Crowdfunding Bill Moving Swiftly Through Arizona Legislature

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When people hear the word “crowdfunding,” websites such as Kickstarter or IndieGoGo usually come to mind.

Those sites provide a platform for people to donate money to charitable events, help a music band launch a new album and help local businesses get off the ground.

But if a private company wants to raise money through shareholders, similar to selling shares a public stock exchange, the general public can’t participate by federal and state law. That’s reserved for only “accredited investors,” or wealthy, financially savvy individuals.

But that could soon change in Arizona.

House Bill 2591 would allow “equity crowdfunding,” meaning any Arizona resident with any income could buy stock in a locally based private company.

The idea behind equity crowdfunding is to create a new avenue for small businesses and start-ups to gain access to capital they otherwise couldn’t obtain through traditional routes, such as a bank, angel investor or venture capitalist.

“They’re struggling to find those earlier and smaller amounts of funding,” said Sidnee Peck, director of the Center for Entrepreneurship at Arizona State University’s W.P. Carey School of Business. “So they’re not quite ready for an angel group, they’re definitely not ready for venture capital and they don’t have what a bank typically requires in order to get a loan. So they might be stuck needing $10,000, $20,000, $50,000 and they just can’t obtain it.”

During a Senate Financial Institutions Committee hearing last week, Senator David Farnsworth said he thinks it’s one of the most important bills this session.

 “I have yet to find someone who is not in favor of this most important piece of legislation,” Farnsworth said.

The basis for the bill stems from the Jumpstart Our Business Start-Ups Act, also known as the JOBS Act, signed by President Barack Obama in 2012. A portion of the JOBS Act required the Securities and Exchange Commission, which regulates the nation’s securities industry, to create new rules to allow equity crowdfunding nationwide.

Those rules were supposed to be in place by December 2012, but the SEC still hasn’t acted.

Thus, some states began taking matters into their own hands.

About 15 states have passed their own equity crowdfunding laws so far and Arizona is among several currently considering doing the same.

These state laws allow crowdfunding only if the business and investors are located within that state. Crowdfunding can’t happen across state lines until the new SEC rules are in place.

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Yesterday’s Crowdfunding Seminar By CJ Cornell of Propel Arizona at SMAZ6

At yesterday’s Social Media Arizona #smaz there were many speakers covering different social media related topics and the one that interested me the most was the Crowdfunding seminar presented by CJ Cornell of Propel Arizona

CJ Cornell is an ASU Professor and the founder of Propel Arizona.

In a nutshell, Propel Arizona is a Crowdfunding platform for Arizona Entrepreneurs.

But it’s much more than funding, Propel Arizona is a way to get all of Arizona involved with innovation, and helping to build the next Google, Apple or Facebook.

Propel Arizona is a broad initiative designed to help drive economic growth in the state of Arizona by providing an environment where people can support and help the entrepreneurial ventures, innovative ideas, projects and the entrepreneurs that build them.

Online, Propel Arizona allows entrepreneurs with projects or ideas that one day may be wildly successful, to engage with the community and enlist their support – financial support and other kinds of important support.

Specifically, Propel Arizona is about “Crowdfunding” entrepreneurs and innovative projects that have the potential to become wildly successful – perhaps in the Facebook-Google-Amazon kind of way that generates jobs, wealth and inspires even more entrepreneurs and new ventures.

Members of the Arizona community can get involved with the excitment of the entrepreneurial startup – from concept to product to market – and become early funders of promising projects.  In the end, helping these potentially high-growth entrepreneurial projects become successful, will help contribute to the overall economic growth and prosperity of all Arizona.  Every Propel Arizona member gets to fill out their own profile page (1), can add projects needing funding and post a blog post promoting their projects.

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