Ellenoff is Enthusiastic About the Power of Crowdfunding

Doug Ellenoff, a founding partner at Ellenoff Grossman & Schole, a New York-based law firm that focuses on securities law, has been very involved in understanding crowdfunding and the implications of the Job’s Act.  Below, he is interviewed by OneMedRadio.



Click below to hear full audio interview and see transcript that follows.

Brett Johnson:   Welcome, this is Brett Johnson with OneMedRadio in New York City. Today, I’m with Doug Ellenoff who is a partner, a founding partner at Ellenoff Grossman & Schole, a New York-based law firm that focuses on securities law. Doug has been very involved in understanding the crowdfunding issue and the Job’s Act. In fact, he has visited the SEC on numerous occasions and given them some input from the private sector about crowdfunding and the Job’s Act. Thanks for joining us today, Doug.

Doug Ellenoff:   Brett, thank you for the opportunity to speak to you and your audience. As a firm, Ellenoff Grossman & Schole is very actively engaged in crowdfunding and in fact we have the entire corporate group of the firm which consists of 35 lawyers up to date on the act and the ongoing rulemaking process with the SEC and FINRA. We’re very encouraged by the interactions that we’ve been having with those regulatory authorities about this particular program.

BJ:     So can you tell us, Doug, what do you think from the point of view of an emerging growth company, entrepreneur, and investor in the healthcare and life science space, what’s the big picture point of view that you’d want them to understand about Job’s Act and crowdfunding?

DE:   In the most simple terms, I would say crowdfunding is no different than a friends and family round for an early stage company except offered to a broader group of potential investors, the crowd rather than just the friends and family. As we’ve analyzed the program and we’ve done so carefully, we’re very enthusiastic about the power of crowdfunding as a program for entrepreneurs to more easily raise the first round capital they need for pursuing and implementing their ideas. The idea for crowdfunding originates from crowd sourcing, which is where creative folks and politicians raised money without the sale of securities either by donations-based or rewards-based contributions of funds for their political campaign or for the creative person’s ideas in getting a Broadway show on the ground or a photographer having a book made. In Europe, it’s being done in the UK and in other EU jurisdictions successfully for entrepreneurs to raise money.

BJ:  Interesting. Where do you see it going here in the States in terms of what kinds of companies is it appropriate for because there’s a limitation on how much money can raise?

DE:    That’s true, Brett. The limitation from non-accredited investors is up to a million dollars through these online websites referred to as portals. We believe that given the power of the crowd to find specific websites tailored to their investment criteria, investors will go to portals that segment themselves along the lines of investor interest. So as I gather from your audience, biotechnology and healthcare science is of particular interest, we believe that there will be portals devoted to obtaining issuers who are in search of funding to just that portal. There may be one or many portals devoted to that theme and then there will be portals that emerge that are segmented to other geographies or other investments themes and theses that will be appropriate for those investors.

BJ:  Interesting. So in terms of the other parts of the Job’s Act, there’s the prohibition against the general solicitation that’s being eliminated. Can you talk about what that means?

DE:  The removal of the prohibition on general solicitation, to be clear, is a completely different rule change than the rules in the act that will enable crowdfunding to take place. Crowdfunding is raising money online from investors who are non-accredited. The removal of the prohibition on general solicitation is a change to another private placement exemption that will enable issuers to take out ads or go on to TV and actively solicit money for their opportunities from investors that must be accredited and accreditation is a term of art under the Federal Securities laws. Those investors will have to certify that they meet those standards in order to put money into the opportunity that they’ve learned about by being generally solicited in advertising that can be in a magazine, a newspaper, television commercial, or radio ad.

BJ:     So the Job’s Act has two very different things going on and people need to make sure they don’t get them confused, but I guess together they both represent some pretty significant changes to the way people do business in terms of financing.

DE: There are fundamental shifts in this legislative initiative that will enable investors to invest in opportunities that they would never under the last 75 years of statutes been permitted to participate in.

BJ:  Interesting. Well it sounds like a very interesting time ahead. Thanks so much for sharing your thoughts with us today, Doug.

DE:   Thank you, Brett.

BJ:  So that’s Doug Ellenoff with Ellenoff Grossman & Schole, a firm specialized in securities work and has been very, very active in crowdfunding and the Job’s Act. Brett Johnson in New York signing off for OneMedRadio. Good day.


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