3c hapter - Index of

Pennies from Many 141
to make the market more transparent. He readily acknowledges
that investing in a startup carries risk, but at least you can see what
you are investing in—all the relevant information is posted on
the web site and investors and entrepreneurs are encouraged to
communicate directly. Grow VC’s system also aims to harness the
wisdom of the crowd to identify potential winners. “We believe
that in the future, fi nancial services will be more transparent, so
it will be easier for people to understand exactly where they make
their investments. That could be a better solution than making it
so that you must be a sophisticated professional before you understand
how these instruments work.”
There have been attempts to change the securities laws as
they pertain to crowdfunding, or at least loosen them a bit. The
Coalition for New Credit Models, a group initiated by Prosper, is
lobbying for change. Other efforts have focused on petitioning
the SEC to make allowances for P2P funding.
Paul Spinrad, a San Francisco–based editor with a longtime
interest in micropayments, raised $1,099—through crowdfunding,
naturally—to pay for a lawyer at the Sustainable Economies
Law Center in Oakland, California, to draft a petition to the SEC
for a crowdfunding exemption. The idea is to create an exemption
for companies raising up to $100,000 from individuals investing
small amounts of money—up to $100 apiece—without the
company needing to go through a costly federal and state registration
process. One hundred dollars is enough to make a difference
in aggregate, if enough investors participated, but hardly enough
to bankrupt someone if the venture failed.
“Securities law lets you gamble your retirement on investments
conveyed through the all- controlling fi nancial system, but you
can’t invest $100” to help someone “start a small business, write
a book, make a fi lm, build an iPhone app, or develop a new product
that you believe has commercial potential,” writes Spinrad on
his crowdfunding campaign site. 11 While our securities laws served
their purpose well for many years, today, he believes, the cost prohibits
many small ventures from raising needed capital, and individual
investors from investing in companies or artists they would
like to support. The result, he says, is “millionaires who can invest