crowds of small investors. Until now, selling equity stakes has been limited to so-called accredited investors, people who presumably have the wherewithal and sophistication to know what they are getting into. Crowdfunding opens the field to the general public, and critics worry the newcomers may not adequately understand the risks…

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First crowdfunding conference to promote new financing models

UK Crowdfunding Deep Impact

The UK’s first National Crowdfunding Conference will feature MPs, entrepreneurs and finance industry speakers. ‘Crowd Funding Deep Impact’ will take place on Tuesday February 26th in Hertfordshire, and will hear from the likes of Ariadne Capital CEO, Julie Meyer; CBI director, Matthew Fell; and Barry Sheerman MP. Crowdfunding experts from Crowdcube, Bloom VC, and BankToTheFuture will also share their experiences and thoughts on the future of crowdfunding in the UK. The event is the result of a partnership between the University of Hertfordshire and Barry James’ Social Foundation. Julie Newlan, pro vice-chancellor of enterprise at the University, said: “Crowdfunding has huge potential to help transform the…

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Sec Chair Says Crowdfunding Coming “Soon”, But When Is That?

American Jobs Act

In a recent speech at the annual “SEC speaks” event, current Securities and Exchange Commission chair Elisse Walter placed the word “crowdfunding” immediately after the word “soon.” Well, that seems like progress. Of course, I could just be engaging in the time-honored tradition of over-parsing every word uttered by a beltway insider in search of clues about what’s going on inside the government. Here’s the complete sentence: “Soon, crowdfunding will bring the potential for a broader range of investors to provide private capital, although their investments will be and should be limited.” As most people that have ever visited this site — or listened to our…

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Crowdsourcing: A burgeoning jobs market for the jobless recovery

As the improvement in the nation’s economic outlook—coined the “jobless recovery” by the New York Times in 2010—has been slow-going in some markets, the number of unemployed and underemployed remains high. So the question is, where will the high-paying opportunities of the future come from? Are we destined for a world where these positions are merely sourced offshore to places with a lower cost of living? Part of the answer lies in an idea whose roots hearken back to the dawn of the “New Economy.” Fifteen years ago, Fast Company touted the benefits of “Free Agent Nation” – the millions who were, by choice, maintaining their…

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Five Reasons Why Equity-Based Crowdfunding Under the JOBS Act Won’t Work

There’s so much hype surrounding crowdfunding and for good reason. Stories like the one of Ouya, a game console developer that raised $950,000 in just 8 hours on Kickstarter capture our imaginations. In 2012 alone, over 2 million people pledged approximately $319 million on Kickstarter while global crowdfunding is predicted to grow to $6 billion in 2013. So far so good. But existing crowdfunding models are based on donation and reward based models where backers donate money to projects with no prospect of enjoying the upside of a successfully funded crowdfunding project. That’s where equity-based crowdfunding comes in. Rather than donate money in a crowdfunded business,…

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Crowdfunding Animal Rescue Projects

crowdfund pet

Conzortia Business Funding, Inc. has launched the world’s first crowdfunding website dedicated to helping to provide funding for animal rescue efforts. “Actually, a friend of ours inspired me to launch Crowdfund Critters”, Robert Dobyns, CEO of Conzortia stated. “She runs an equine rescue and her feed bills are enormous. She related what a struggle it is to provide quality care for the abused and neglected horses that she takes in and then it hit me – Conzortia can help rescuers like Lisa, all across the country, by launching this crowdfunding platform specifically for animal rescue. It’s our way of giving back.” Tens of thousands of animals…

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