TriplePundit has been following the work of Cutting Edge Capital for some time now. The group consists of, among others, Michael Shuman (author of the Small-Mart Revolution), John Katovich, JD (Professor at the Presidio Graduate School), and CEO Jennie Kassen from Cutting Edge Capital. The aim is to help small businesses gain access to capital through crowdfunding. The potential to jumpstart our economy is obvious through this process if one considers the monumental effect that small amounts of capital invested by interested investors have had through organizations like Kiva or the way the Obama Administration changed the game in campaign finance in 2008 by raising large numbers of small contributions rather than becoming beholden to smaller numbers of wealthy investors.
According to CEC,
In most cases, your investors will be your customers, community, colleagues, and friends. There may also be affinity groups for your product or service that would be interested in investing in your business.
It sounds terrific–you can raise capital for your small business from groups of people that already like your product, become more invested in the success of your business, and help you to push forth with your sustainability mission. However, it’s complicated–laws designed to protect investors make that challenging to some degree. The two main issues, according to Sherwood Neiss, are fraud and investor protection. Neiss is heading up a campaign for an SEC regulatory exemption covering public securities offerings with individual investment capped at $100.
A couple of things to consider:
- Wall Street banks, venture capital and private equity fund only 2.7% of all entrepreneurs in the U.S.
- Laws set up for regulating investment were set up in the 1930s, defining what “friends and family” meant (and allowing certain exemptions for investment).
- Technology and social media have completely changed the landscape of transparency for businesses.
- The financial spigot has effectively been cut off, with predictable results for the U.S. and global economy.
- Companies nowadays are increasingly including social responsibility and Triple Bottom Line principles into their strategy.
Neiss has set off to change crowdfunding laws to represent modern realities. Check out CrowdFundingLaw for more information and to be added to their list for their upcoming conference on crowdfunding. In addition, the group recently gave testimony before Congress, and has a proposal to the Securities and Exchange Commission in the works. If you want to participate in the process, you can submit your comments to their proposed framework as well.
Scott Cooney is the author of Build a Green Small Business (McGraw-Hill), and covers green business strategy on GreenBusinessOwner.com.
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