What The Senate?s Crowdfund Act Means For The Tech Industry Right Now [TCTV]
The Crowdfund Act, a bill to reduce restrictions on regular people investing in privately held companies, passed through the United States Senate today with flying colors in a 73-26 vote, having passed through the House of Representatives this past fall. But legislative matters are by definition quite complex (which is, of course, ostensibly why we elect people to deal with them on a full-time basis.) So we talked to Chance Barnett, the founder and CEO of Crowdfunder.com, to get an idea of what this really means for startups, potential investors, and the technology community at large.
You should certainly watch his full interview above, since he has personally be involved in the effort to make crowdfunding a reality for years ? he is very knowledgeable about both the legislative and business sides of this issue. But here are some of his key points:
Crowdfunding is not Kickstarter
Many people may think that we already have crowdfunding, through sites such as Kickstarter and IndieGoGo. That?s not the case. Today, most regular people are prohibited from investing in private companies companies unless they become an accredited investor. In order to become an accredited investor, a person has to prove that he or she has a net worth in excess of $1 million, among other requirements.
Kickstarter and the like are actually based on a donation model, Barnett explained: People who give money to projects and companies on those sites are ?donors?, not investors. They may get a gift such as a t-shirt or free products in exchange for their donation, but they do not actually get a stake in the company in return for their money. The Crowdfund Act would allow any individual to give money to a company and become a full-on investor ? someone who stands to benefit financially if the company is successful (and lose their money if the company tanks.)
Angel and VC funding doesn?t have to die
The advent of crowdfunding does not have to mean that the existing models of funding tech companies will go away. According to Barnett