This Proposed Crowdfunding Exemption Could Be the Big Breakthrough for This Type of Seed Capital
President Obama is going to push for an SEC exemption which has the potential to unleash a tsunami wave of private seed and startup capital to small enterprises. The exemption will cover amounts in the $10K to one million dollar range. You can read more about this initiative at the White House Office of Science and Technology website.
As part of the President’s Startup America initiative, the Administration will work to unlock this capital through smart regulatory changes that are consistent with investor protection. This means reducing the disproportionately high costs that smaller companies face when going public, as well as raising the cap on “mini” public offerings (Regulation A) from $5 million to $50 million. It also means responsibly allowing startups to raise money through “crowdfunding” – gathering many small-dollar investments that add up to as much as $1 million. Right now, entrepreneurs like these bakers and these gadget-makers are already using crowdfunding platforms to raise hundreds of thousands of dollars in pure donations – imagine the possibilities if these small-dollar donors became investors with a stake in the venture.
U.S. Chief Technology Officer Aneesh Chopra and Office of Science and Technology Policy Deputy Director Tom Kalil explained that they advocate such an exemption. If the exemption is not possible, their second choice would be a more streamlined and less-expensive registration process for public securities offerings of $1 million or less, with individual investment capped at $10K. However, both men believe the SEC has the authority to make this regulatory change without any new legislation being required.
This is a long overdue opportunity to democratize finance again.