Scott Brown: Democratize Capital Investment for the 99%

For all the talk about the so-called 99% vs 1%, one of the largest reasons the disparities exist is due to government regulation of private capital markets.  Currently only persons with less than $1,000,000 in liquid assets or have made $200,000 a year in the last two years if single, or $300,000 if married, may invest in startups.  This person is called an accredited investor.

Non accredited investors are unable to invest in start-up stage companies, as the government is “protecting them” from doing so.  So if you knew Mark Zuckerberg was looking for money in the 2000’s and you wanted to give him some, unless you were already part of the 1%, you would not have been able to.  Given the news stories that the guy who painted Facebook’s offices and took stock then valued at about $3,000 in lieu of payment is now worth $200M, the fact the 99% can’t make those investments is an unbearable government regulation.  

Enter Scott Brown.  Brown has been championing his bill S 1791, the Democratizating Access to Capital Act.  An act championed by many in the Boston Innovation economy.  The act will do two things, first allow the 99% to invest in startup companies, and second allow startup companies another method by which to raise capital.  This will jump-start our economy. This tactic is called “crowdfunding”.

Today Brown took the floor of the Senate to thank Harry Reid for scheduling a hearing on this important bill.  Below is a clip of his speech.

This is an important bill, which will immediately jump-start capital formation in the United States. Scott Brown has been hyper-focused on job-creating legislation over the past few months, and has been instrumental in getting it passed.  Just ask President Barack Obama.

Full Text of the Speech is Below

I want to thank Majority Leader Reid for highlighting next week’s Banking Committee hearing on small business growth. One of the issues that will be discussed is crowdfunding.

Mr. President, have you ever wished you had had the opportunity to invest in Facebook or Google before they hit it big? My Democratizing Access to Capital bill (S. 1791) would expand entrepreneurs’ access to capital by democratizing access to startup investing so that they have the funds to grow and create jobs.

The House passed a crowdfunding bill 407-17; the President supports crowdfunding, and public support for crowdfunding is exploding. Just this week, on Monday, I hosted a roundtable on small business access to capital in Boston. I listened to small business owners, entrepreneurs, and high-tech investors.

They all had one thing to say: if we can’t get behind the bipartisan, commonsense idea of crowdfunding, what can we agree on?  And how can we expect small businesses to grow?  With such strong support, I believe that we should put partisan politics aside and focus on what we can do to help small businesses.

Next Monday, I am hosting a roundtable with Wefunder, a group of innovators who started a petition for my bill, to discuss crowdfunding. Their petition currently has 2500 supporters who would invest over $6 million in small businesses if crowdfunding was legal.

My bill is a common sense bill. I want to note that Senator Merkley has also introduced a different crowdfunding bill, and I’ve asked my staff to reach out to Senator Merkley’s staff because I really believe that we can work together to resolve these differences and legalize crowdfunding. Today I’m going to talk about some important principles that I believe are critical for making crowdfunding legislation a success.

For crowdfunding to work, we need a national framework, which my bill creates. If we require entrepreneurs to comply with every separate state securities law mandate, filing the appropriate paperwork would cost $15,000. I also believe we should not burden small startup business with costly quarterly reporting requirements until they are fully off the ground. The point of crowdfunding is to allow entrepreneurs to flourish, not bog them down in an avalanche of paperwork.

In addition, I believe that our existing fraud laws are solid. We just need to enforce them. Exposing startup founders to new personal liability from thousands of investors who are investing only a max of $500 or $1000 is not wise. This will cause entrepreneurs to use crowdfunding only when no other option is available and will lead entrepreneurs to switch out crowdfunding investors for venture capital firms at the first available opportunity.

Recognizing that investors need protection, my bill requires entrepreneurs to offer their securities through regulated crowdfunding intermediaries.  In addition, my bill requires intermediaries to facilitate communication between investors and offerors. I believe that Senator Merkley and I have the same concerns, which I believe can be addressed without creating a private right of action.

Crowdfunding depends on small investments by many, which is why we must exempt crowdfunding securities from the 500 shareholder cap so we don’t create additional red tape for startups.  Everyone talks about the overregulation of small business and how that is hurting their growth.  In legalizing crowdfunding, I believe we can still provide for the appropriate level of regulation, but also give small businesses the access to capital they so desperately need.

I am pleased the Majority Leader has taken this additional step to call for a Senate hearing on crowdfunding.  I look forward to continuing to work with my colleagues to highlight the importance of passing this legislation and providing yet another mechanism to help get our economy back on track and grow small businesses.-As prepared for Delivery by Senator Scott P. Brown (R-MA) on 2/29/2012

About Rob "EaBo Clipper" Eno

  • ‘(B) individual investments in the securities are limited to an aggregate annual amount of not more than $1,000.

    Why is there a limit?  Scott wrote this in November:

    http://www.wired.com/epicenter

    Despite these protections, some have voiced concerns that crowdfunding is an avenue for fraud and abuse. But, consider this: Americans are allowed to gamble unlimited amounts at casinos, and can send donations to charities halfway around the world with one tap of a trackpad. Yet, we are legally prevented from making even modest investments in job-creating small businesses.

    Instead of blowing unlimited amount at the casino why shouldn’t I similarly be allowed to invest an unlimited amount in a startup?  Scott apparently wants to “protect me” from investing too heavily in the next Facebook.