Hub Board Member Published in ACS Medicinal Chemistry Letters

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Hub Board Member and Mentor, Dr. Ruth G. Perez, Associate Professor of Biomedical Sciences in the center of Excellence for Neurosciences at Texas Tech University Health Sciences Center at El Paso and Paul L Foster School of Medicine has published a seminal paper describing new compounds with potential for treating Parkinson’s disease.

The manuscript, entitled “Novel FTY720-Based Compounds Stimulate Neurotrophin Expression and Phosphatase Activity in Dopaminergic Cells” was published May 30th in the journal ACS Medicinal Chemistry Letters. The work was conducted in collaboration with Dr. Jeffrey Arterburn of New Mexico State University in Las Cruces. The co-authors of the paper include Javier Vargas-Medrano, Sesha Krishnamachari, Ernesto Villanueva, Wesley H. Godfrey, Haiyan Lou, Ramesh Chinnasamy, Jeffrey B. Arterburn, and Ruth G. Perez.

Please click here to access the paper.

Agritopia in the Upper Valley?

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Agritopia in the Upper Valley_ – El Paso Inc. 3-30-14

Posted: Sunday, March 30, 2014 6:00 pm
By Robert Gray El Paso Inc. staff writer

Joseph Nester, left, of Kaizen Construction Services and Scott Winton of Winton Group stand on the Upper Valley farmland where they want to develop an urban agriculture community. But first, they are asking for input from area residents at a design charrette.

Joseph Nester, left, of Kaizen Construction Services and Scott Winton of Winton Group stand on the Upper Valley farmland where they want to develop an urban agriculture community. But first, they are asking for input from area residents at a design charrette.

Where El Paso’s Westside suburbs end and the green and brown rectangles of Upper Valley farmland begin, two El Paso developers are moving forward with an unusual 120-acre development.

On Thursday, two green tractors crisscrossed the land at the southeast corner of Artcraft Road and Westside Drive, the neatly plowed soil dotted with white tufts of cotton left over from last season’s crop.

Partners Scott Winton of Winton Group and Joseph Nester of Kaizen Construction Services are contemplating building an urban agriculture community here with a tightknit mix of residences and retail.

The partnership, called UV120, has a pending contract to buy the land.

But the development has concerned some longtime Upper Valley residents who believe the creep of suburban neighborhoods threatens the area’s agricultural heritage and character.

To help allay concerns, the partners are seeking input from area residents before drawing up plans and have worked with the city to hold planning sessions. The second and final, “design charrette” is scheduled for 6-8 p.m. Wednesday, April 2, in the Canutillo High School cafeteria.

Winton said he expects to present the master plan 45 days after the charrette.

“If we are going to be developing land, we should be doing it in a way that is more conducive to the creation of community,” Winton said.

He and his partner said the development will respect the area’s agricultural heritage and they imagine a village with a simple, small-town feel that could center around a small cash crop, something like an organic garden or orchard.

“Hopefully, they are going to do something like that, because we only have this little bit of the valley left,” said Jim Maxfield, a founder of the Save the Valley neighborhood association. He has lived in the Upper Valley for 20 years.

David Bogas owns a small pecan farm in the Upper Valley where he has lived for 25 years. He’s also director of development for EPT Land Communities, the group building the Montecillo urban village along North Mesa Street.

“Being both a developer and having a small farm, it is a difficult line to walk,” Bogas said. “It tugs at the heartstrings to see land come out of farming. But the truth of the matter is when it comes to housing and commerce, a lot of times it is a necessity.”

At the first planning session for UV120, “the idea of preserving the agricultural heritage of the Upper Valley came out very clear,” Winton said. [Download report]

His partner, Nester, said the UV120 community may incorporate some elements of the Agritopia neighborhood in Arizona.

Agritopia is described as a “modern day village set within the urban fabric of the Phoenix metro area.” Although located in a suburb, life in the neighborhood revolves around a working farm.

“We know that there are a lot of better ways to develop land that we are not familiar with yet,” Nester said.

“So part of this process is also researching other communities that have been successful.”

More houses

In the meantime, Winton Group is set to break ground on a 62-acre neighborhood called Rio Valley half a mile north of UV120 at the corner of Westside Drive and Borderland Road, according to Winton.

It could include up to 350 residences, a “main street” lined with shops and an orchard with pomegranate trees.

Winton hopes Rio Valley will one day be the home of a pomegranate festival with sales of pomegranates helping fund the neighborhood association.

Further east, the first residents are moving into Desert Springs, a much larger suburban subdivision immediately north of Transmountain Road that is being developed by Desert View Homes.

