Crowdfunding: A 2012 Event?

Both houses of Congress were busy last autumn crafting new legislation that, if reconciled and passed, will radically change the way entrepreneurs and early-stage companies raise capital. The legislation provides for what is commonly called "crowdfunding" and would provide an easier way for young companies to raise their initial capital.

In early November, the House of Representatives passed The Entrepreneur Access to Capital Act (H.R. 2930) by a notably large and bi-partisan majority of 407-17. H.R. 2930 would amend the Securities Act of 1933 by providing private companies and others raising capital in a "crowdfunded" financing with a new securities registration exemption. The bill would allow companies to raise up to $1 million within a 12-month period (or up to $2 million, if investors are presented with audited financials) without registering the securities offered in the financing(s) with the Securities and Exchange Commission (SEC). The exemption would only be