House passes startup-friendly bills as part of ‘innovation initiative’

By: Marisa Kendall

Tuesday was a good legislative day for Silicon Valley.

The House passed two bills designed to make it easier for startups to raise funding, pushing full steam ahead on the “Innovation Initiative” spearheaded by House Majority Leader Kevin McCarthy and Chief Deputy Whip Patrick McHenry.

The first, the “Fix Crowdfunding Act,” loosens restrictions for equity crowdfunding. It received an overwhelming majority — passing 394-4, The Hill reported. The bill would amend prior rules that went into effect in May — expanding equity crowdfunding even further. Before the May rule change, startups seeking to raise money via crowdfunding were mostly restricted to platforms like Kickstarter, where they could offer donors T-shirts and other swag, but not equity in their company.

Crowdfunding, both with and without the promise of equity, has become a popular method for early-stage startups to raise capital. In 2014 crowdfunding campaigns raised $9.46 billion in North America, and the industry had an annual growth rate of 145 percent, according to a study published last year by crowdsourcing research and advisory firm Massolution.

The second bill to pass in the House on Tuesday is the “Supporting America’s Innovators Act 0f 2016,” which would expand the limit on investors engaging in early-stage funding from 100 to 250, The Hill reported.

Both bills face their next test in the Senate.

Speaking on the House floor Tuesday, McCarthy said the bills are designed to restore the original spirit of the JOBS Act.

They are intended “to harness innovation and bring together millions of Americans with potential new businesses through crowdfunding,” he said. “These new businesses could become the next Apple or Under Armour. They could revitalize the most downtrodden communities who were hardest hit by the recession and faced the slowest recovery.”

The National Venture Capital Association cheered the passage of both bills Tuesday.

“Financial capital is the lifeblood of innovative, high growth startups,” President and CEO Bobby Franklin wrote in a news release. “We are pleased to see Congress focused on proposals to help startups access the capital they need to scale and hire new workers, which is critical for the entrepreneurial ecosystem and the American economy.”

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