Once a two-lane road cutting across untouched desert from the western slopes of the Franklin Mountains to Interstate 10, Transmountain is scheduled to open as a four-lane divided highway this summer with overpasses and sweeping direct connectors.

Drive that way today and you’ll see workers finishing up the first 25 homes of the 1,000-acre community.

“The growth rate is exceeding expectations,” said Pat Woods, director of land for Desert View Homes.

“I wouldn’t be surprised to see several hundred homes in place in the next 18 months.”

The homes, priced for first-time homebuyers, are selling as fast as they can build them, Woods said, and he expects they will build 600 homes in Desert Springs over the next six years.

Stretched thin

So where are all these new homebuyers coming from?

They’re probably moving from older parts of the city, said University of Texas at El Paso economist Tom Fullerton.

“Usually what happens in these cases is that people move out to the fringes of cities because most of the houses inside the city are occupied and that unfortunately has a hollowing out effect on school systems,” Fullerton said.

The city’s chief planner, Mathew McElroy agreed.

“People are moving out of the city core and moving into new development on the edges of the city,” McElroy said.

One of the problems with that, Fullerton said, is that people buying new houses tend to have children, so school districts struggle to keep up as families with school age children push out to the edges of the city.

Enrollment at El Paso Independent School District, for example, has not grown in the past 25 years, yet the district has had to build new facilities totaling more than 3.7 million square feet, according to Superintendent Juan Cabrera.

“They are building new schools when they have excess capacity in other schools in the district,” said Susie Byrd, who was elected to the district’s board of trustees but hasn’t taken office because a board of managers now oversees the district.

Most of the new development in Northwest El Paso and in the Upper Valley is occurring in the Canutillo Independent School District. There are plans for 5,200 new homes in the district, CISD spokesperson Gustavo Reveles said.

The district’s student population has grown by more than half in the past 20 years, from 4,151 students in 1994 to 6,042 today, according to the district.

An elementary school under construction at the corner of Northern Pass and Paseo del Norte is scheduled to open in fall 2015. The district has one high school that is close to capacity and no funding to build another one, Reveles said.

To download the “UV120 Charrette Findings” report, click here.

Softener sensor, airplane-control system win El Paso venture contest

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Softener sensor, airplane-control system win El Paso venture contest – El Paso Times 3-12-14

By Vic Kolenc / El Paso Times

EvoAir CEO Michael Everett won the Professional Track of the Paso del Norte Venture Competition + Expo

EvoAir CEO Michael Everett won the Professional Track of the Paso del Norte Venture Competition + Expo

A University of Texas at El Paso team with a sensor that reduces the amount of salt needed to operate water softeners, and an El Paso startup developing an automated control system for small airplanes were the winners of the sixth annual Paso del Norte Venture Competition last week.

“When we were announced as the winner (of the professional division), I think I was in shock,” said Michael Everett, chief executive officer and founder of 5-year-old Evolved Aircraft Systems, or EvoAir. It beat out 18 other startups for the win.

“We have been doing this for quite awhile, and there always seems to be a bump in the road to overcome,” said Everett, 34, who has degrees in mechanical engineering from UTEP, and is working on a doctoral degree. Everett also competed as a student in the first two competitions in 2009 and 2010 when he was just forming his company.

EvoAir is developing a system to control a host of systems in small airplanes, similar to autopilot, Everett said.

“Unlike autopilot, however, our technology has been developed to function when the pilot is hand-flying the aircraft,” Everett said in an email.

Atlas Regeneration Technologies, a four-member UTEP team that hopes to be able to form a company to sell a unique water-softener sensor, beat out 19 other student teams from UTEP, New Mexico State University, and Mexico to win the student division of the competition.

“You learn things in books and classes and to do something more real was pretty neat,” said Malynda Cappelle, 37, leader of the team. “The judges understood our (eco friendly) message and thought it was a viable message and a broad arena.”

Cappelle is a doctoral student in civil engineering at UTEP and associate director of the UTEP Center for Inland Desalination Systems. The water softener sensor is the invention of the center’s director, Tom Davis, Cappelle said.

The sensor, which could be installed on residential and industrial water softeners, monitors water hardness, which reduces the amount of salt used in a softener, Cappelle said. That means less salt would be released into sewage systems, and ultimately into rivers, such as the Rio Grande, she said.

Water softeners are an $11 billion market worldwide, so the sensor has big potential, she said. And it could be modified to detect pollutants in water, she said.

Atlas and EvoAir each won $10,000 and a year of incubation at The Hub of Human Innovation, an El Paso incubator and one of the organizers of the venture competition.

