Everybody complains about the lack of funding for Tampa Bay startup businesses. Now some help is on the way.
A federal proposal unveiled Wednesday would allow entrepreneurs and startups looking for backing to solicit small investments online from the general public.
Called equity crowdfunding, it would let small companies raise money by pooling together tiny investments from people around the country in exchange for a potential financial return. This should not be confused with websites such as Kickstarter, where people donate funds to support a creative project and can receive a reward for their pledges — but not a financial return on their investment.
The Securities and Exchange Commission proposal, if adopted after a period for public comment, could shift how small companies raise money in the private securities market.
Tampa's Jordan Raynor, co-founder of startup Citizinvestor, an online service that helps fund public projects, says the new rules would be "hugely beneficial" in Tampa Bay, where the pool of early-stage investors is small.
"We kicked off our funding round this morning on AngelList" — an online source of funding for startups — "seeking to raise $250,000 to allow us to expand our Tampa-based team," Raynor said. "Once the SEC rules are implemented, we will be able to cast a much wider net for investors."
An informal survey of more than 60 area startups by the Tampa Bay Times this year found the lack of access to investors willing to fund new businesses was a chief hurdle.
In the past, private firms could solicit only investors deemed "accredited" — meaning they have a net worth of at least $1 million or annual income topping $200,000.
The SEC's crowdfunding proposal would expand that pool of eligible investors.
Startup veteran Daniel James Scott, a director of USF St. Petersburg's entrepreneurship program, likes the SEC plan but has reservations.
"The huge plus is that accredited investors aren't restricted to investing in just their own back yards anymore," he says. But Scott wonders if Tampa Bay startups can gain traction without a breakout success in the area.
"Who will step up in Tampa Bay to be the celebrity investor that generates social proof for our startups?" Scott asks. "We've come up short to date."
"Naturally, a new source of funding can be good for startups," says Tonya Elmore, chief executive at the Tampa Bay Innovation Center, a startup accelerator in Largo. "However, I am curious to see if the crowdfunding market will simply replace the traditional friends and family role."
At Tampa's KiteDesk, a startup that boosts a company's sales prospects, co-founder Jack Kennedy says the SEC rules will help create new opportunities for Tampa companies. "They can pitch the crowd and go public on a small scale," he says, "and that helps increase the total dollars going to startups."
In a metro market long on startups but short on funding, celebrate every door opening to new investors.
Robert Trigaux can be reached at firstname.lastname@example.org.