Phil Shmerling is waiting—for the moment patiently—to launch a business.
He has been developing a platform for investment-based crowdfunding for nearly a year and has been brainstorming seriously on the concept since 2011, months before President Barack Obama signed legislation last spring allowing equity crowdfunding.
So what’s the holdup?
The Securities and Exchange Commission must write regulations to protect investors as they begin to fund startups through crowdfunding platforms, such as Shmerling’sInCrowd Capital. The first deadline for the commission was set for January, which has come and gone. Shmerling is optimistic rules will be released by the third quarter. Realistically? It could be 2014, he said.
“It’s a bit of frustration,” Shmerling said, adding that as a silver lining he has been able to explore other business ideas related to crowdfunding and promoting startups in general. “When I hear about a new delay, I’m not surprised and not upset personally. Would I like them to be finished so I can run the crowdfunding business? Yes.”
InCrowd Capital has been about four years in the making. Shmerling worked as an investment banker at Morgan Keegan in Memphis. As he became more familiar with private equity and venture capital funding, he became interested in investing in startups. Without being an accredited investor, his options were limited. And, even if he could invest in startups, he knew a few thousand dollars would go a lot further if other small investors could contribute as well.
“It was pretty ridiculous that I understand investing in startups and understand the risks and the process, but because I don’t have a net worth of $1 million, I can’t do it,” he said. “I learned about Kickstarter and Indiegogo, but I didn’t want to invest in a company and get a T-shirt. I wanted stock and to invest.”
When discussions began in the Senate in 2011 about lifting investment restrictions for startups, Shmerling, then at Choice Food Group, said he would listen to the hearings on his computer. He bought the domain for InCrowd Capital in December 2011 and when the Jumpstart Our Business Startups Act, or JOBS Act, passed, allowing businesses to raise less than $1 million online, he began working nights and weekends developing the platform. In fall of 2012 he left his job to concentrate on InCrowd full time and graduated from the Entrepreneur Center’s business accelerator program in December.
While crowdfunding is a big piece of InCrowd, it also seeks to help startups manage the capital raising process from before the raise to communicating with investors after a raise, as well as promoting institutions that support startups such as universities or incubator programs, Shmerling said. As the crowdfunding regulation stalls, he has been able to focus on those sides of the business.
Despite the regulation delays, Shmerling said he is still confident the demand for equity crowdfunding is strong.
“There is a very large demand from people who want to be able to say, ‘I have ownership, I have stock in this company,'” he said. “I think it’s the future of investing.”
Source: Nashville Business Journal – Jamie McGee