Kauffman CEO boosts 'crowdfunding' to help entrepreneurs
The Kansas City Star
Tom McDonnell is urging federal regulators not to smother a new source of entrepreneurial capital with excessive regulation. Here’s hoping the Security and Exchange Commission takes the advice from McDonnell, the new chief executive for the Ewing Marion Kauffman Foundation.
In a Washington appearance earlier this week, McDonnell summarized the foundation’s annual State of Entrepreneurship report, which touched on the new “crowdfunding” financing method that will allow smaller companies to raise capital and become established more rapidly.
Crowdfunding allows investors to buy small portions of a company’s equity via the Internet. “Emerging growth companies” — firms with total revenue less than $1 billion — would be able to sell equity stakes without going through the onerous and expensive registration process required of typical initial public offerings.
The Kauffman report noted that in a period in which initial public offerings have been few, and the traditional conduit from venture capital has eroded, emerging companies need innovative ways to find capital.
McDonnell urged the SEC to draw up the rules quickly. That point is key, given that the SEC has already missed a year-end deadline for finishing its rulemaking process, which must take place before crowdfunding can occur.
With economic growth still sluggish — and the important role startups play in job creation — McDonnell’s message is especially timely.