Atlas also gets the chance to compete in May at the Global Venture Labs Investment Competition in Austin. It’s been dubbed the Super Bowl of venture competitions. American Water Recycling, another UTEP team, and winner of last year’s Paso del Norte Venture Competition, finished in the top 10 in the Austin competition last year. It’s now in the process of further developing the company.

A long list of venture experts from investment firms, companies, and other organizations judged the competition. The teams and startups had to make pitches to the judges. The student teams had to submit business plans.

“They were judged on whether they could explain the market pain — what problem they are trying to solve, what the market is, and how they plan to market” their product or service, said Nancy Lowery, assistant director of The Hub of Human Innovation.

Vic Kolenc may be reached at 915-546-6421.

Winners of 2014 Paso del Norte Venture Competition, and prizes:

Pro division

1st: Evolved Aircraft Systems, or EvoAir, $10,000 and year of incubation.

2nd: Ruskat Medical Group, $2,500 and six months of incubation.

Student division

1st: Atlas Regeneration Technologies, UTEP, $10,000 and year of incubation.

2nd: Polyverse, UTEP, $5,000.

3rd: Stratum Technologies, UTEP, $1,000.

Flying car and more pitched at El Paso venture expo

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Flying car and more pitched at El Paso venture expo – El Paso Times 3-7-14

Entrepreneurial spirit, technologies on display at UTEP
By Vic Kolenc / El Paso Times

Luz Perez, right, and Alexandra Perez of MPI Machinery and Design show Cathy Swain, president of The Hub of Human Innovation, products of their company during Thursday's Paso del Norte Venture Competition and Expo at the Camino Real Hotel. (VICTOR CALZADA — EL PASO TIMES)

Luz Perez, right, and Alexandra Perez of MPI Machinery and Design show Cathy Swain, president of The Hub of Human Innovation, products of their company during Thursday’s Paso del Norte Venture Competition and Expo at the Camino Real Hotel. (VICTOR CALZADA — EL PASO TIMES)

A UTEP team’s grand dream of producing a flying car, a father and son start-up selling apps to track down lost or stolen phones, and Chihuahua students’ simple vision of a desert shrimp farm were part of the entrepreneurial spirit displayed Thursday at El Paso’s second venture expo.

Other ventures included technologies to treat diseases and make paper-thin solar panels.

Nineteen start-up companies and 20 college teams were represented at the expo in the Camino Real Hotel’s ballroom. It launched the sixth annual Paso del Norte Venture Competition, which ends Saturday when winners of the student and professional divisions are picked at the University of Texas at El Paso.

The events were organized by The Hub of Human Innovation, an El Paso high-tech incubator, UTEP, New Mexico State University, and Monterrey Tech’s campus in Juarez.

The expo, which included afternoon sessions where start-up companies made pitches to investors and judges, had the feel of a school science fair mixed with doses of TV’s “Shark Tank.”

“We were in the student competition last year and were told our idea would never go forward,” said Leon Viveros, 32, a partner in 35 Solar, a startup based at New Mexico State University’s Arrowhead Center, a venture incubator where he also is a staff member. “But we were able to raise money and make our first prototype” — a tiny solar panel, which he held in the palm of his hand.

Kramer Winningham, 35 Solar’s chief executive officer, said his company raised $15,201 on Kickstart, a crowd-funding Web site, by giving Hatch chile powder as a reward for making a donation. The startup is aimed at using thin-film technology to produce thin solar panels at low costs.

El Paso businessman Stephen Myers and his tech-savvy son, Matt, 35, developed DataGNS, a software application that can be placed on a cell phone or other mobile device that tracks the device, and can remotely erase all personal data in it if needed. The app is on the Google Play store now.

Robert Cottingham, a partner in the Myers’ start-up, NewSource Electronic Solutions, and its acting CEO, said their business model is to become the “ADT of recovering phones.” ADT is a giant home and business security company.

Leonardo Orea, 22, a mechanical engineering student at the University of Texas at El Paso, 18 months ago began working on his dream of producing a flying car. That idea turned into Lilienthal, a UTEP team competing for the $10,000 first-place prize and a shot at going to a global venture competition in Austin in May.

“People have been trying to come up with a flying car for over 100 years,” and no one has been successful, Orea said. One problem is the car usually looks more like an airplane than a car, he said.

His design has winglets that retract while the car is on the ground, and it uses NASA-researched aerodynamics to make the car easier to lift into the air with the help of an on-board compressor, he said. Win or lose, Orea said his team hopes it can interest investors into giving them $20,000 to do their “proof of concept” work.

