FOR FRIDAY WEB: Let Maine Entrepreneurs Use the Crowd to Grow Their Businesses

Bangor Daily News (Bangor, ME), January 9, 2014 | Go to article overview

FOR FRIDAY WEB: Let Maine Entrepreneurs Use the Crowd to Grow Their Businesses


Crowdfunding has picked up momentum in recent years as a way to raise money for art projects, social causes and philanthropic ventures -- from microfinance in developing countries to class field trips.

For Maine business startups, it could soon be a viable means for raising serious capital to get a new venture off the ground.

Sure, crowdfunding for startups isn't new. But crowdfunding that allows funders to become investors with a stake in a business venture is less common, though it's catching on through a patchwork of new state laws and regulations under consideration by the federal Securities and Exchange Commission.

Maine this year could join the handful of states with equity crowdfunding laws on the books. The law under consideration in the Maine Legislature -- LD 1512, which had its public hearing Wednesday -- offers Maine entrepreneurs a more workable means for raising startup capital than federal rules proposed by the SEC in October.

We urge Maine lawmakers to pass the legislation that comes before them. In a state dominated by small businesses that often struggle to grow into engines of job creation, a crowdfunding tool that allows entrepreneurs to appeal to small-time investors for capital in exchange for equity offers those entrepreneurs an accessible avenue for growth.

The bill, sponsored by Senate President Justin Alfond, D- Portland, comes about two-and-a-half months after the SEC released 585 pages of proposed regulations for equity crowdfunding meant to carry out a provision of the 2012 Jumpstart Our Business Startups Act. Those regulations haven't yet taken effect, and the SEC hasn't indicated how it might change them in response to public comment or when the revised rules might take effect.

The proposed Maine law and the proposed SEC regulations would both allow entrepreneurs to raise a maximum of $1 million through crowdfunding, keeping the equity crowdfunding mechanism firmly in the camp of small businesses.

The Maine law would cap most individual investments at $2,000. The federal regulations would cap one person's investment at $2,000 or at 5 percent of the investor's annual income or net worth -- whichever is greater. …

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