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Economic Development is . . . (increasing the flow) of capital through the community and reducing its leakage.

The Skinny

The phrase, “Get the Skinny,” is said to have originated in the armed forces in the 1940s as “getting down to the skin” of a story, the naked truth. Also it’s been noted that military orders in the Marine Corps were copied on paper that resembled the skin of an onion. It was extremely thin and fragile, and translucent in appearance.  Orders written on thin pieces of paper were referred to as “the skinny.”

Now that you know where the term came from I am going to give you “The Skinny” on Equity-Based Crowdfunding Opportunities.

The Jumpstart Our Business Startups Act (called the JOBS Act) was passed with support from Republicans and Democrats alike and signed by President Obama in April 2012. It is designed to make equity-based crowdfunding much easier. It means you won’t have to seek out accredited investors specifically (people with incomes of $200,000 or more, or a net worth of $1,000,000 or more-not including their residence). You can receive funds from people of all income ranges, which makes the pool of potential investors MUCH bigger.

What’s happened since April; the SEC (Securities & Exchange Commission) was given until January 1, 2013 to propose the specific terms by which equity-based crowdfunding would operate.

For example, the SEC wants to make sure standards are in place with regards to how much money individual investors can invest (e.g., what portion of their annual income), the type and amount of information companies must show prospective investors, how to monitor the amount of money raised by individual companies, measures to protect against fraud, etc.

However, with just a few days left before January 1, the SEC has not come to an agreement on how things will operate. One key event which is probably both good and bad is that current SEC chairman Mary L. Schapiro announced last month that she will step down this month. Elisse Walter, one of the agency’s commissioners, is expected to fill the position. The bad news with regard to this changing of the guard is that it will most likely slow the finalization of equity-based crowdfunding laws beyond January 1st. The good news is that once Walter takes the helm, we can expect the SEC to come to decisions more quickly.

Massive Spike in Crowdfunding Websites: One year ago January 2012, according to the North American Securities Administrators Association, there were less than 900 websites whose names included the word “crowdfunding” in them. Today, there are nearly 9,000 of them. So, once equity-based crowdfunding laws are set (probably within a few months), there will be many, many websites upon which entrepreneurs will be able to raise crowdfunding dollars.

Crowdfunding is an extremely interesting and exciting new way to fund our Tama County businesses. It has grown dramatically as a funding source over the past two years and is poised to grow even more in the coming months and years once the JOBS Act laws are finalized by the SEC.

Whether you want to start raising money with crowdfunding today via rewards-based method, or wait until 2013 for the equity-based model to shake out, you can start by calling our office 641-484-3108 and we will share with you the important things you can do.

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