New business ventures take money to get off the ground, and “crowdfunding” for support online has become a popular way for entrepreneurs to generate cash to bring their ideas to market.
Websites that link startups and entrepreneurs with people willing to support a new business idea have proven successful in recent years. One such site, Kickstarter, says nearly 90,000 projects have received almost $2 billion in funding since it launched in 2009. The funders, however, don’t earn stakes in the new company in return for their support, only gifts like limited edition T-shirts.
But a bill that just cleared the state Senate would add New Jersey to the list of states that allow private companies to “crowdfund” capital directly from investors in exchange for equity stakes.
The goal of the measure, which has bipartisan support, is to provide a boost to New Jersey entrepreneurs, small businesses and other companies by giving them a new way to generate capital.
“At a time when conventional sources of financing are scarce, this legislation will help New Jersey’s innovators seek private capital from the investing public to develop their products or services right here in our state,” said the bill’s primary sponsor, Sen. Joseph Kyrillos (R-Monmouth).
The crowdfunding measure is also the latest to advance in a package of job-creation bills that Senate Republicans have been pushing this year to help a New Jersey economy that is still struggling to recover jobs lost to the last recession.
Under the bill, New Jersey-based companies could go online to seek up to $1 million in private investment in increments of up to $5,000 from New Jersey investors.
“Crowdfunding will level the playing field for future employers, giving those without access to Wall Street a chance to gain startup capital quickly and grow their business with the support of the community,” Kyrillos said.
Similar measures have already been enacted in other states, including Georgia, Kansas, North Carolina and Wisconsin, he said.
“Entrepreneurs in New Jersey deserve the same opportunities to thrive as innovators in other states who have turned several thousand dollars in online crowdfunding investments into thriving businesses with dozens of employees,” Kyrillos said.
Senate Republicans have been working since April to advance their more than 30-bill job-creation package. When the effort began, the state’s unemployment rate was 6.5 percent, well above the national average. Since then unemployment in New Jersey has ticked down to 6.1 percent, but the state lost 7,400 jobs in June and unemployment still remains higher than the 5.3 percent national rate.
[related]A key to all of the bills in the GOP economic package is that they are “revenue neutral,” meaning they don’t cost taxpayers any money. That’s a crucial feature, given the state’s longstanding fiscal challenges.
Although the $33.8 billion budget Christie signed into law last month increased total spending by about $1 billion, it did not fully fund the public-employee pension system, the state’s school-aid law or the Homestead property tax relief program.
And a new legislative analysis of the budget found there’s already an overall $10.23 billion structural deficit going into the next fiscal year
Christie, a second-term Republican now running for his party’s nomination for president, has tried to address the state’s sluggish economy with business-tax cuts and lucrative corporate tax incentives. But an analysis by New Jersey Policy Perspective, a liberal think tank based in Trenton, found New Jersey has only recovered about 70 percent of the jobs lost to the recession.
Senate Republican leaders say they’ve been working hard behind the scenes this summer — when the legislative schedule typically slows to a trickle — to get their jobs bills moving forward. So far, 15 bills have picked up Democratic cosponsors and 10 have passed the full Senate.
In addition to the crowdfunding measure, others bills aim to reduce government regulations, generate a better workforce, and improve the overall marketing of New Jersey and New Jersey-made products.
“These are important ways to make New Jersey the place to be for businesses and families alike,” said Senate Minority Leader Tom Kean Jr. (R-Union). “This is a way to advance job creation and innovation and opportunity without a cost to the taxpayer.”
“They just make common sense,” he said. “I can’t imagine anybody would oppose any of these initiatives. My hope is, on a bipartisan basis, more people will hop on board.”