EQUITY CROWD-FUNDING is here in Arizona!
Let the entrepreneurs and investors begin their dancing in the streets! Hurray!
For everybody else who's saying, "What-quity Fundwha??" here's
WHY IT IS COOL:
-- Old economy: Big companies got very rich investors to buy stocks and they all got richer together. A company needed to be big to sell stocks for many reasons, especially to pay lawyers to do it according to SEC rules.
-- New economy: Even very small businesses can go to crowd-funding websites and ask people to invest in them. (Ex: Kickstarter)
Before this bill, a business could only offer "gifts," not a share in the company. Ex: Give me $75 toward producing my movie, and I'll give you a hat and a free download of the movie when it's done.
After this bill is law, a business could sell shares in the company in exchange for that money from an investor. Ex: Buy a share in my company, "Movies by Micky" for $100. When the first Micky Movie makes a profit, so do you. .... hopefully enough to buy several hats and copies of the movie.
There are some limitations, thankfully. Limitations help to keep markets fair and open for newcomers and innovators. For example, a single investor cannot ...
... One investor cannot buy more than $10k of shares. (Unless you're an accredited investor in which case you have no limits.)
Sellers cannot accept more than $1 million if their books are not audited. If their books are audited they can accept up to $2.5 million.
Personally, I also enjoyed this video of the first committee hearing.
Important note: Many people spoke about how this change could help entrepreneurs and business owners with a start-up or to expand on a small scale.
In the House committee hearing, Rep. Debbie McCune-Davis was the ONLY one to speak up for consumers. In this case, consumers are the investors. She asked about what the law does to avoid fraud. She expressed concern for smart investors who do their homework, but still might be duped.
Contrast that to Rep. John Allen who expressed, "I have no sympathy for investors who don't do their due diligence."
That's the huge difference between Rep. Allen (Republican from Phoenix, LD15) and me. I DO have sympathy for investors who are hoodwinked, duped, or cheated. I think our laws should provide market places that are fair and balanced.
As written, this law is low on protections for consumers/investors. However, I applaud it as a good step. At the same time, I'll be noting the results. If you hear of any fraudulent activity and think, "That ought to be outlawed!" please let me know, and of course, notify the Arizona Corporation Commissioners, whose purview includes oversight of securities exchange and prohibition of fraud.
As Arizona legislators have done with many markets, this one is starting in the tradition of the Wild West. It is stream-lined, and low on regulations. I'm hopeful that its simplicity encourages great projects! I'm looking forward to hearing about great advances by small businesses in Arizona with this new avenue for capital!