Steve Case: Crowdfunding Will Augment – Not Replace – Venture Capital
The buzz surrounding equity-based crowdfunding has died down since theJOBS Act entered the purgatory of SEC rulemaking last April. That hasn’t stopped a flock of startups looking to capitalize on the new law, but it does mean they’ll be twiddling their thumbs and wasting investor money indefinitely until the SEC acts.
In a video interview at the South By Southwest festival in Austin, Steve Case, the AOL cofounder and Startup America chairman who advocated for the bill’s passage, says he’s hopeful the agency will finish rulemaking and begin to implement the law by the end of this year. Given that the SEC currently doesn’t have a permanent chairperson and still hasn’t finished fleshing out the Dodd-Frank reforms passed nearly three year ago, this seems a bit optimistic. But I hope he’s correct.
In the meantime some speculate that the introduction of equity-based crowdfunding will put pressure on venture capital as an asset class. Fred Wilson of Union Square Ventures has publicly warned about the torrent of money crowdfunding might unleash, a torrent that could elbow out venture capitalists. Steve Case doesn’t appear worried. “My view is it will help entrepreneurs get going,” he says. “Some of those companies, after they raise a few hundred thousand dollars through crowdfunding, might need a few million dollars and will turn to venture capitalists.” He admits the trend may put pressure on “some” VC firms. My view is that top tier firms will remain insulated from the trend—just as top-tier universities will likely survive the rise of the digital universities like Coursera and 2U—while those without cachet will struggle for deals.
Next on the agenda: immigration. In November the Obama administration declined to support the STEM Jobs Act, which would have eased the way for foreign students studying science and technology in American universities to work in the U.S. following graduation. As I reported in November, the administration ostensibly supports the act but likely opposed its passage in order to preserve leverage for the upcoming debate over comprehensive immigration reform.
The STEM Jobs Act is dead, but Case signals support the I-Squared Act(Immigration Innovation Act) along with Startup Act 3.0 which carries on the STEM Act’s reforms. The I-Squared Act, the bill with the broadest support in Senate according to PandoDaily, would increase the number of STEM visas from 65,000 to 115,000 annually. Startup Act 3.0 addresses the issue of expanding visas for foreign-born graduates of U.S. universities while introducing 75,000 “entrepreneur visas” to immigrants who raise over $100,000 to start a company.
Given the administration’s previous commitment to comprehensive immigration reform, neither of these bills will likely pass. But their existence is important in that they will provide the framework for high-skilled immigration policy within a larger deal. Always the optimist, Case says we might see comprehensive immigration reform legislation introduced in the next month. “I’m confident it will have a robust, high-skilled immigration component,” he predicts. Dismissive of the partisan deadlock witnessed over the past four years, he thinks such legislation could get passed in the next three to six months.
“As a nation, we need to win the battle for talent,” says Case. “We need to really step up our game.”
Image : Flickr user Case_Foundation