The Deregulation Bill That's Drawing Crowds In the same month that the debt supercommittee failed to rise above partisanship for the sake of America's economy, a hyper-partisan House of Representatives managed a landslide victory. The crowdfunding bill it passed last week could be a big break for entrepreneurs — but does it put investors at risk?

The Deregulation Bill That's Drawing Crowds

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It's a tough time to get anything through on Capitol Hill with bipartisan support these days. So when a financial bill passed the hyperpolarized House of Representatives with flying colors earlier this month, we took note and wanted to dig a little further. The bill is designed to make it easier for aspiring small-business owners to get money from investors through the Internet. It's called crowdfunding.

The legislation allows businesses to sell unregistered securities, but there are still some rules. Each business person can't raise more than $2 million, and each investment can't be higher than $10,000. NPR's Aarti Shahani has more on how Democrats and Republicans came together to give start-ups a boost.

AARTI SHAHANI, BYLINE: While everyone may not agree on financial deregulation, when it's for the little guy, it draws a supportive crowd - a crowd of lawmakers and crowdfunders, to be exact.

REP. PATRICK MCHENRY: On this vote, the yeas are 407, the nays are 17. The bill is passed.


SHAHANI: Earlier this month, the House passed the Entrepreneur Access to Capital Act.

So you were surprised?

MCHENRY: I was quite surprised. One of my Republicans said this bill should be renamed the Obama-McHenry Friendship Bill.


SHAHANI: That's congressman Patrick McHenry, the North Carolina conservative who introduced the bill. At a small victory rally, he says the measure is simply...

MCHENRY: Eliminating regulation so you can let capitalism be free in this country. There's a wider belief in the power of crowdfunding, and what it can do to help job creation.

SHAHANI: Crowdfunding is a way for entrepreneurs to raise money on the Internet from people they may not personally know. Currently, all sorts of do-gooder causes get donations through engines like But because of a securities law born of the Great Depression to prevent fraud, for-profit businesses can't ask strangers to invest. The crowdfunding bill would change that.

Virginia resident Osiris Hoil stood at the victory rally alongside McHenry. Today, Hoil is a restaurateur. Just two years ago, he was a laid-off construction worker mulling around at home, cooking for fun and solace.

OSIRIS HOIL: When I moved to the United States, I start getting better with my culinary as a Mexican, because I missed my mom's food.

SHAHANI: A neighbor loved Hoil's authentic family recipes enough to invest 25,000 and a food truck for him, among D.C.'s first. One year later, District Taco has 33 employees, two trucks, and a restaurant in Arlington, Virginia.

HOIL: Number 12, el locito. Number 12.

SHAHANI: The business is a local staple with a cyberstrategy. Hoil tweets daily specials to over 6,000 followers. Another 1,300 eye him on Facebook. Under current law, Hoil can't ask these followers to become shareholders, and he thinks that's unfair, not just to him.

HOIL: We don't own District Taco. The customers own District Taco because they build it, you know? I would like for them to get something back.

SHAHANI: Dana Muriello works for people just like Hoil. She's the entrepreneur's entrepreneur. In 2009, she launched ProFounder, a consulting company that helps businesses crowdfund. Muriello testified before the House Financial Services Committee in support of the bill. She says it could solve market inefficiency without introducing rampant new fraud.

DANA MURIELLO: You could have great entrepreneurs, communities that want to support them and yet for some reason, those two parties just can't connect. We don't see a particularly viable scenario, where total strangers are going to wander on to this marketplace and invest in deals from people they don't know, in areas they don't care about.

SHAHANI: Jack Herstein is skeptical. He's president of the North American Securities Administrators Association, and investigates fraud for the state of Nebraska. In the typical scam, con artists...

JACK HERSTEIN: Just need a few investors to jump in, spread the word around how great it is. And the next thing you know, the website's down and the money's gone.

SHAHANI: The bill could make a bad situation worse by taking regulation out of the picture. It would create an exemption for small businesses so that they don't have to register investment activity with the state that they're located in.

HERSTEIN: Once you preempt state law, it is gone. It's very difficult to get that back.

SHAHANI: Investing is a risk that District Taco regular Lisa Merman is willing to take if given the chance.

LISA MERMAN: I could do it in a small way, in a community business that I use and trust. I would love to do that because it would be a chance to be a part of it. And at a low dollar amount, it's a low risk.

SHAHANI: Would you feel as a part of it if you just bought 500 tacos?

MERMAN: I can't eat 500 tacos, so no.

SHAHANI: Right beside her is Brian Waldman.

BRIAN WALDMAN: This morning, I had a colonoscopy, and the first thing I wanted to have as soon as I left was District Tacos.

SHAHANI: If his pockets run half as deep as that appetite, and the crowdfunding bill becomes law, this company is in business. Aarti Shahani, NPR News.

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