"Crowd funding rules hold promise, raise questions"
The community-backed solar energy projects that have become popular in Portland, now reliant on tax investors, could become truly community owned under crowd funding.
By Erik Siemers, Business Journal staff writer
New rules making it easier to use the Internet to attract equity investors could provide a new pathway to capital for the world of sustainable business.
But questions over when and how the “crowd funding” structure may be applied still hold equal weight to the excitement over its potential.
The JOBS Act — an acronym for Jumpstart Our Business Startups — signed into law last month by President Barack Obama will enable small businesses to use the Internet to raise up to $1 million in small investments from lots of people.
The funding mechanism has generated excitement in the world of sustainable business, where goals are often driven by a mission rather than profits, making it difficult to attract angel investors or venture capital.
“I think everyone can really benefit from this,” said Jenny Kassan, CEO of Oakland, Calif.-based Cutting Edge Capital, one of the earliest advocates of crowd funding who stood alongside Obama at the White House Rose Garden bill signing ceremony.
Before the JOBS Act, soliciting equity capital online was forbidden under U.S. Securities & Exchange Commission rules. Companies were limited mostly to seeking out “accredited investors” — individuals with a net worth of at least $1 million — giving them just a tiny fraction of the population from which to solicit equity capital.
The JOBS Act, though, opens the field to an endless array of equity investors and could allow sustainably focused enterprises the ability to link-up with investors that believe in their mission.
“There are all kinds of people out there with all kinds of different motivations for investing,” said Kassan. “Some might be looking for the next Google. Some might be looking for a business in their community. Some might be looking for businesses that promote women’s equality. It opens up a huge new potential group of investors.”
Though the bill was signed into law, Kassan warns that it could take at least two years before it can really be applied.
The law requires companies to use an SEC-approved intermediary service to solicit investors online, and it could be a while before the SEC completes the rule-making process.
That isn’t stopping advocates from thinking about the possibilities.
“We have a lot of entrepreneurial activity looking at things like energy, water, shelter, food that’s really improving the quality of life for our community,” said Tom Osdoba, the former director of the Center for Sustainable Business Practices at the University of Oregon’s Lundquist College of Business. “We now have the opportunity to let people in our own community have access to these investment opportunities they didn’t have before.”
The community-backed solar energy projects that have become popular in Portland, now reliant on tax investors, could become truly community owned under crowd funding, said Osdoba, who now runs the sustainability consulting firm TAO Strategies.
Developers of environmentally friendly real estate projects that struggle to attract bank loans could take their pitch directly to the community in which they want to build.
“All of a sudden people can put $20,000 and $50,000 into those kinds of investment projects they weren’t able to do before,” Osdoba said.