The U.S. Senate today passed the JOBS Act, whose acronym stands for Jumpstart Our Business Startups, which includes a crowd funding provision to allow entrepreneurs to raise money directly from small investors through crowd funding sites.
The Senate passed the bill 73-26.
Now the legislation goes back to the House, which must vote on the amended version. The house passed the bill earlier this month in its previous form.
“Crowdfunding will allow small businesses to bypass Wall Street and go straight to Main Street for financing, freeing every American to invest in a local business or the next great idea,” U.S. Senator Scott Brown, (R-MA) who sponsored the Crowdfund Act provision, said in a news statement. Colorado Senator Michael Bennet (D) and Senator Jeff Merkley (D-OR) also sponsored the bill.
“Crowdfunding is an important way to harness potential investments in small businesses and start-ups in Colorado and across the country,” Bennet said in news statement. “This amendment will help bring our securities regulations into the 21st century while driving innovation, promoting job growth and supporting small businesses in a way we have not seen before.”
The bill allows entrepreneurs to raise up to $1 million per year through a Securities and Exchange Commission crowd funding portal. The amended Senate bill requires more disclosures from companies seeking to raise crowd source funds, including financial statements.
“The House bill would allow individual investors to invest up to $10,000, or 10 percent of their annual income a year, whichever is less. The Senate bill would limit those investments to the greater of $2,000, or 5 percent of either annual income or net worth, if either figure is less than $100,000,” according to the New York Times. “Investors with annual income or net worth of more than $100,000 could invest up to $100,000 or 10 percent of annual income, the Senate amendment states.”
The legislation is already spawning new startups focused on crowd funding.
On Wednesday, CrowdFund Securities, based in Dallas, launched. It’s accepting applications from entrepreneurs and investors and plans to offer crowd funding services as soon as its legal.
“We are excited about this explosive market and the promise it holds for needed capital for hundreds of thousands of start-ups, film producers and small companies nationwide,” David Marlett, an attorney, CPA and the site’s founder, said in a news release.
Arts-focused Kickstarter, which has raised more than $200 million for all kinds of projects in the past two years, is one of the most well known crowd funding sites in the United States. It does not allow companies to seek investors on its site. But several businesses have raised funds by pre-selling products under development on the site.
IndieGoGo and RocketHub also allow people to raise from funds online.