WI Lawmakers Embrace Crowdfunding; NJ May Be Next

A measure to amend the state securities laws in order to permit equity crowdfunding won approval in the Wisconsin Legislature following swift and unanimous passage in the Senate this week. The bill, called the Wisconsin Crowdfunding and Securities Exemptions (CASE) for Jobs Act, is aimed at providing better access to small business capital by connecting Wisconsin-based investors with startups through crowdfunding websites. Wisconsin now joins three other states, Georgia, Kansas and North Carolina, that have enacted similar securities exemptions. Lawmakers across several states, including in New Jersey, have cited frustrations regarding the delay in full implementation of the federal JOBS Act as a reason for creating the state-level exemptions.

Under The CASE for Jobs Act, a new category of certified investor is established to include individuals with an income of $100,000 or a joint income of $150,000 in each of the most recent two years. The original bill would have reduced the threshold for accredited investors in the state from $200,000 in annual income to $100,000. Instead, the amendment adopted by the legislature creates the new certified investor status, which also mandates an individual or joint net worth of at least $750,000. Further, the bill allows unaccredited investors to invest up to $5,000 per offering and requires investors to certify in writing or electronically their acknowledgment of investing in a high-risk, speculative business venture. The bill now heads to Gov. Scott Walker. Read the bill.

New Jersey soon may be the next state to consider such legislation. Sen. Joe Kyrillos (R-Monmouth) last month issued a press release announcing his intentions to introduce a bill allowing New Jersey entrepreneurs to seek up to $1 million in private investment in increments of up to $5,000 from unaccredited investors residing in the state. Earlier this year, SSTI reported on the three states that have enacted securities exemptions thus far (see the June 12, 2013 issue of the Digest).

The topic of crowdfunding has garnered a great deal of attention from the TBED community who want to know how the companies and clients they support can benefit. SSTI brought together a panel of experts during our annual conference in September to further explore strategies for creating regional networks to support startups that want to engage in investment crowdfunding. Tom Vass, president of The Private Capital Market Inc., talked about the importance of having skilled business professionals (e.g., accountants and securities lawyers) to help startups engaged in crowdfunding navigate the regulatory burdens of state and federal securities laws. Don Gooding, executive director of the Maine Center for Entrepreneurial Development, added that state economic development organizations, regional TBED groups and angel capital groups also play a vital role by providing education and other resources for both entrepreneurs and potential investors. Both speakers advised the audience to first develop a comprehensive crowdfunding strategy with the support services intact if they are to unlock the potential of crowdfunding as a viable source of startup capital.