Floor Speeches

I would like to express my appreciation to the leadership of the House for expediting these two important bills and bringing them before the House of Representatives. I rise in support of the underlying bills, the Entrepreneur Access to Capital Act and Access to Capital for Job Creators Act.

Now, while I support the two bills before us, I do wish the rule was an open one. I will be voting against the rule. An open rule would allow the House to work its will in a true democratic process, allowing Members to come down to the floor and freely debate these bills. Unfortunately, in the Rules Committee, we were offered only a structured rule. 

Now, both of these bills accomplish something very important in terms of opening up capital markets and helping startups work. Let me discuss briefly how this whole accredited investor concept works.

To be an accredited investor, you simply need to be worth $1 million or have income of $200,000 a year. Now, that's a very rarified strata of the American people.

What does that mean when you're an accredited investor? It means that you can participate in a private equity offering that doesn't need to go through the full SEC process which is cumbersome and costs a lot of money. So, in effect, many venture capital opportunities, funding opportunities for startup companies, are reserved for those who are only worth above a million dollars. They say the easiest way to make a million dollars is to already be worth a million dollars. In fact, people worth more than a million dollars have heretofore had a monopoly on participating in these kinds of opportunities.

Now, what can an average American family, let's say with a net worth of $50,000 or $100,000 do? Well, they can go to Las Vegas and they can bet it all on number 9. They can buy gold, which is being pushed by all these profit organizations, and I think we need a congressional investigation into that. Many of these organizations selling gold sell it for above market value by preying on unsuspecting people who are not accredited investors. They might be worth $50,000 or $100,000.

What you find, by the way, is that this whole concept of tying an accredited investor to net worth has its flaws. Just because somebody has several million dollars doesn't mean they're a sophisticated investor. Meanwhile, there could be somebody who's worth $10,000 who is very sophisticated. It's unfortunate that we have the whole system tied to that.

But what we see before us today are two important chinks in this armor. One is consistent with the current concept of accredited investor but at least opens it up beyond their personal networks, and the other one allows small investors to participate in a more meaningful way.

First, the Entrepreneur Access to Capital Act, crowdfunding. What this means is it provides a new way that companies, startup companies, can raise a limited amount of money, $1 million a year, or $2 million if they have audited financial statements. Now, that's a sizable amount for a company to get off the ground and get started. Many tech companies that you hear of today started with that much money or less. Historically, how did they raise that money? They would go to a venture capitalist. They would go to a wealthy individual. We call that person an angel investor. They'd get a check for $500,000. The investors had to be worth more than a million dollars. Your average American might be worth--might only have $5,000 to invest or $1,000 to invest, was unable to, under law, participate in that offering.

What this does is it opens up an avenue that allows the individual investor to invest up to $10,000 in a startup company. Now, that's a risky investment. They could lose that $5,000. They could lose that $2,000. But you know what? They could go to Las Vegas and they could lose it a lot quicker with a lot less upside.

So this gives every American the opportunity to invest in startup companies, if one of their friends is starting one, if there is some concept they are excited about, and reap the rewards as well. In addition to feeling part of something special, some of these investments, the vast minority, could return 50:1, 100:1 and could help those people acquire wealth, and that's very, very exciting.

The Access to Capital for Job Creators Act also deals with a flaw in how private equity is raised. Currently, you have to know the right people to get into a private equity deal. In fact, a company that's offering private equity is not even allowed to, under SEC regulation, post a prospectus and information on their Web site in an open environment. What this bill does is it creates a safe harbor that allows them not to advertise it in the sense of loudly promoting it and trying to sell shares, but in a sense of simply providing it in a nonpassword-protected way on their Web site to allow people who aren't part of their personal network of elite friends to participate in that private equity offering as well.

The average median household net worth in this country is about $100,000. And previously, all of these investment opportunities have been reserved for people worth over a million dollars. Now, if somebody's family, an American family watching this, or one of my constituents is worth $100,000 or $150,000 or $50,000, it may not make all the sense in the world to invest $5,000 or $10,000 in one startup, but a cap of $10,000 is a reasonable amount. It's their money and their right to do that if that's what they want to do. These bills are consistent with that. And, more importantly, they provide a new financing mechanism for startups in this country. That way, a startup that has broad appeal and a broad network can go to 1,000 people that have $1,000 each rather than one wealthy investor for $1 million. That was previously nearly impossible under current law.

Mr. Speaker, I have here a Statement of Administration Policy, and I'm proud to say that this bill, the Entrepreneur Access to Capital Act, has strong support from the administration: ``This bill will make it easier for entrepreneurs to raise capital and create jobs, and the administration looks forward to continuing to work with Congress to craft legislation that facilitates capital formation.''

I would like to applaud the leadership of the President of the United States in strongly supporting these endeavors. As a former small business owner, I know how important it is to invest in a company's future and how critical resources are for growth. The more avenues that we can provide for financing startup companies or allowing a mom-and-pop company to expand, the better it is for the growth of our economy.

More importantly, these two pieces of legislation before us demonstrate that Democrats and Republicans can work together. We can put aside our partisan differences, we can fast track a commonsense piece of legislation and work towards solutions to spur economic growth.

Now, to be clear, these two bills alone don't do enough to turn our economy around. These measures do little to address what the American people are asking us for, creating jobs in the short term and getting the economy moving. Will they have a positive impact in creating jobs and allowing for financing to flow to new startup operations? Yes, but they are not fundamentally game changers.

These bills will allow average Americans an opportunity to invest in early-stage companies. Now, many of these opportunities won't work out. American investors will lose their money. Other American investors will make money. But, again, it is a very American concept that it is your money to invest as you choose, and the best opportunities shouldn't be reserved for millionaires. We should make them widely available to all Americans.

Democrats on the Financial Services Committee have also been extremely instrumental in improving these bills to protect business and investors. Democrats have added a critical provision requiring that issuers verify that an investor is actually eligible to purchase the offer in securities, and the change ensures there's a balance between the need to use restrictions on capital formation and protecting investors from fraud and making sure we don't get in the way of State regulation, as well.

There is a fine line; and there are, as I mentioned, some areas where sham investments are being aggressively promoted that are certainly contrary to the spirit, if not the letter, of the law.

Likewise, there are real opportunities that until this bill becomes law those who are worth under $1 million are ineligible from participating in, and as a companion those who might be worth more than $1 million but don't know the right people are unable to participate in private equity offerings. This bill remedies both of those restrictions and will help unleash capital flows to startup corporations. I'm proud to support both bills.