Exciting Changes to Illinois Financing Law
New York and California are firmly entrenched as the go-to states for financing and tech, but thanks to a new bill passed by the state of Illinois, a midwest competitor could soon be in the mix as the hot new place for entrepreneurs.
With some of the highest fees to start a business in the nation, not to mention the ever-changing maze of Chicago’s various administrations and departments, Illinois and Chicago have taken a long time to realize the opportunities for jobs and new business they have been missing out on.
That is all about to change. With the high profile success of Chicago’s premier startup incubator, 1871, along with recent changes to legislation that includes a $270 million dollar initiative specifically earmarked for growing and supporting new businesses, Illinois is poised to be one of the best places in the nation to start a business.
Lowering administration fees and setting aside funds for new business are effective ways to encourage new businesses but certainly nothing groundbreaking. The new bill, which recently passed unanimously in both the House and the Senate, is called The Illinois Intrastate Crowdfunding Bill and, you guessed it, changes the laws governing how individuals can crowdfund new and existing businesses.
When most people think of crowdfunding, the first name that comes to mind is generally Kickstarter, which launched in 2009 as a way for companies or individuals to raise money for a business or project directly from people they may or may not know through an online network. Anyone can post a project, set a fundraising goal, and start soliciting donations within a couple hours. Companies can offer incentives or “packages” based on the size of your donation that would include early access to products or features to the project they were backing, usually at a discount.
This new bill opens up a huge a new avenue to entrepreneurs and individual investors alike. Here are the two big changes resulting from the new bill:
Changes to the definition of ‘Accredited Investor’. Before the bill, only ‘Accredited Investors’ were eligible to invest directly in companies for equity, and this definition basically meant only people with over $1mm in net worth were eligible. Now, almost anyone is able to invest.
Allows individuals to invest in local companies via crowdfunding, and allows those investors to actually own a piece of the company. This includes start-ups and companies not yet off the ground.
I was lucky enough to hear Hector Robles, the co-owner of one of Illinois’ first approved crowdfunding sites, Vestlo.com, speak about these changes at the Incubate Illinois Conference last week, and it was very inspiring to hear his ideas and passion for this project. Needless to say this changes things in a huge way for both the individual investor and the entrepreneur in some truly exciting ways.
For further reading on crowdfunding in Illinois, please check out these articles:
Crowdfund Insider - Illinois Crowdfunding Bill Gets Approval In Both House and Senate - http://www.crowdfundinsider.com/2015/05/68210-illinois-crowdfunding-bill-gets-approval-in-both-house-senate/
Chicago Tribune - Big Ideas 2016: Everything is about to change for startup and small-business investing - http://www.chicagotribune.com/bluesky/originals/ct-big-ideas-equity-crowdfunding-bsi-20160119-story.html