With state’s economy struggling, it’s vital to diversify – now! – argues Sen. Mia Costello, an NFIB member, in a special guest editorial for NFIB.
Have you ever had a problem whose solution is so simple – it feels like you already knew it, but just hadn’t thought of it recently?
With Alaska oil prices floundering and our economy struggling, it is vital Alaskans begin to think about new business in this state — it’s something I’ve made a cornerstone of my legislative career. We simply have to diversify and grow if we are to survive. This will require first and foremost the hard work and ideas of innovative Alaskans.
But they can’t move forward alone. They need the help of a Legislature focused on reform and economic development to improve the state’s business climate. I believe this Legislature can help. I believe we are already on the way to attracting both new entrepreneurs and the financial capital they need to succeed.
Access to development capital is one of the biggest hurdles faced by any small business. You can’t do much of anything unless you can get your hands on startup funding. I’m working to help make that easier. The Innovating Alaska Act passed by the Legislature and signed by Gov. Bill Walker this year is designed to provide a new path forward.
It is intended to do for Alaska businesses what GoFundMe does for good causes. This isn’t a program set up to help people specifically purchase something like users do on Kickstarter. It is a program to invest in something. It helps small investors make money here at home while helping small businesses grow the Alaska economy.
Equity crowdfunding is not something new. It is an old concept that is just now reaching broad popularity due to the internet, but its roots trace back to one of our nation’s iconic landmarks.
Americans Rally for Lady Liberty
In 1885, New York City faced a dilemma. France had donated a massive copper statue to welcome arrivals at Ellis Island in the New World. The Statute of Liberty, as it was called, was then boxed in pieces awaiting $100,000 needed to complete the project. Numerous fundraisers and attempts at state and federal funding came up short in covering a cost that today, adjusting for inflation, would be near $2.5 million.
There was a very real possibility Lady Liberty would never rise above New York harbor.
To avoid such a disaster, Joseph Pulitzer, publisher of the New York World, tried something new. Instead of going to banks or colleagues, he pitched the statue fundraising directly to the people. In front page appeals, his paper urged Americans rich and poor to donate whatever they could to the project.
The response was remarkable. Within five months, $101,091 was raised from over 160,000 donors. The average donation was less than $1. Supporters ranged from street sweepers to a kindergarten class in Iowa. By April 1886, the Statue of Liberty towered over the port of New York.
This was an early example of Americans contributing to, some would say investing in, their community. Crowdfunding made the Statue of the Liberty possible.
Today crowdfunding is everywhere thanks to the internet. Social networks connect millions of dollars to tens of thousands of causes and projects. Innovators with new ideas, old ideas, ideas good (and not so good), compete to attract attention and dollars.
Alaskans participate in this new sharing economy all the time. Whether it’s contributing to a GoFundMe site for a friend with serious medical problems, or giving to a Kickstarter account for an artist or theater production. But until now, they could only use crowdfunding to donate or purchase.
Opening Doors For Alaskans
Now there’s a way to use crowdfunding to invest. The Innovating Alaska Act opens the doors for equity investments by individual Alaskans.
You, the investor, can buy ownership shares in an Alaskan company in an amount up to $10,000.
The act is intended to help entrepreneurs connect with investors and gain access to capital. Business owners can raise up to $1 million to start a company. Instead of trying to obtain large investments from a bank or a few traditional investors, they can solicit small investments from a huge pool of investors.
Alaska now joins two dozen states that have enacted equity crowdfunding laws since Congress passed the Jumpstart Our Business Start-Ups Act in 2012. These new policies pave the way for new business creation while protecting consumers.
One cannot overstate the importance of these small business startups in growing our state’s economy. The Alaska Department of Commerce, Community & Economic Development estimates over 60 percent of new jobs in Alaska come from startups and growing small businesses.
Crowdfunding is a pioneering approach to empowering local entrepreneurs. It gives you and your neighbors the opportunity to invest in Alaska companies. Investing locally gives you the chance to get in on the ground floor with innovative Alaska-owned startups.
The flexibility crowdfunding provides could help expand growing industries from craft-breweries to tourism to shellfish aquaculture to who know’s what. The sky is the limit. Among the opportunities that excite me most are the potential for the development of unmanned aviation and technology in our state.
At a time when Alaska truly needs new investment, small steps and simple solutions like this can help move our state forward. I’m proud to be joined by legislators from both parties in crafting a framework to encourage new investment within Alaska. Advancing our economy through innovation can make Alaska’s small businesses a big success.
Senator Costello explains more about the Innovating Alaska Act in this five-minute video: