CINCINNATI - Several Cincinnati startup companies used a visit by Congressman Brad Wenstrup Wednesday to push for fewer restrictions on crowdfunding.
Wenstrup visited the Cintrifuse offices downtown where he listened to startup leaders discuss the business fundraising option authorized by Congress in 2012, but is still awaiting the implementation of final rules by the U.S. Securities and Exchange Commission.
Until new rules are in place, only accredited investors - those who meet minimum wealth requirements and are considered to be sophisticated investors by regulators – can invest in startups.
Crowdfunding emerged as a local issue this month after it was disclosed that the Ohio Division of Securities is investigating SoMoLend, claiming it sold unregistered securities, committed securities fraud by overstating SoMoLend’s early success and made fraudulent financial projections by exaggerating revenue projections during public presentations and statements.
SoMoLend, an online lending platform, must participate in an October hearing on whether it misled investors. Its CEO Candace Klein resigned from the company because of the controversy.
Some view the SoMoLend case as evidence of the need for more regulation in the crowdfunding space. But startups engaged in the Cintrifuse program urged Wenstrup to push for less restriction.
“The regulations are ostensibly in place because you want to protect people from fraud and all of that, but we already have laws against fraud,” said Tom Raterman, co-founder GlueWorks, a talent management platform that lets job seekers post videos, photos, PDF files and biographies to sell themselves to potential employers.
“I really don’t see any reason why we continue to let only rich people invest in businesses,” Raterman said. “Why not let everybody?”
“We joke all the time about how I can go blow as much money as I want at the casino but I can’t write a $5,000 check to help him fund his business,” added Tim Metzner, co-founder of Differential, a startup accelerator that launched in January.
Wenstrup, a Republican representing Ohio’s 2nd Congressional District, provide no ready solutions. But he is friendly to the idea.
“You know, politicians are able to raise $5 at a time,” Wenstrup said in an interview with WCPO Digital. “We always want to protect against fraud but at the same time, let’s give them an opportunity to shine. If there’s fraud, you catch it and take care of it.”