Federal securities regulators recently cleared the way for small, Kickerstarter-style campaigns for startups to sell shares. But many entrepreneurs view the federal process as too cumbersome. Now, Washington state lawmakers are contemplating a state-only version to help small businesses raise capital more easily.
Crowdfunding websites like Kickstarter and Indiegogo have grown rapidly as a way to raise money for creative ventures. But in the eyes of the law, people who pledge money are making a donation, even when there's an expectation of receiving a product or service in return.
Now Washington state lawmakers are mulling whether to allow startup businesses to raise money by giving backers actual shares in the company. That sounds good to Adam Lieb, the founder of a social network for gamers called Duxter.
"Every step of the way, I had people in my life, whether they were students I went to school with, customers, people I knew, that would've been able to support me, but they weren't millionaires, so they couldn't do it,” Lieb said.
The proposed equity crowdfunding framework comes with a variety of restrictions to limit the exposure of small investors to risk. A suburban Seattle legislator speculates that online gaming and entertainment startups might be first to take advantage.
