Senator Warner to entrepreneurs: "Crowdfunding needs your help"
US Senator Mark Warner, who has been touted as a Presidential contender for 2016, showed up at South By Southwest today to speak in support of crowdfunding and urge the startup community to help with efforts to drive it forward.
Speaking on a panel hosted by the Startup America Partnership that also featured AOL co-founder Steve Case, the Democratic Senator and former Governor of Virginia said it that the startup community has an important responsibility to bear in making equity-based crowdfunding a success.
The JOBS Act, which was signed into law last year, allows for equity-based crowdfunding, which enables individuals to invest small amounts of money in startups in return for a stake in the companies. However, regulators at the SEC have so far failed to draw up a set of regulations that would allow crowdfunding to actually get going. While cautious about the potential for fraud and abuse of such a system that exposes "mom and pop" investors to some of the harsh realities of the venture market, the regulations have also been stalled by SEC leadership changes.
Sen. Warner told an audience of a couple hundred people, many of whom were entrepreneurs, that they will play a key role in whether or not crowdfunding will be a success. He said they had to be alert to people and organizations that would cheat the system and undermine it. “There will be mistakes made, and you’re going to have to be vigilant in calling out bad actors early on," he said.
He also noted that crowdfunding is “still a very esoteric idea within a very small crowd of folks," which increases the onus on the startup community to help alleviate fears about fraud and educate the public about how crowdfunding can benefit the economy. They can't just rely on the rule-makers alone, he said. “The regulators cannot and will not totally get it right.”
Earlier, Warner spoke approvingly of crowdfunding's potential to be "totally disruptive" and noted that it could help the areas of the US that don't have easy access to venture capital. “The promise of the internet to democratize the world... has worked in major communities, but a whole lot of rural America and mid-sized America is getting left behind,” he said.
Part of the education process entailed helping regulators realize the power of the Internet to self-regulate and letting them know "this is a chance worth taking."
Meanwhile, Steve Case, who is also a cofounder of the Startup America Partnership, continued to drive home a message he has been taking to Congress and the public for many months now. Case said that while there was some legitimate concern and uncertainty about the potential for fraud in crowdfunding, some people didn't appreciate how Internet marketplaces have evolved to ensure that reputation and trust are key ingredients in the transaction process. He also noted the irony that entrepreneurs are allowed to sell 100 percent on their business on eBay, but that they can't sell just 1 percent to anyone.
Case said that educating the public on crowdfunding is a priority for the Startup America Partnership in the year ahead.