US passes CrowdFunding Act: What Now Canada?

Sigh. And I mean just that….sigh. What are we going to do now, Canuck startups?

The US Senate, as nicely as you please, just passed today, the new JoBS Act, and guess what startups -crowdfunding is now LEGAL in the US.

You heard me. It’ legal. Sure, there’s a few i’s to dot and a couple of t’s to cross…but in fact, if you have a startup and you want to be funded via a crowdfunding website – it’s legal.

Sigh. So let’s first look at the Crowdfund Act itself…well no, let’s not…but here’s the new law’s highlights….

• Allow entrepreneurs to raise up to $1 million per year through an SEC-registered crowdfunding portal.
• Free people to invest a percentage of their income.
• For investors with an income of less than $100,000, investments will be capped at the greater of $2,000 or 5% of income.
• For investors within an income of more than $100,000, investments will be capped at 10% up to $100,000.
• Require crowdfunding portals to provide investor protection, including investor education materials on the risks associated with small issuers and illiquidity.

And while the terms above may seem a bit restrictive, it’s pretty obvious that with the huge number of soon-to-be Crowdfunding sites that will rise to this new opportunity – that many of the terms listed will be totally unenforceable. Here’s another look at same…

Make less than $100k and want to invest more than the $2k limit? Ignore it and just check the box that says yup, you did make more than $100k last year. Easy-peasy. And I’m pretty sure, willl be absolutely ignored too.

Are there any items listed above in that short list that might be somewhat restrictive? Something, that I would have hoped that we Canucks would have included as the ‘bones’ of our own Crowdfunding Canuck statute?

Did you catch though that the “portals” that can provide Crowdfunding must be SEC-registered? Hmm…what’s that all about you might wonder. And while the passing of the JoBS Act is like only hours old and as yet the SEC has not yet published the final regulations, here’s a quick look at what they think they should be doing to protect the investors. Honest. That’s just what they’re thinking. Honest. So….yeah, it’ll take some work to get these ducks in a row. But in a row they will be, eh!

So….what does all this mean for Canada? How “adept” is our governing party at responding to this new marketplace for our own startups. Oh, what do I mean by that?

Think about it. Why would a Canadian based startup NOT simply contact a US based legal firm say in Seattle or Fargo or Duluth or Detroit or Buffalo or Burlington or anywhere that our borders are close; form a US based company, then apply for funding where a marketplace 10 times our own, will offer up funds. Again, easy-peasy. Sigh.

Ten times the size…and legally offer up funds for equity. Sounds like a real winner to me…

Hello, Ottawa….you folks listening? Hello? Hello?