I’ve always wanted to be a writer, ever since I was 10 and won a contest with my best friend for writing a story about recycling. We won a huge cash prize for our story, it was less than $100 but it felt like a million dollars for a couple of ten-year-olds. In high school I wrote for the school paper and in college I was an editor, reporter and op-ed columist, often all at the same time. Writing is how I express myself; despite years of piano lessons I can’t play anything more complicated than Hot Cross Buns, my best stick figures resemble sticks a whole lot more than they resemble figures and my singing is reserved to the shower for a good reason. Words are the way that I paint, color, hear and fill the world.
The past few months have been particularly exciting for me because for the first time large numbers of people have read my writing via blog posts for Forbes and The Huffington Post. With this excitement has come responsibility–I want to write informative and interesting that inspire people in some way. With every word, I aim to fulfill my personal mission statement (habit #1) to create the language and facilitate the dialog to build a more sustainable, just and joyful world.
Last Thursday night I did something that violated my mission statement. I wrote an article for Forbes called Why Crowdfund Investing is The Path to Economic Recovery but I didn’t take the time to thoroughly research the crowdfunding bill (H.R. 2930, called The Entrepreneur Access to Capital Act). I already knew a fair amount on the topic and so I read a few articles, pieced together a bunch of stuff that I’d already written about the bill for Solar Mosaic and sent the article to Forbes who published it right away. Almost immediately, I realized that I’d mistakenly written about the bill as though it had passed the Senate and President Obama had signed it when in actuality the bill had only passed the House–though it’s expected to become law soon, officially the bill hasn’t yet passed the Senate Banking Committee, gotten through the Senate floor vote and gotten a presidential signature. I emailed my Forbes editor right away, making the two corrections in bold (see below) to clarify that the bill is not in fact law yet. Unfortunately, given that the article wasn’t published till 2pm on a Friday, I suspect that she had already gone home for the weekend.
Perhaps I’m a bit neurotic but all weekend I’ve been stressed out about the article. Finally I realized that the best way to stop stressing about it is to recognize that accidents happen and that in terms of life mistakes, misrepresenting the legal status of one bill is probably one of the lesser mistakes I’ll make. I’ve certainly learned my lesson though, and in the future I am going to make doubly sure that I do the proper due diligence on everything I write!
Here’s the article as it should (and hopefully soon will) appear with corrections in bold:
The House did something astounding yesterday. They a) passed a bill and b) passed it with nearly full bipartisan support. This miraculous bill, called the JOBS (Jumpstart Our Business Startups) Act, is a series of 6 bills tied together designed to make it easier for startups to gain access to capital. Undoubtedly the most exciting aspect of this act is what it does for crowdfund investing.
Think of it this way: you’re in the center of a room filled with everyone who has ever known you, friended you on Facebook or followed you on Twitter. You stand in front of all of these people and pitch the crazy, brilliant business idea that you’ve been dreaming of. If these people like your idea, they can invest in your company, benefiting financially if you succeed or losing a few bucks if you fail. Soon, this concept of “crowdfund investing” is expected to become law.
The potential for crowdfund investing to transform that way startups access capital is staggering. Crowdfunding platforms have already gained traction in the U.S. with the success of sites like Kiva, a microfinance platform and Kickstarter, which lets people donate to fund artistic ventures. Kiva has arranged nearly $250 million in loans while Kickstarter users pledge funds to the tune of $2 million a week. The key thing to note here is that these millions are being raised strictly as donations and zero-interest loans because until yesterday U.S. securities laws forbade offering a return on investment (ROI) to non-accredited investors.
While these crowdfunding platforms have been widely successful in their niches, they fail to fill a key need: the lack of financing for startups. Currently startup activity is at its lowest point on record–a point worth paying attention to since historically startups have created an average of 3 million jobs annually, while existing firms lose 1 million jobs each year. As the Kauffman Foundation report puts it, “Startups aren’t everything when it comes to job growth. They’re the only thing.”
As traditional Venture Capital firms have moved into funding later stage companies, there has been an increasing lack of early-stage funding, known as Seed Capital. According to the Silicon Valley Watcher, “the latest report on trends in US Venture investments shows a massive decline of 40% in seed investments in US startups in the final quarter of 2011, and a much larger drop of 48% for the entire year.”
All it takes is a look to our neighbors across the pond to see what crowdfund investing can do to fill this gap. In Britain, startups like Funding Circle raise more than $2.3 million each month for small businesses from individuals who earn an average yield of 7.3 percent and Crowdcube just successfully funded the first $1.75 million project.
As the Community Builder for Solar Mosaic, a crowdfunding platform for solar investments, I’ve seen what crowdfunding can do to bring people together and pool their money to fund solar projects on the roofs of important community organizations, like The Murdoch Center in Flagstaff, Arizona. I can’t wait to see what Mosaic and other startups like us can do once we’re able to offer returns on these crowdfunded investments.