Illinois state Reps. Carol Sente, D-Vernon Hills, and Tom Demmer, R-Dixon, filed bills last week to allow online crowdfunding in Illinois.
Crowdfunding allows small investors to pool their dollars together to finance a new business or local project, and thus gain a debt or ownership stake in the project. It’s similar to fundraisers onKickstarter and Indiegogo, except that investment crowdfunding is done as an investment rather than a donation. This innovative form of funding is described by economist John Berlau as “finance of the people, by the people, for the people.”
Crowdfunding has a rich history of spurring American economic growth; it’s how Henry Ford financed the start-up of Ford Motor Company. However, investment crowdfunding was severely restricted in the U.S. from the 1930s until the passage of the bipartisan Jumpstart Our Business Startups (JOBS) Act in 2012.
Sente and Demmer are pushing a bipartisan bill to set the rules of the game in Illinois, which will get crowdfunding underway in the Land of Lincoln. Legislators in neighboring Indiana, Michigan and Wisconsin have already created a legal exemption for crowdfunding in their states, but the Illinois bill will allow for higher investment caps and thus more investment dollars than any other state.
This is an important step in outpacing neighboring states, and for embracing an innovative, entrepreneurial culture in Illinois. Research from Crowdfund Capital Advisors shows the average business that met its crowdfunding campaign goal doubled its number of employees as a result.
Illinois is ready to become a friendlier state for startups of all sorts. Changing public policy by enacting a legislative agenda for entrepreneurs can help make it happen. And creating a flourishing environment for investment crowdfunding is an important step towards becoming a more innovative and competitive state.
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