Nationally regulated securities-based crowdfunding has yet to make it past the gatekeepers at the SEC but with the recently submitted Startup Act 3.0, the future is bright. The main goal of this bipartisan act is to ease up on visa restrictions for immigrant entrepreneurs. The act proposes the following: In order for a foreign businessperson to gain access to a US Visa, he or she must raise $100,000 in capital and hire at least two employees within the first year and at least five more in the following three years. While the Startup Act 3.0 proposal was recently submitted, it’s far from original legislation. The Startup Act 2.0, a precursor to the current act, was submitted with little fanfare and ultimately failed to pass last summer. So what improvements does the new act have and how can it change the game for immigrant entrepreneurs?
The only real improvement or change between acts 2.0 and 3.0 is the timing. Startup 2.0 was proposed during an election year, which made it extremely difficult to pass. Both parties were concentrating on how to win an election, and couldn’t come to an agreement on immigration reform, or job creation. However, this previous act did lead to a further understanding, and approval the JOBS Act. The JOBS act, which eases restrictions on securities, allows anybody to fund startup companies in exchange for ownership equity, or corporate debt. It was passed on April 5, 2012, and is currently awaiting regulation structuring from the SEC and FINRA.
Now that the JOBS act is in motion, the new Startup Act 3.0 will create a much needed reform in immigration laws regarding entrepreneurs, and STEM (Science, Technology, Engineering, and Mathematics) students. If the act passes, more than 75,000 visas will be awarded to foreign entrepreneurs who are on the cusp of creating job-generating businesses. In addition, 50,000 newly created visas will be awarded to foreign students who are pursuing advanced degrees (Masters, PhDs) in STEM categories. This will eventually lead to an increase in GDP, but more importantly, it will create thousands of new jobs. “Young companies have created almost all net new jobs in America – averaging about three million jobs each year” (Forbes, 2013). But even after Startup Act 3.0 passes, and the SEC completes all necessary regulation creation on the JOBS act, a major issue will still remain. How will those 75,000 foreign entrepreneurs raise $100,000 in capital?
The US is known for its generous open arms policy in terms of investing money in great ideas. Venture capital spending for 2012 surpassed the 26 billion dollar mark. Investments ranging from seed capital to series funding spanned across thousands of different startups. Yet, there were tons of companies left high and dry without any external investments. New companies are competing with 40,000 to 60,000 other firms for 1,000 to 1,400 seed financing deals. So the chances of getting funded by a conventional VC is at best 2%. How will foreign entrepreneurs, who have trouble building credit, and applying for bank loans, gain access to these limited funds? Well, it would be next to impossible for all 75,000 of these entrepreneurs to find the funding they desired using traditional methods, but there is a solution.
This is where SME Venture Crowdfunding comes to the rescue…
Even before all of the necessary legislation is in place, SME can work as a traditional broker/dealer for accredited investors. Certified investors can sign up on our platform and make funding transactions as they would at other more traditional platforms. SME has very transparent investing systems, which allow investors to not only make initial safe, sound decisions, but also track their investments’ financials, and thus their progress towards profitability, and returns. In order for companies to get funding from unaccredited investors today, they will have to use the state regulated Small Company Offerings Registration (SCOR). This standardized question and answer form allows new and emerging businesses to state the reasons for why they need funding. After registration, unaccredited investors can view the different reasons for funding and move forward from there.
Once the required legislation passes through all of the hurdles, the entrepreneurs, both immigrant and domestic, will have access to even more investors, and hopefully more funding opportunities than if they went with the more traditional “pitch to every VC” route. The SME platform will allow immigrant entrepreneurs to focus more on streamlining and improving their startups, and less on finding investors and funding.
By Vipin Shri,
SME Venture Crowdfunding, Marketing Consultant
The Wall Street Journal