News from the Alaska State Legislature, the Office of Senator Costello
For Immediate Release: September 28, 2016
Innovation is key to growing an economy
Innovation is key to growing an economy
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 - its something I've made a cornerstone if 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 all alone. They'll need the help of a Legislature focused on reform and economic development that can 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 start-up funding. I'm working to help make that easier. The Innovating Alaska Act passed by the Legislature and signed by the Governor this year is designed to provide a new path forward.
It is intended to do for Alaska businesses what GoFundMe did for good causes. This isn't a program set up to help people specifically buy something like Kickstarter. It is a program that helps people invest in something. It helps small investors make money here at home while helping small businesses grow the Alaska economy.
Equity crowd-funding 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.
In 1885, the City of New York faced a dilemma. France had donated a massive copper statue to welcome those arriving 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 of 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 fund-raising 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 a dollar. Supporters ranged from street sweepers to a kindergarten class in Iowa. By April of 1886, the State 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. Crowd-funding made the Statue of the Liberty possible.
Today crowd-funding 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 crowd-funding to donate or purchase.
Now there's a way to use crowd-funding 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 crowd-funding laws since Congress passed the Jumpstart Our Business Start-Ups (JOBS) 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 that over 60 percent of new jobs in Alaska come from start-ups and growing small businesses.
Crowd-funding is a pioneering approach to empowering local entrepreneurs. It gives you and your neighbors the opportunity to invest in Alaska companies. Investing local gives you the chance to get in on the ground floor with innovative Alaskan-owned start-ups.
The flexibility that crowd-funding 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 that will encourage new investment within Alaska. Advancing our economy through innovation can make Alaska’s small businesses a big success.
Sen. Mia Costello represents District K in the Alaska State Senate, and serves as chair of the Senate Labor & Commerce Committee.
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