Crowdfunding bill advances in Assembly

Trenton, NJ – Crowdfunding is the financing of a business venture using the Internet to raise small amounts of money from a large number of investors. A- 2073/S-712, which recently passed the Assembly, would allow businesses to invite small investors to offer capital through a pledge.

The bill mimics the federal Jumpstart Our Business Startups Act (JOBS Act), which became law in 2012 and shall not exceed $1 million of funding with certain exceptions. A business cannot accept an investment exceeding $5,000 from any single source unless that source is an accredited investor and must be made through an Internet site. These types of investors would include individuals with relatively high incomes, banks, insurance companies and trusts.

To Mario Casabona, founder and chief executive officer of Tech Launch — a technology start-up accelerator in Clifton — crowdfunding offers an alternative way for start-ups to gain access to capital.

"It's a good thing for entrepreneurs," enabling more investors to fund a business, he said in a phone interview Tuesday. But, he added, "it doesn't make it easier."

For a small business, one challenge of having many investors is ensuring that it maintains communication with all of them, Casabona said. The legislation requires companies to provide quarterly reports to their investors.

The legislation’s Senate counterpart is waiting to be posted by the Senate Commerce Committee.

For the complete bill: http://www.njleg.state.nj.us/2014/Bills/A2500/2073_I1.PDF