New bill to allow $1m crowdfunding rounds
merkley.senate.gov
merkley.senate.gov
- Minimally regulated so that it is easy to get money, but then full of scams.
- Heavily regulated so that it is hard to get money, which makes it not much better than the current system.
I'd love to see smaller investors able to invest in startups, but it just seems like a bad idea to let any old person invest.
Can someone convince me I'm wrong?
The accredited investor rules have been around long before the internet and all of the tools we can now use to follow up on start up companies and the people behind them.
I am certain that if this bill passes, there will be plenty of services offered to dig up this kind of information and make this kind of due diligence easier and more complete.
Sure, grandma and grandpa might be targeted by scammers (not that there is any shortage of Utah based pyramid schemes and other n'er do wells out there doing just that) but there should be /severe/ penalties attached to discourage bad actors.
I don't think we should be protecting people from themselves as much as we do as a society, and I really think this is going to be a net positive when all of the wrinkles are ironed out.
That much I do agree with you. This is definitely a case of the government protecting people from themselves. Just the same, I'm still not sure it's a good idea because it will give entrepreneurs a bad name, so in a sense, it is protecting that reputation too.
This is basically what happened during the mortgage bubble -- the banks lowered their standards because they knew the government would back up the loans.
Doesn't regulation of a 'crowdsourced' anything, kind of defeat the purpose? The entire idea is that many small failures lead too faster successful iterations.
That's not actually true (otherwise you couldn't do a friends and family round).
The reason a startup generally wants qualified investors is because the non-qualified ones can sue you if you they lose money, so it is in your best interest not to take their money.
I didn't see it in TFA, and googling "CROWDFUND ACT" didn't bring me the text of the bill.
Ostensibly the line must be drawn somewhere.
Is this only for "tech" companies? How is that defined?
Is there a particular company structure that is dictated? Delaware S-Corp, or any state Corp/LLC?
The last part of the bubble in late 20's was characterized with the lower middle class, which previously didn't have much investments, getting involved with the stock market. A lot of companies of all sizes advertised their stocks and "expected returns" in everything from radio to milk labels. Too many people bought into it at the worst possible time, on the top of the bubble.
I also wonder how this would impact wider disclosure requirements. From what I've read, you can only have so many private investors (500?) before you are required to provide enlarged financial statements. Apparently it's one of the reasons Facebook needs to IPO--too many stockholders. If this law isn't modified in this bill--you'd have small companies who had to spend tons of resources to comply at a very young age.
One of them passed the House recently: http://www.govtrack.us/congress/bill.xpd?bill=h112-2930
I thought the way VCs worked is that most of their investments go bust, while a few percent do absurdly well. How do you "minimize the risk of ... loss" for people who supposedly can't afford it, by giving them access to something even professionals usually lose money on?
This is an alternative to the "detailed disclosures" the SEC requires now, the way that's presented makes it sound like this requires less detail.
Is this because more people want to directly invest in startups, or because startups have a hard time getting funding the way things are now? Either way it sounds a bit bubbly...