By Bill Taylor, Contributor
Here is something that will make your eyes open wide with excitement and immediately tear up with sadness realizing the U.S is just plain falling further behind the rest of the world. What would that be? Capital formation and innovation.
There are “tons” of entrepreneurs with thoughts and ideas (some good, some….not so good) that need capital to try and bring their dreams to life. Venture capital firms may deem them too small and want to take to much of the entrepreneur’s equity, ICOs are being looked down upon by U.S. regulators (hey SEC, nice job on Theranos), so how about crowdfunding? Well, the SEC doesn’t really like that either, so with the “deck stacked” against small business formation here in the U.S what can a genius entrepreneur do?
Well, lucky you if you live in the EU. TAKE A LOOK AT THIS! The EU is raising the crowdfunding exemption to just under $10M from accredited investors and, AND, that means any project looking to raise that amount does NOT have to ask permission or register with any agency…….if they are EU based. WHAT? Encouragement to bring new ideas to life? Yes, just not in the U.S.
Now, technically, accredited investors in the U.S can be approached for capital raising BUT the definition of accredited investors in the U.S. basically limits that pool of investors to just around 0.5% of all households. Sorry, smaller investors and millennials, no risky startups like Google, Facebook, etc. for you.
In addition, there is what’s called the Enterprise Investment Scheme (EIS) which gives investors some very interesting tax breaks in the form of investment tax relief AND no capital gains on any profits from the investment. Oh yeah, no inheritance tax and you can offset any losses against income too. All to encourage investment and risk taking.
Obviously there are other benefits but, surprisingly, few negatives or paperwork. So, that’s just ONE way the rest of the world is racing by the U.S in facilitating innovation and creating new jobs. Once again, hello SEC…….can we get this on the docket by, say 2025?
Bill Taylor is Managing Partner at Fintek Capital & a frequent contributor to FintekNews