The Assembly Financial Institutions and Insurance Committee voted Thursday to release a bill that would allow private businesses in New Jersey to “crowdfund” through web portals.
The concept, which calls for raising money through small contributions made online by a large number of investors, has been made popular by the website Kickstarter, which since its inception in 2009 has led to roughly $1 billion in funding for some 62,000 total projects.
But while Kickstarter campaigns can only offer investors gifts of appreciation for their contributions, the New Jersey bill, which was just recently reintroduced, would permit companies to give out shares of equity in return.
Though crowdfunding provisions were included in the JOBS Act, which President Barack Obama signed into law in 2012, they have yet to be finalized. So in the meantime, the New Jersey-based bill can only offer intrastate crowdfunding. Similar versions have been put forth in states like Georgia, Kansas and Michigan.
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“Innovative businesses can use this new source of funding to open new ventures, expand existing operations, develop, manufacture and market new products here in New Jersey and to gain an important competitive advantage over out-of-state rivals,” Assemblywoman Alison Littell McHose (R-Sparta), one of the Assembly bill’s sponsors, said. “Opening the spigot of this funding option benefits business, the state’s workers and the economic climate.”
Under the bill, total investments can not exceed the $1 million mark with single purchaser investments capped at $5,000 each.
“Our legislation helps local investors connect with in-state businesses,” Assemblyman Parker Space (R-Sparta), another of the bill’s sponsors, added. “They can visit the facilities, meet key personnel and take pride in their investment.”
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On the Assembly side, joining Space and McHose in bipartisan sponsorship of the bill are Assemblymen Angel Fuentes (D-Audubon), Upendra Chivukula (D-Somerset), Carmelo Garcia (D-Hoboken) and Assemblywoman Amy Handlin (R-Red Bank).
State Sen. Joe Kyrillos (R-Middletown) has been a sponsor and proponent of the measure in the Senate.
“Frankly, there is no reason to embrace laws enacted in the 1930’s that have outlived their usefulness,” Kyrillos told NJBIZ last month. “The economy is still troubled. Financing is hard to come by. Millions of people understand intuitively that when there is a good idea, people would like to risk their capital make that a success.”
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