Will opponents of HB2 hold crowdfunding hostage in Raleigh?

Crowdfunding is an issue that has received broad bipartisan support in the past because it could mean new money for startups, drive more economic development (read: jobs) and provide investment opportunities for people outside the “asset class.”

But this proposal, which so many states have already passed and the SEC continues to format, could very well be doomed from the get-go because it’s part of a big bill Governor Pat McCrory wants in a heat-filled election season.

Remarkably, very little media attention was given the huge economic development bill introduced in the North Carolina General Assembly this week. Crowdfunding is part of it, rather than a separate piece of legislation titled the “Prosperity and Economic Opportunity for All of North Carolina Act of 2016.”

A similar version of the bill has been filed in both the Senate and House.

Will that help or hurt in a session dominated by HB2?

HB2 is as divisive – if not THE most political tumultuous – to hit Downtown Raleigh in years, creating a divide between (most) Democrats and (most) Republicans that right now seems beyond amicable resolution – or compromise. And caught right in the middle is the crowdfunding/economic development bill called Senate Bill S826.

The legislation is packed with a laundry list of “wants” from the Department of Commerce – and includes many parts that the state’s tech, life science and startup sectors could support:

  • A new $100 million investment fund targeting emerging businesses
  • Funding for commercialization efforts at universities and colleges
  • Funding for a statewide entrepreneurial network to help recruit investors and talent

Then there are broader issues such as economic development recruitment and funding.

“Wait and see”

One outside observer who has been deeply involved in promoting various crowdfunding bills is angel investor Mark Easley. And he’s worried about having crowdfunding mixed in with other initiatives.

“From my point of view, the main concern with this bill is that it is not a stand-alone version of the NC PACES Act, which would be much easier to pass quickly in both Houses of the legislature,” Easley told WRAL TechWire on Thursday evening.

“We will have to wait and see what develops on that front.”

NC PACES Act was the name given to crowdfunding last year. Previously known as the NC JOBS Act, the bill represents a collaborative effort of entrepreneurs, investors and attorneys working with General Assembly members to gain passage.

With bipartisan support and with Republicans in control of the governorship as well as both House and Senate, NC PACES should have been a slam dunk. But no one made it a priority last session.

Now …

“The new S826 bill has a total of 14 parts which are various other economic programs,” Easley pointed out. “Several appear to be supportive of the initiatives requested by the Commerce Secretary and the Treasury Secretary of various types. Others appear to be more local in nature to address requests from various constituencies.

“This bill also allocates money for some of these programs (no funding is needed for NC PACES, it is just a new exemption to state securities law), so it will need a full-blown effort to debate and pass a bill of this size and scope.”

In other words, acrimony, finger pointing, jousting, posturing … You know the drill.

Any hope for quick passage this time disappeared with the General Assembly hammered out LGBT legislation commonly called HB2, McCrory signed it, and pandemonium ensued.

WRAL TechWire has asked two prominent attorneys to review the crowdfunding portion of S826 – and that review is continuing.

Easley, however, read through the legislation and sees a lot of the old PACES act.

“The new Senate Bill S826 has last year’s NC PACES Act included as Part I of the bill, so in that regard there are no major changes or improvements since last session in this bill,” Easley said.

“I expect there will need to be some technical changes to the crowdfunding portion of the bill as it moves through the review process to bring it more in line with recent SEC changes at the Federal Level.”

More to come?

If S826 runs into a buzz saw, there could be alternatives.

“This is the first of a couple of different bills we are expecting to be filed about intrastate investment crowdfunding this session,” Easley explained.

A stand-alone bill may be crowdfunding’s best hope.