Crowd Funding Private Equity is on its way!

What is crowdfunding?  This video gives you an introduction.  Why can't we crowdfund as investors already?  Because in order to invest in private businesses you must be someone wealthy (over $1 million in assets) and have gone through a process to become an accredited investor.  Even if you've gone through that process, it's not always easy to find the kinds of investment opportunities you're looking for because the regulations limit publicizing private equity opportunities.  These regulations were put into place to protect the public from schemers and shysters. They figured the people of high net worth were less vulnerable to schemers. 

AND by not allowing the 99% to invest in private businesses (except their own or their family's) the opportunities to get our money out of Wall Street and on to Main Street are very limited. This bill, which seems likely to pass, would make give the opportunity to invest in private businesses to all of us.  That gives us the opportunity to support businesses we know about and care about.

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So, just one week ago, I let out an involuntary whoop! when I saw this image on twitter: 

Introduced by a Republican member of the house, Patrick McHenry of North Carolina, the Entrepreneur Access to Capital Act is a truly bi-partisan bill.  President Obama made an official statement in support of the bill the day before it passed. The bill amends securities law to be user-friendly (or not at all so onerous) for small businesses to attract small-time equity investors who are not necessarily wealthy (accredited) investors.  The official text of the bill is likely to change in the Senate so keep an eye out!

Although I like the game-changing aspect of unleashing the small money of the masses to help small businesses  there are big potential pitfalls to investing in private businesses.  Small businesses, especially startups, often fail and then you're left with nothing.  Your shares in small business can't easily be liquidated.  If you need to get your money out of your shares in private business, that is pretty much impossible to do.  These investments are not publicly traded.  You can't just put them on the market to sell, because there isn't a market and regulations are different for private equity shares then for the kinds of stocks you're used to!  So watch out! This stuff is risky.