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Texas to Allow Equity Crowdfunding

Texas is on track become one of the first states to allow equity crowdfunding. The Texas State Securities Board is finalizing rules that will permit Texas small businesses to solicit up to $1 million annually from unregistered and accredited Texas investors via online crowdfunding portals. State

Current Crowdfunding Platforms
Current Crowdfunding Platforms

officials estimate that eligible businesses will be able to begin making such solicitations just before the end of this year. Investors, who can invest up to $5,000 a year in portal offerings, will seek to get back equity shares in the companies in return.  Prior to this, online crowdfunding on such outlets as Kickstarter and Indiegogo has been limited in Texas to people who sought to contribute to a firm or cause without any financial return other than promotional materials.  The U.S. Securities and Exchange Commission is in the process of finalizing similar rules on a national level, following up on a law approved by Congress in April 2012.

State Rep. Mike Villarreal (D-San Antonio), who chairs the Texas House Committee on Investments and Financial Services, asked the Legislature to take up the state issue after San Antonio entrepreneurs at Geekdom, and Rondero De Mosier and Nathan Roach, brought it to his attention.  Roach and De Mosier are getting ready to launch a web portal that would enable startups to seek equity-based crowdfunding under the new state guidelines.  Villarreal briefed supporters of the cause and reporters during a press conference Sept. 16 at Geekdom, the growing collaborative co-working space in downtown San Antonio.  “Texas’ investment crowdfunding model provides innovative entrepreneurs new avenues of access to capital,” Villareal said.  “It also allows backers to make a return on their investment. Two forward-thinking San Antonio businessmen asked me to help pave the way for crowdfunding in Texas, and now, the economy and job market in San Antonio and throughout the state is poised to begin reaping the benefits.”  In May, the House Committee on Investments and Financial Services performed a hearing on the costs and benefits of implementing an intrastate equity crowd funding system in Texas.  Villarreal had requested the Texas Securities Board to use its authority and discretion to propose new rules needed to implement equity crowd funding in Texas.  Crowdfunding is designed to especially bolster tech startups and other new businesses, to help those enterprises lure more local capital, rather than competing with startups in other regions for venture capital.

Geekdom, Courtesy Photo
Geekdom, Courtesy Photo

Keeping it local is a refrain known to locals familiar with how established companies such as Rackspace Hosting got started. A February 2014 Silicon Hills News article details a discussion with Stephanie Chandler, a partner in the local law firm Jackson-Walker.  She explained that old real estate and oil money in San Antonio was invested in the early stages of Rackspace’s growth. It was one of the initial cases of old local money invested in a homegrown startup tech venture. That trend has blossomed in the past decade, Chandler added.  State Rep. Mike Villarreal of San Antonio has been instrumental in having the state expedite the finalization of rules to permit equity crowdfunding in Texas.

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