A measure that will make it easier for regular people to invest in a start-up business passed the U.S. Senate today.
The so-called “crowd funding amendment“, authored by Democrat Sen. Michael Bennet, is expected to pass the House and be signed by the president.
The proposal expands access to capital for start-ups and small businesses by allowing investors — large and small — to put money forward via social media or the Internet.
Previously, regulations made it harder for any old person to invest in small up and coming companies like (the early days) of Facebook. Founders had to go to venture capital firms or “angel” investors who had to believe in the concept enough to invest big dollars.
But that pool of people was obviously limited. And the trouble with it, according to Nick Bhargava, is that those firms were on the hook for a lot and start ups had to leverage a lot more of the early business to be attractive.
“Now, literally hundreds of thousands of individuals can invest in a single company and it spreads the risk,” said Bhargava, co-founder of Motaavi, a company that will connect small investors with start-ups. “These people won’t ask you for your first born child and both your kidneys like an angel would.”
Bennet’s staffers said he moved the measure across the finish line Thursday by bringing a Republican and a Democrat together to agree on language after the House sent over a “crowdfunding” measure authored by House Majority Leader Eric Cantor. The amendment passed the Senate 64-35.
The newest version requires start-ups to disclose the health and viability of the idea to those in the “crowd” who may want to invest. A company can only raise $1 million every 12 months through crowd funding, but are able to raise money in other ways.
“It’s a piece of legislation that moves from a legacy economy to an innovation economy,” Bennet said. “I think it was a moment when the Senate worked the way the Senate is supposed to work.”
White House officials issued a statement Thursday saying they were pleased with the measure.
“The President is grateful that the Senate acted in a bipartisan way to … help our small businesses and startups access capital they need to grow and create jobs.”
Source: denverpost.com
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