Sunday, March 4, 2012

Crowdfunding for Fun and Profit

Amy Cortese started a small tidal wave with her book Locavesting. Subtitled, The Revolution in Local Investing and How to Profit from It, Cortese's book poses the question, why are we dumping our money into retirement accounts over which we have little or no control, and yet we cannot invest in the small businesses right in our own towns? These businesses cannot access the capital they need to survive. If people invested closer to home, the theory goes, they would have a stake in patronizing those businesses and keeping them alive.
Crowdfunding has been going on for some time. This method of raising capital relies on the generosity of others. For the most part, the money that people contribute toward a business idea on websites such as and leverage the reach of the worldwide web to help entrepreneurs raise the money they need to get their projects off the ground. But it's not enough, and it's important for small businesses to comply with SEC regulations when raising funds to avoid legal hassles that could destroy their businesses. The Senate is now considering legislation that would make it legal for small businesses to raise capital. House Bill 2930 blasted through the House with wide bipartisan support. Go figure. Democrats and Republicans both feel the bill benefits small business without any taxpayer burden. The Senate however, wants to analyze the legislation to make sure that people who are not savvy investors don't get taken for a ride by smooth-talking Joes with a slick business plan -- but no intention of ever doing anything beyond collecting the cash. I also fear that Wall Street is whispering in a few Senate ears to water down the bill that threatens to take investment dollars away from Wall Street and give them to Main Street. Surely there's enough to go around, isn't there?

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