Exciting news from our friends east of Lake Washington came out last week! The City of Bellevue is developing a plan to launch a website that will take advantage of Washington’s new crowdfunding bill. The City’s goal is to provide local companies a new way to raise money from smaller, local investors.
What is crowdfunding?
As we’ve discussed in previous posts, equity crowdfunding allows companies to advertise to and raise investment from the “crowd,” i.e. the general public. This is significant because traditionally companies could only access capital from “accredited investors” (or high net-worth individuals) due to the SEC restrictions and compliance costs associated with raising funds from non-accredited investors.
With crowdfunding, non-accredited and accredited investors alike can invest in companies they believe in and want to own a piece of. The idea is that communities can back local businesses to ensure those beloved small businesses have the necessary capital to prosper. There are competing arguments regarding the impact of crowdfunding, but the goal in general is to make raising capital more accessible for small businesses.
City of Bellevue’s Plans
The crowdfunding platform would be similar to Kickstarter, except the investors would receive an equity interest in the company—contributions to Kickstarter campaigns are considered “donations” and participants in the Kickstarter campaign do not receive an ownership interest in the particular project or company.
The City has a team of consultants performing a feasibility study, which is set to be released sometime this month. If the report says it’s a good idea to launch the venture, then the City is ready to move forward with the plan in the next few months.
While there are several crowdfunding platforms that have launched in the last few years, the City of Bellevue’s proposed plan would be the first ever public crowdfunding platform.
Bellevue-based companies would be able to advertise their offerings for free, while out-of-town businesses would have to pay a fee to use the site. Bellevue would use these fees to help fund developing and maintaining the website.
If you’d like to learn more about crowdfunding or how it is impacting small business fundraising, please comment below or contact me.
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