Ducey signs Arizona equity crowdfunding bill aimed at small businesses, entrepreneurs
The Phoenix Business Journal
By: Hayley Ringle
Arizona small businesses and entrepreneurs can now raise money from the general public through equity crowdfunding after Gov. Doug Ducey signed the bill into law Wednesday at Chandler’s TechShop.
House Bill 2591 allows companies to raise up to $2.5 million and non-accredited investors to give up to $10,000 each.
The bill will allow small businesses to raise money in crowdfunding campaigns with a deadline, similar to Kickstarter and Indiegogo, with investors getting equity in the company.
Crowdfunding comes with its own legal challenges
Equity crowdfunding will “empower” small businesses and entrepreneurs with wider access to capital, providing more options for money than just banks, family and friends, and angel investors, said Mitzi Montoya, vice president and dean of entrepreneurship and innovation at Arizona State University.
“We’re in favor because there is a need for more refined instruments on how people can raise capital," Montoya said. "Crowdfunding is an excellent concept to leverage that social network for investments.”
The Arizona Small Business Association helped write the bill, which was introduced in February by Rep. Jeff Weninger, R-Phoenix, and Sen. David Farnsworth, R-Mesa.
Congress passed a federal bill in 2012 to allow equity crowdfunding across the country, but that part of the law has not been rolled out because the U.S. Securities and Exchange Commission hasn’t written rules on how equity crowdfunding will work.
Chris Petroff, senior vice president of business development for the Greater Phoenix Economic Council, said having another small-business resource is good.
“This provides technical parameters to get funding,” said Petroff, who co-founded Seed Spot, a Phoenix incubator for early-stage social entrepreneurs, before leaving in September 2013 to work for GPEC. “Having worked with a lot of entrepreneurs this is something they’ve wanted for a long time.”
Colorado also signed an equity crowdfunding bill into law this week.
I addressed the issue in January 2014 in a cover story on how companies can legally access capital.
Montoya provided some caution to this new way of getting equity.
“You’re not dealing with sophisticated experienced investors, and if you’re an investor, you’re investing in early-stage companies,” he said. “You need to make wise decisions. I think it’s fair to put that out there. People need to be smart.”