California Needs Investment Crowdfunding: An Open Letter to Gov. Jerry Brown

California Needs Investment Crowdfunding: An Open Letter to Gov. Jerry Brown


Dear Governor Brown,

Long time listener, first time caller.

You’re a busy man, but I want to bring your attention to something that I suspect is right up your alley: investment crowdfunding. California should be leading the way on this promising new economic mechanism, and you’re just the kind of Liberaltarian, innovation-minded, and fiscally conservative governor who would embrace it. But instead, we have fallen behind a growing list of states that includes Alabama, Georgia, Kansas, Michigan, North Carolina, Washington, and Wisconsin.

As you know, the JOBS Act of 2012 (acronymically named for “Jumpstart Our Business Startups”) legalized investment crowdfunding at the federal level. This legislation will let the public invest in makers, small businesses, and others, through sites like Kickstarter, bypassing the expensive DPO (Direct Public Offering) process that’s designed for large companies. Sites like Kickstarter have already sparked a wave of creativity among makers, and allowing the public to invest in garage startups promises to take their entrepreneurship to the next level. The Securities and Exchange Commission (SEC) is still figuring out how they will oversee investment crowdfunding, so it isn’t legal yet, but the green light is expected later this year.

However, some people argue that the burden and expense of all the required reporting and auditing will make investment crowdfunding under the JOBS Act not worth the trouble. Several companies are betting the other way, hoping to create a streamlined “TurboTax for Investment Offerings” that makes the process worthwhile — but only time will tell if they’re successful.


Meanwhile, several states have enacted new regulations and laws for crowd investing that are inspired by the JOBS Act, but demand far less administrative overhead. They all operate under the longstanding intrastate securities exemption, which says that if a business offers stock to investors in its own state only, the sale is regulated by the state rather than the SEC.

Kansas led the way on this with the Invest Kansas Exemption, which was enacted before the JOBS Act passed. That’s no surprise, given the state’s history — in 1911, Kansas passed the first-ever securities laws, and the “blue sky laws” that govern intrastate securities sales are named for its example.

Georgia followed with the Invest Georgia Exemption. Then Wisconsin and Michigan followed with similar exemptions — Michigan’s passed on Dec 31, 2013. Meantime, investment crowdfunding bills have been introduced into the legislatures of North Carolina and Washington state. Alabama promises to be next. Georgia-based Bohemian Guitars, which builds beautiful musical instruments out of oil cans, is one example of a new business that funded itself in this way.

Photo: Associated Press 1992
Photo: Associated Press 1992

So where’s California, the land of startups and innovation? Like the USA itself, people come to California to reinvent themselves and pursue their dreams. And people come to crowdfunding for the exact same reasons, so I think we have a disconnect — especially since you yourself are such a crowdfunding pioneer. In 1992 you financed a presidential campaign and won multiple key primaries using a toll-free number (1-800-426-1112) to collect donations capped at $25. That was a major milestone in crowdfunding.

You don’t need to be Richard Florida to understand that the creative people who drive economic success move to places that support them, and leave the places that don’t. That’s why Georgia investing guru Knox Massey said, after Ohio regulators threatened Cincinnati-based funding platform SoMoLend, “Ohio Startups, Ohio Doesn’t Want You. Move to Georgia!

I hope you will consider advocating for a California crowdfunding exemption, which can be accomplished either legislatively, or as a simple rule change by the California Department of Business Oversight.

I would be delighted to discuss further, and you can see others who likewise favor such an exemption for California at this online petition: Create a California Intrastate Crowdfunding Exemption.


Paul Spinrad

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Paul Spinrad is a broad-spectrum enthusiast, writer, maker, and dad who lives in San Francisco. He hatches schemes at

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