In a previous article, the PitchBook Blog looked at Wisconsin’s efforts to attract more financing for its startups, whether it be through government-led programs, university grants or public-private partnerships. These issues, which many states no doubt grapple with on a daily basis, were discussed at a Nov. 7 roundtable hosted by Gov. Scott Walker and attended by local angels, VCs and startup founders. Following the roundtable, Governor Walker opened a new avenue for startups in Wisconsin to raise capital by signing Assembly Bill 350 into law, making his state the third—after Kansas and Georgia—to have a state-level crowdfunding bill.
The Wisconsin CASE (crowdfunding and securities exemptions) for Jobs Act is similar in many respects to key provisions in the JOBS Act signed by President Barack Obama in 2012, but features several key differences.
- In an effort to further break down barriers for Wisconsin startups seeking easier access to capital, the Wisconsin law allows up to $1,000,000 in crowdfunding across a 12-month period and up to $2,000,000 if the company undergoes a financial audit of its most recent fiscal year. The JOBS Act’s threshold for financial audit kicks in at $500,000, with a cap on 12-month equity crowdfunding at $1,000,000.
- Income requirements to become an accredited investor in the context of state securities will only be $100,000 if filing taxes individually, $150,000 if filing jointly. In JOBS Act provisions, you must have a gross income of $200,000 or more ($300,000 if filing jointly) to be considered an accredited investor.
- Investors who aren’t accredited would be able to invest up to $10,000 a year in Wisconsin companies, compared to $2,000 or 5% of the investor’s annual income or net in the JOBS Act.
- Accredited investors in Wisconsin would be able to invest an unlimited amount in local businesses. The JOBS Act puts a cap at 10% of the investor’s annual income or net worth, not to exceed $100,000.
It remains to be seen whether this crowdfunding bill will be successful in growing the startup community in Wisconsin, but it does provide new companies an additional way to raise money. And the bill should provide for an interesting test case for whether crowdfunding at a state-wide level can have a positive impact on the startup environment.
“One of the nice things about that is it really opens the door, particularly for small-scale startups that previously didn’t have this kind of access to capital,” Governor Walker said in an interview with PitchBook. “I mentioned how people in the roundtable were saying access to capital, access to money, is such a difficult task. This gives us one more tool to make it easier not just for the high-stakes investors, but for the much smaller-scale investors to put money into companies that are starting up in the state of Wisconsin.”