Ohio is making progress in trying to make it easier for startups to raise equity and start their businesses via crowdfunding. As introduced, House Bill 10 changes a few of the rules and brings state law more in-line with federal laws. As it stands, the proposed legislation is about 90% of the way there, but there are a few items in the bill that are not fully aligned with the federal rules and needs some wordsmithing. Here are the suggested amendments I put together and sent to Representative Arndt a few days ago.
Here is the email I sent:
Dear Rep Steven Arndt:
It is great that you have introduced legislation to drive additional interest in helping startups raise capital for their ventures. As the chair of Ohio’s largest non-profit organization for entrepreneurs, I fully applaud your efforts and appreciate your attention to this space.
I have three minor suggestions for amendments to the bill as proposed.
1) Remove the $10k cap and bring it more in-line with SEC rules
Who Can Invest?
Like stocks and bonds, anyone can invest in crowdfunding offerings. But because of the risks involved, you are limited in how much you can invest during any 12-month period in these kinds of securities. The limitation on how much you can invest depends on your net worth and annual income:
If either your annual income or your net worth is less than $100,000, then during any 12-month period, you can invest up to the greater of either $2,000 or five percent of the lesser of your annual income or net worth.
If both your annual income and your net worth are equal to or more than $100,000 then, during any 12-month period, you can invest up to 10 percent of your annual income or net worth, whichever is less, but not to exceed $100,000.
Say your annual income is $150,000 and your net worth is $80,000. JOBS Act crowdfunding rules allow you to invest the greater of $2,000 or five percent of $80,000 ($4,000) during a 12-month period. So in this case, you can invest $4,000 over a 12-month period.
2) Remove the In-State requirement for investors. We do not have a lot of high risk capital sloshing around in Ohio. Limiting investors to just Ohio, puts a cap on what a company can raise. You want to cast a wide net of potential investors. Many out of state residents have an Ohio connection. If you look at the distribution of high net worth individuals that have an Ohio connection, they are concentrated in New York, Arizona, and Florida. Cutting those people out put entrepreneurs at a disadvantage to raise capital.
3) Reduced the filing fee from $300 to $150, like any other security offering in Ohio. The goal is to make raising capital easier in Ohio and not harder. Doubling the registration fee is a barrier for a startup to raise capital.
Please let me know if I can be of any assistance in helping you get this legislation with the above amendments passed.
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I encourage you to reach out to Rep Arndt and let him know you support the bill with these minor amendments. His office can be emailed at firstname.lastname@example.org