Saturday, February 28, 2015

The NC PACES Act – Signs of Spring for Local Financings?

Benji's Blog by Benji Jones

Just last February I was writing one of my last posts, offering hope for a thawing of otherwise frozen capital markets through the use of the intrastate offering exemption in North Carolina.  All we needed was the General Assembly to pass a bit of legislation--the Jumpstart Our Business Start-ups (the NC JOBS Act) (or former H680).  But the grips of winter hit the General Assembly during a very long “short session” and the deep freeze set in on the NC JOBS Act.  The bill (which passed the House in 2013 with near unanimous support) failed to make it out of the Senate or anywhere close to the Governor’s desk for signature.

Those of us supporting the NC JOBS Act sat frozen as we watched other states spring ahead of us.  Over a dozen states now have adopted intrastate crowdfunding provisions.  Champions of the legislation, such as the NC JOBS Act original House sponsor, former Rep. Tom Murry, fell in the November elections; leaving questions of whether there was any hope for the future of intrastate crowdfunding in North Carolina.
Benji Jones

But the power of entrepreneurship in North Carolina cannot be stopped by (yet another) February blizzard.  Despite the snowy ground, there are signs of Spring for North Carolina entrepreneurs and small business owners local companies in need of capital:  the North Carolina Providing Access to Capital for Entrepreneurs and Small businesses Act (NC PACES Act).

Although there are several similar bills currently under consideration, NC PACES is expected to be introduced to the General Assembly soon.  Touted by Governor McCrory as key for promoting start-ups, small business, and innovation in our state, this new bill, which is expected to closely mirror the NC JOBS Act bill, allows North Carolina businesses to access capital locally and flexibly.  Whether sourcing capital from the “crowd” through the use of the internet or through a more traditional “friends-and-family” approach, the NC PACES Act facilitates investment by North Carolina residents in North Carolina companies.  The NC PACES Act smooths the way for smaller North Carolina companies to access funds from local investors so they can grow their businesses here.

Access to capital creates jobs and promotes innovation, leading to new business ideas and further opportunities for growth in our State—creating a cycle of abundance for North Carolina entrepreneurs, North Carolina investors and North Carolina workers.

Look soon for a more detailed discussion of the NC PACES Act.

If you have questions or comments, feel free to contact me by email at: benjisblog@smithlaw.com.

The content contained on this blog does not provide, and should not be relied upon as, legal advice. It does not convey an offer to represent you or establish an attorney-client relationship. All uses of the content contained in this blog, other than for personal use, are prohibited.

Saturday, February 7, 2015

CED and CNBC Recognize the Investment Crowdfunding Future

The North Carolina Council for Entrepreneurial Development (CED) today published an editorial encouraging the NC legislature to move forward with the NC PACES Act investment crowdfunding bill. CED President Joan Siefert Rose writes:

"If state lawmakers approve two new economic development initiatives, North Carolina would improve its ability to boost employment the old-fashioned way: by home-growing jobs through entrepreneurship." and "... the N.C. Providing Access to Capital for Entrepreneurs and Small Business Act (NC PACES), is a crowdfunding bill designed to help start-ups and small businesses raise much-needed early stage capital."

Read more here: http://www.newsobserver.com/2015/02/06/4536562_fashioning-public-policy-to-help.html

In addition, today marks the day that investment crowdfunding has gone mainstream in the financial community. CNBC has just launched a website dedicated to the crowdfunding industry, including several new indexes for tracking developments in various target markets for crowdfunding. This means that investment crowdfunding has now grown large enough and strong enough to be considered a legitimate alternative asset class for investors. Visit the CNBC crowdfunding page here:
http://www.cnbc.com/id/100807099


Monday, February 2, 2015

WRALTechwire to Host Investment Crowdfunding Event on February 17th

WRALTechwire will host an investment crowdfunding event on Tuesday February 17th called Executive Exchange: Crowdfunding in 2015. The educational event is about the investment crowdfunding opportunity in North Carolina and will feature a keynote address by NC Commerce Secretary John Skvarla talking about the importance of crowdfunding as a new way to finance startups and small businesses and create new jobs in North Carolina. Passage of a crowdfunding bill in this session of the legislature is a key part of the Commerce Department's Innovation to Jobs Initiatives. Other speakers will address ways that crowdfunding can be used to raise funds. This event will be of interest to entrepreneurs, investors, and startup community members who want to learn more about investment crowdfunding. The event will be held at the NC State University Club, and begin with a buffet breakfast, followed by speaker and panel presentations. Click here to register.

