DearMember of Congress:
On behalf of the 362,000 members of theNational Taxpayers Union, I encourage you to support H.R. 2930, the“Entrepreneur Access to Capital Act,” and H.R. 2940, the “Access to Capital forJob Creators Act.” Introduced by Rep. McHenry (R-NC) and Rep. McCarthy (R-CA)respectively, these bills would ease the regulatory constraints that arepreventing entrepreneurs from finding and utilizing the capital required to gettheir businesses off the ground.
Early-stage entrepreneurial activityhas been steadily declining in the United States, putting America’sinnovation-based economy at serious risk of losing out to foreign competitors. Theproblem is not the result of a lack of ideas or entrepreneurs, but an inabilityto match potential sources of capital with investment opportunities. Recentestimates from the General Accounting Office reveal that the financial marketsfell $60 billion short in meeting the demand of small businesses for financingin their formative phase. Given the important role that start-ups have playedin economic dynamism and job creation, the federal government should be doingall it can to strike the best possible balance between investor protection andcapital formation.
The Entrepreneur Access to CapitalAct would help accomplish this goal by allowing businesses to accept and pooldonations of up to $5 million without registering through the Securities andExchange Commission (SEC), which is cost-prohibitive for many small offerings. Traditionallymany small startups have difficulty securing financing due to a combination offactors including the scarcity of bank lending and the focus of most “angelinvestors” on larger projects. By allowing “crowdsourcing” – raising smallamounts of money from a large group of investors – H.R. 2930 would unlock apotent source of capital to help turn entrepreneurial ideas into centers of economicactivity.
In order to further harness thepower of small investors, the Access to Capital for Job Creators Act would helpemerging companies attract resources by eliminating the current ban againstgeneral solicitation. The SEC has interpreted this prohibition very narrowly,only allowing the company to contact investors or intermediaries with whom theyhave a preexisting, substantive relationship. This not only eliminatescrowdsourcing as a strategy, but severely hampers entrepreneurs’ ability toattract investors of any means, however modest. By thoughtfully reconstructingthis regulatory barrier, H.R. 2940 would open up a variety of marketingtechniques to connect start-ups with latent investors.
By passing the Entrepreneur Access toCapital Act and the Access to Capital for Job Creators Act, Congress can bringoutdated securities regulation into the modern world of the Internet and socialnetworking while also jump-starting America’s economic engine. For thesereasons, NTU supports H.R. 2930 and H.R. 2940, and any roll call votes on thesebills will be significantly weighted in our annual Rating of Congress.
Sincerely,
Brandon GreifeFederalGovernment Affairs Manager