And one of the many ways to celebrate Washington is to reflect on his pioneering entrepreneurship. That’s right, the father of our country was also one of the first of America’s many visionary entrepreneurs who was largely self-made. As I write in National Review, “Washington’s background wasn’t exactly poor, but he was not as wealthy as many of his contemporaries among the Founders. His father died when he was eleven, and the family lacked money to give him a formal education.”
But Washington learned not only the value of perseverance but of innovation. He abandoned Mount Vernon’s main cash crop of tobacco to cultivate wheat. Then, “pioneering the integration of related enterprises, he became a manufacturer of two products from his crop: flour and distilled whiskey.” As I note, Mount Vernon has reconstructed Washington’s flour mill and whiskey distillery, and they are definitely worth a visit!
Today, we are still a nation of entrepreneurs, but entrepreneurs have much red tape to deal with. One area of bipartisan agreement for barriers that need to be eased is in the area of equity crowdfunding. It is legal to raise funds for music, movies or other ventures on crowdfunding sites such as Kickstarter and IndieGoGo, but only if funders of these projects are offered nothing of real value. Any promise of profit sharing or potential return on investment trigger the same securities laws that apply to Fortune 500 companies.
The Jumpstart Our Business Startups (JOBS) Act signed by President Obama in 2012 was supposed to change this. And indeed the JOBS Act has made it easier for small and midsize companies to go public by delaying onerous provisions of Dodd-Frank and Sarbanes-Oxley for most new initial public offerings (IPOS), spurring the U.S. IPO market. But unfortunately its promise remains elusive for the smallest of entrepreneurs and the ordinary investors who could benefit. The Securities and Exchange Commission proposed a severely restrictive rule for crowdfunding that, as I wrote in CEI’s comments to the agency, “may cost an entrepreneur as much as $39,000 to raise $100,000 through crowdfunding” by the SEC’s own estimate.
I pointed out that equity crowdfunding is not at all radical given the other electronic transaction we engage in every day. “Investors buying the smallest portions of the smallest businesses face more ‘protections’ than if they pay thousands more for a business outright.”
And we should remember that crowdfunding really began while Washington was serving as president in 1790, when merchants and investor who got together in Philadelphia’s taverns and coffee shops formed the Philadelphia Stock Exchange in those very watering holes. Crowdfunding, minus computers but with the (physical) social networking, was how the first stock exchange in the U.S. was formed.
Happy 282nd, Mr. President! May we restore freedom for entrepreneurs following in your footsteps.