Executive Exchange: Crowdfunding in 2015
Tuesday Feb. 17th 8:00am to 10:30am
NC State University Club
4200 Hillsborough St, Raleigh

Agenda:

•8 a.m.: Breakfast and networking
•8:30 a.m.: Opening remarks from WRAL TechWire Editor Rick Smith and sponsors
•8:35 a.m.: Investor Mark Easley, “2015 Can be the Year for Investment Crowdfunding in North Carolina,” including an introduction to the new NC JOBS Act for the 2015 session. Easley also will discuss other funding opportunities such as angels and angel list.
•9 a.m.: The Money Hunt - Entrepreneurs on the hunt for funding; how NCSU and the state is already helping. (John Hardin, Department of Commerce, head of Science and Technology grant program; entrepreneurs Justin Miller of WedPics, who has raised money from non-traditional sources and VCs, and John McDonald, who is seeking backers for his barbecue sauce; Lewis Sheats, director of NCSU Entrepreneurship Clinic.) Moderator: John Hardin. Q&A, time permitting.
•9:35 a.m.: Keynote - Commerce Secretary Jon Skvarla discusses “NC Commerce Department Innovation to Jobs Initiatives” with an emphasis on the importance of the investment crowdfunding initiative to startups and small business plus Q&A.
•9:55 a.m.: The Legal View - Panel discussion from attorneys on the legal challenges of crowdfunding; What's happening at the federal level; the SEC's impact on crowdfunding in N.C. Panelists: Jim Verdonik of Ward and Smith, Mitel Patel of Wyrick & Robbins, and Benji Jones of Smith Anderson Law. Moderator: Mark Easley.
•10:15 a.m.: The Rising Importance of Alternative Funding - The Council for Entrepreneurial Development's Joan Siefert Rose recaps findings in recent CED study about where all startup funding comes from.

The Buffet:

A breakfast buffet will be served including: scrambled eggs, raspberry-Nutella stuffed french toast, home fries, turkey sausage patties, peach-strawberry salad and mini-cinnamon rolls with cream cheese icing.


NC Investment Crowdfunding Update - Governor McCrory and Commerce Secretary Skvarla Support Passage of a Crowdfunding Bill this Session

Governor Pat McCrory and Commerce Secretary John Skvarla both support the passage of a crowdfunding bill this session, and work on getting a bill passed is in progress.

The 2015 North Carolina legislative session has convened. The first new version of the bill has been filed called the Start-Ups Act/New Markets Tax Credit (House Bill H14) and is sponsored by Representatives B. Brown, Bryan, Jeter, Jones, and S. Martin. This bill has two parts. The first section is the same as the NC JOBS Act bill H680 investment crowdfunding exemption previously passed by the House. The second section is a tax credit bill called the New Markets Tax Credit Act of 2015. Here is the text of H14.

In addition, a companion bill has been filed in the Senate called the Jump Start Business Startups/New Markets Credit Act.(Senate Bill S35) It is sponsored by Senators Rick Gunn;  Ralph Hise;  (Primary) Andrew C. Brock;  Ben Clark;  Warren Daniel;  Joel D. M. Ford;  E. S. (Buck) Newton;  Louis Pate;  Ronald J. Rabin; This bill has two parts. The first section is the same as the NC JOBS Act bill H680 investment crowdfunding exemption previously passed by the House. The second section is a tax credit bill called the New Markets Tax Credit Act of 2015. Here is the text of S35.

A second crowdfunding bill has been filed, sponsored by Representatives Millis and Collins known as the NC Intrastate Private Capital Act (H63). This bill is a stand alone version of an investment crowdfunding exemption, which is very different from the original H680 NC JOBS Act. Here is the text of H63.

It is anticipated that additional filings of the crowdfunding exemption may also happen in the House and/or Senate, including a standalone version known as the NC PACES Act. Work on these alternatives is in progress.

More coverage can be found on WRALTechwire and at Triangle Business Journal.