Right now, North Carolina is “out of business,” when it comes to having a toolbox of incentives to offer job-creating companies that the state might want to attract, said North Carolina Commerce Secretary John Skvarla, keynote speaker at the WRAL Crowdfunding event in Raleigh Tuesday morning.

That’s because the North Carolina General Assembly has not passed legislation that would permit use of the Job Development Investment Grants (JDIG) program, let alone the Paces bill that would open up crowdfunding to state residents, even if they were not accredited wealthy investors.

The problem with the JDIG grants, Skvarla explained, is that many legislators – particularly from rural areas of the state – do not realize they take no money from the state treasury. They simply give a tax break to companies that meet job creation goals.

Later Tuesday, The Associated Press reported that Skvarla faced skepticism from Senate Republicans who believe lower tax rates is the better way to attract companies.

At a Senate Finance Committee meeting, Skvarla reiterated his support for a plan the House approved two weeks ago to increase the cap on Job Development Investment Grant program awards by $15 million. It also would include $20 million to help improve infrastructure like water, sewer and gas lines.

Sen. Bob Rucho of Matthews suggested to Skvarla lowering rates is the better way for job creation without incentives. Skvarla says an improved tax climate is important but North Carolina can’t compete right now with other states because it’s out of grant program funds, the AP said.

The Paces bill, Skvarla said, “is the most marvelous thing I’ve see come along in decades.”

“It’s a way for everyone involved in small business – not just tech – to get new investors,” he said.

The bill does need to make sure investors, even unsophisticated ones, have access to the information about the businesses they invest in so that “crowdfunding does not suddenly turn into crowd lawsuits,” he added.

The event also included panel discussions on “The Money Hunt” and “The Legal View,” both of which provided insights into crowdfunding from entrepreneurs, investors and attorneys.

Three pieces of advice stand out

Entrepreneurs must educate themselves on the crowdfunding process before attempting it.

They should not try it without legal and accounting advice, because federal and state regulations can be complex.

And they should build a network of potential investors, advisors and partners early before they need to ask for money or help. Then, they need to maintain that network.

Mark Easley offered not only an overview of what the Paces bill is about – noting that 14 other states have already copied and passed it ahead of North Carolina – but also presented a list of websites to assist with that educational process.

For a thorough look at what the Paces bill is about and to stay abreast of what’s happening in the General Assembly, for instance, see www.jobsnc.blogspot.com.

NC program matches federal grants

“The Money Hunt” panel included John Hardin of the North Carolina Department of Commerce Science and Technology’s grant program; entrepreneur Justin Miller of WedPics; entrepreneur John McDonald; and Lewis Sheats, director of the North Carolina State University Entrepreneurship Clinic.

Hardin noted that North Carolina offers matching grants for startups that win federal SBIR and STTR grants, providing an amount equal to about a quarter of the federal award.

Miller, who has raised more than $10 million from a variety of investors – including through crowdfunding – described how 10 single men working in his basement figured out how to “sell something to brides.”

His company provides an easy way for everyone who attends a wedding to share photos and videos even if they do not know each other.

He sold his startup story by focusing on data – for example, how many new people signed up; how many photos shared – and it worked. The firm’s crowdfunding event, run via AngelList.com, raised $250,000 for the company.

“They had their own syndicate and platform, did all the work and deposited the money to our account,” Miller said. “Short of someone filling a briefcase with money and giving it to me, it was about as good as fundraising gets,” he said.

Lewis said that the N.C. State Entrepreneurship Clinic strives to get students into the community where they can start establishing contacts. It also gets them working on real concepts and products with startups so they have some experience.

McDonald, who is seeking investors for his barbeque sauce, said that he has just started looking at crowdfunding but that for a consumer product, such as his barbeque sauce, “it’s a challenge.”

Explaining what you can do, not just what you can’t

“The Legal View” included Jim Verdonik of Ward and Smith; Mital Patel of Wyrick & Robbins, who is involved with Startup Weekend; and Benji T. Jones of Smith Anderson. Easley moderated.

Verdonik, who has just completed a new book and writes a syndicated column for business journals, said one of the things good about crowdfunding is that “it lets us spend more time telling folks what they can do rather than what they can’t.”

Jones, who focuses on fundraising for large and small businesses, pointed out that, right now, you can crowdfund from accredited investors but not from others. She emphasized that, even if the law passes allowing non-accredited investors to do in-state investing, entrepreneurs will still need a lawyer.

Patel, who is focused on high-growth tech startups, noted that one aspect of crowdfunding that may give entrepreneurs heartburn is the need to report to investors on how much company executives are compensated – a requirement that lasts as long as someone holds stock.

When you have hundreds of investors, that could turn out to be a problem even with non-disclosure agreements.

Verdonik said that the thing about raising capital in a digital world is that the “walls come tumbling down” – for instance, the wall between rich people and poor people.

“The rich have an advantage, because they know lots of other rich people,” Verdonik said.

Now, however, things are shifting.

“In the past, funding was about who you know. Now, it’s about who you can get to know and how creative you are in getting to them,” Verdonik said.

Finally, Joan Siefert Rose of the Council for Entrepreneurial Development recapped findings on where startup funding in North Carolina came from.

In 2014, 331 investments to 221 companies raised more than $622 million from a variety of sources in four sectors: technology, life sciences, clean tech and advanced manufacturing and materials.

The money came from a variety of sources – 41 in the Southeast and more than 100 outside the state.

The point?

“North Carolina has strength in a lot of different areas, and there is strong interest in North Carolina companies raising money,” Rose said.