Last week, the Senate passed a modified version of H.R. 3606, essentially adding investors protections through increased SEC filing requirements. Today, the House passed the Senate’s version of the Bill by a vote of 380-41, sending it off to President Obama to be signed into law.
This soon-to-be law is drawing criticism from both ends of the extreme. Some see it as the ultimate panacea of entrepreneurial opportunity. Others see it as a tool for hucksters and charlatans to separate us from our hard-earned money.
I’m willing to bet that the truth lies somewhere in the middle.
Those who see legalized crowdfunding as the answer to our economic prayers must understand that all business aren’t created equal. Some will succeed and some will fail. Investing is risky. If you’ve ever invested money before, you’ve probably lost some of it. It happens. Buyer beware.
On the other hand, those who see crowdfunding as the new “smoke-filled room where digital thieves plan to pick our pockets” need to understand the power of the networked crowd. Public offerings aimed at specific communities will be vetted by those communities. Crowdfunders for a particular project probably have intimate knowledge about the products, services, and sometimes even the players. Those vetted by a networked community will have a good chance of getting funded by it. On the other hand, any company or individual who has broken trust with that community will likely suffer its wrath.
Is H.R. 3606 perfect? Probably not. But it offers American entrepreneurs access to something that their European counterparts already have–crowdfunding sources such as CrowdCube.
The networked economy is upon us. We can choose to sit and wait for other countries to lead the way, or we can dive right in too.
Are you in?