The Pros and Cons of Crowdfunding

By Drew Foster
Tri-City Herald (Kennewick, Wash.)

After developing a computer program that would allow anyone to present and solve software problems, Sidd Goyal and his team needed money to get their product on the market.

They considered venture capitalists, but they hesitated to attach a monetary value to their conceptual idea. Instead, the Pacific Northwest National Laboratory engineer turned to the crowdfunding site AngelList, where his team sought $100,000 to create a prototype of their Fixoncloud programming platform.

“It’s better to have more than one person than a single venture capitalist,” Goyal said.

Goyal’s initial attempt at crowdfunding — raising money through groups of sometimes-unknown investors, largely across the Internet — fell short, but he’s considering using it again when a newer, simpler Fixoncloud prototype is developed.

Equity crowdfunding has evolved in the past few years, especially since the 2012 passage of the federal Jobs Act. Washington passed its own crowdfunding legislation earlier this year.

Seattle attorney Joseph Wallin, who wrote Washington’s crowdfunding bill, will share his expertise on the subject Nov. 18 during a presentation at the Energy Northwest auditorium in Richland.

“Companies want to raise money and they don’t know how to do it,” he said. “They need to find a correct, legal pathway to do it.”

Wallin said he was dissatisfied with provisions in the federal Jobs Act, so he wrote his own legislation, spoke to a state legislative committee about making Washington more business-friendly and, earlier this year, saw the bill passed.

Washington House Bill 2023, unlike the federal Jobs Act, does not require companies seeking crowdfunding to have audited financial statements, and it does not mandate the use of an intermediary who takes 8 to 10 percent of the offering’s proceeds.

Wallin said Washington is ahead of the curve in its regulation of crowdfunding. The bill Wallin crafted reduced restrictions faced by entrepreneurs and business people who seek crowdfunding.

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