Crowd-funding would provide diversification of capital

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The crowd-funding measure that the U.S. Senate passed last week as part of the Jobs Act could help level the playing field for “the 99 percent who don’t have five- to six-figure amounts” of money to invest in startups, suggests Tom Szaky, chief executive of Trenton, N.J.-based TerraCycle, in a New York Times blogpost today. The ability to attract small amounts of capital from many different investors through crowd-funding platforms could lessen the pressure from larger investors that entrepreneurs often have to balance against the long-term interests of the company. Crowd-funding “would result in a diverse spread of investors who are focused as much on the company’s impact as on financial returns,” assisting social entrepreneurs in particular, Szaky says.

The Senate version of the bill stipulates investment caps based on individuals’ annual income of 2 percent for those earning up to $40,000 a year to a maximum of 10 percent for those earning more than $100,000 a year, according to the Boston Business Journal. Startups could raise as much as $1 million a year through crowd-funding sites, under to the Senate version of the bill, which now goes to the House for review.

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