AUSTIN, TX—President Obama traveled here to the ongoing South by Southwest festival from Washington, D.C., and so did I. In his March 11 presentation, he said, “The reason I'm here really is to recruit all of you.” Recruiting the tech and entertainment savvy attendees of SXSW, as it is called, was one of my purposes too.
But the differences at what has become one of the premier festivals for music, film and technology, ended there. President Obama’s speech was a defense of big government in all its forms. He sang the praises of the Consumer Financial Protection Bureau and wondered aloud why left and right complain that Dodd-Frank hasn’t reined in Wall Street.
The reason is called reality. Big banks have gotten bigger since Dodd-Frank, while the CFPB continues to terrorize Main Street, as my colleague Iain Murray pointed out in some brilliant questions for CFPB director Richard Cordray this week.
The point where President Obama really clashed with SXSW’s techies and free spirits was on his call for companies to create a wide “back door” to let the government into encrypted devices. As I tweeted, the essence of the president’s speech could be summed up as, “Ask not what your country can do for you, ask how you can help it spy on you!”
Three days after President Obama’s speech, I arrived at SXSW, not by Air Force One, but by commercial flight to Houston and Greyhound bus from there to Austin. This Monday, March 14, I gave a presentation at the NextGen Crowdfunding House at the downtown Austin’s historic bar and club, Maggie Mae’s.
I told the crowd of entrepreneurs that I was there to recruit them too. But I was there not to recruit them to serve the state—though I didn’t begrudge them if they were making technologies that could improve some ways government works—but to fight it.
Ironically, the entrepreneurs were benefitting from bipartisan legislation that President Obama could legitimately take credit for signing into law, but hasn’t done so at SXSW or in other venues. In 2012, the Jumpstart Our Business Startups (JOBS) Act was passed by a Republican-controlled House and in an unfortunately, but not fatally, watered-down version by the Democrat-controlled Senate. President Obama signed the bill into law almost four years ago.
The bill had provisions that went into effect soon after being signed that made it easier for entrepreneurs to raise money from wealthy “accredited investors.” But last year, the Securities and Exchange Commission finally implemented the JOBS Act’s provisions that will benefit entrepreneurs and retail investors by lowering some of the barriers to investment-based crowdfunding that everyone can participate in.
The JOBS Act’s Title III, which allows entrepreneurs to raise up to $1 million without SEC approval, but unfortunately still with plenty of red tape, went into effect in October. Much more impactful was a provision called Regulation A+ that the SEC approved last spring.
This provision allows firms to raise up to $50 million from retail investors in a mini-IPO. Approval from the SEC is required, but because the companies don’t have to fully register, they aren’t subject to many of the cumbersome mandates of Sarbanes-Oxley and Dodd-Frank. Regulation A+ also preempts a lot of the red tape at the state level.
At the NextGen venue at SXSW, one the other presenters was Steve Sadler, CEO of Allegiancy, a Richmond, Va., based commercial real estate management firm that that was the second company approved to raise funds through Regulation A+.
In my presentation, I called investment-based crowdfunding the “Uberization of finance.” But I reminded the audience that like the Uber creators, they would still face much antiquated rules that they would have to harness their creative energies to fight. Noting that other countries had already surpassed us in liberalization of investment-based crowdfunding, I urged this crowd of creative minds to fight on!
I will have more of what I said and what I learned at SXSW in future blog posts.