Legislators file competing NC crowdfunding bills

Competing crowdfunding bills that would enable startups to solicit investments from the public, including solicitations over the Internet, have emerged in the state legislature.

But primary sponsors of the two bills say a compromise is in the works.

“We want to make sure equity crowdfunding passes in North Carolina,” said Rep. Brian Brown, a Republican from Greenville.

“While there are two separate bills out there, we are working on the same case,” said Rep. Chris Millis, a Republican from Hampstead, a primary sponsor of the other bill.

One advocate of crowdfunding says he knows of at least two additional bills that legislators are working on.

“It’s a very popular idea,” said Mark Easley, a Raleigh adviser to startups and an angel investor.

Both Gov. Pat McCrory and state Commerce Secretary John Skvarla have spoken out in favor of crowdfunding.

Current securities laws limit the ability of privately held companies to raise money from the public. A federal law passed in 2012 scaled back those restrictions but has yet to be fully implemented by the Securities and Exchange Commission, prompting state legislatures across the nation to tackle the issue.

A crowdfunding bill introduced in the state legislature at the end of January, H.B. 14, is similar to an earlier bill that the House passed overwhelmingly in 2014. However, that bill stalled in the Senate last year after unrelated economic development initiatives were tacked onto it.

The new bill, called the Jump-Start Our Business Start-ups Act, or JOBS Act, would enable businesses to raise up to $2 million from investors who could invest up to $2,000 each.

The fundraising cap would rise to $2 million a year for businesses that have audited financial statements. In addition, there would be no cap on investments from accredited investors with an annual income of at least $200,000 or a net worth of $1 million.

Although last year’s crowdfunding bill was torpedoed by economic development initiatives, the new bill also retains one of those measures. It calls for a tax credit for insurance companies that bankroll Community Development Entities that provide loans to small businesses in distressed and rural counties.

The primary sponsors of the JOBS Act are Brown and Rep. Rob Bryan, a Republican from Charlotte. A companion bill has been introduced in the Senate.

The second crowdfunding bill, H.B. 63, the NC Intrastate Private Capital Act, is sponsored by Millis and Jeff Collins, a Republican from Rocky Mount.

The Private Capital bill doesn’t have any caps on how much companies can raise via crowdfunding. And it would permit nonaccredited investors – those with annual incomes of less than $200,000 and a net worth of less than $1 million – to invest up to $5,000 per company, rather than the $2,000 limit contained in the JOBS bill.

Millis said he decided to sponsor the Private Capital bill because the JOBS bill is based on laws passed by other states that have failed to generate much interest among companies seeking to raise capital.

Tom Vass, president of a Triangle company that helps privately held businesses raise funding, said the lack of restrictions on how much a company can raise was one of a lengthy list of reasons why he prefers the Private Capital bill.

“There is no public purpose served by limiting the amount a company can raise,” he said. “Why would you do that?”

But Easley said that, given that the JOBS bill is based on last year’s legislation that enjoyed widespread support, he is convinced it has a much better chance of being passed.

“I’m encouraged there is a lot of interest in trying to pass a crowdfunding initiative,” said Joan Siefert Rose, president of CED, a Triangle-based support group for entrepreneurs. “Anything that can help early-stage companies get access to capital would be a good thing.”