Jeffrey Max Jones, a Mexican businessman, former Chihuahua senator, and a judge for the professional division of the competition, said the expo and venture competition are part of the innovation efforts needed to create companies that will create jobs needed in this area.

“More value is added in creating businesses” rather than just trying to attract businesses here, he said.

Webb Johnson, a representative for the Verge Fund, an Albuquerque investment fund, said he was impressed by the presentations at the expo. The fund is always looking for interesting ventures to invest in, he said.

Jorge Garza-Ulloa, 61, who recently received his doctorate in electrical and computer engineering at UTEP, hoped to convince investors at the expo to help fund further development of his software to detect muscle fatigue. That can be used to make diabetes treatment more effective, he said. The software came out of his doctoral research at UTEP.

For the Desert Shrimps team from Universidad Tecnologica de Chihuahua, their idea is to feed some of the salty soil found in Jimenez, Chihuahua into special tanks to grow organic shrimp. They estimate $50,000 is needed to start the venture.

Vic Kolenc may be reached at 915-546-6421.

El Paso expo features high-tech start-ups, college teams in venture competition

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El Paso expo features high-tech start-ups, college teams in venture competition – El Paso Times 3-4-13

By Vic Kolenc / El Paso Times
POSTED:03/04/2014 12:00:00 AM MST

A venture expo Thursday featuring 20 high-tech start-ups, 21 student teams, and four research projects will kick off this year’s Paso del Norte Venture Competition.

The expo gives the public and investors the chance to see the products and services being offered by those in the sixth annual venture competition, Cathy Swain, president of The Hub of Human Innovation, one of the organizers of the three-day event, said.

The expo, free and open to the public, is 8:30 a.m.-4:30 p.m., Thursday, at the Camino Real Hotel, 101 S. El Paso, Downtown. Companies will make five-minute pitches to judges and investors from 1 p.m.-4 p.m., as part of the expo. Student teams will compete beginning at 8:30 a.m., Friday at the UTEP Business College. Finals for the student and professional tracks will be Saturday, beginning at 9 a.m., at UTEP. The winners of each track gets $10,000. The winning student team gets to go to an international competition in Austin. More info:

The Economist Special Report: Tech Startups

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The Economist Tech Startups January 18th, 2014

If you would like to learn more about the current state of tech start-ups please click the link above.

Cathy Swain_ Venture competition offers opportunity

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Cathy Swain_ Venture competition offers opportunity – El Paso Times 2-3-14
By Cathy Swain \ Special to the Times
POSTED:   02/03/2013 12:00:00 AM MST

Don’t miss a great opportunity to pitch your business to potential investors in the Professional Track of the Paso del Norte Venture Competition.

The deadline to apply is Feb. 11, and final judging is March 9. Sponsored by The Hub of Human Innovation and hosted by the University of Texas at El Paso, the competition offers a $10,000 cash prize and one year of affiliate incubation services to the winning business. A $3,000 cash award will go to the second-place finisher.

The competition provides a venue for developing business concepts from initial planning to a startup company and product commercialization.

The competition has both a Professional Track and a Student Track to give students and professionals in the Paso del Norte Region the opportunity to launch a startup company.

The Professional Track is for entrepreneurs with big ideas that address today’s challenges through innovative approaches. Eligible entrepreneurs must be developing or expanding innovative businesses, which will contribute to the regional economy and can scale beyond the region.

Eligible businesses must be incorporated and physically based in the Paso del Norte region (El Paso, Las Cruces and Juárez), scalable beyond the region, and meet two of the three following criteria:

  • In business no longer than three years.
  • No more than $250,000 in total annual revenue.
  • Fewer than five full-time employees.

The following are important dates in the competition:

  • Feb. 11: Intent to compete due.
  • Feb. 15: Notice of eligibility sent to contestants.
  • Feb. 22: Last day to practice pitch with Hub staff.
  • Feb. 25: Competition entry form due
  • March 9: Final judging.

The Hub of Human Innovation incubator works with entrepreneurs who have technology-enabled scalable ideas to bring those ideas to market.

Hub staff, partners and volunteers also work with companies based outside the region, seeking a “soft landing” to launch new products or tap new markets from here. The Hub Works Monthly Workshops are held on the fourth Thursday of most months and are followed by Hub After Hours, which offers networking opportunities to connect innovative companies with know-how, talent, technology and capital.

Hub programs that support client companies include the Hub Team Mentor Program, which is modeled after the world-class MIT Venture Mentoring Service, Hub Clean Energy Partners, Hub Manufacturing Partners and The Hub EquityNet CrowdFunding Program.

The Hub is also preparing to host an intensive, hands-on 14-week advanced entrepreneurship course this spring, to go beyond the basics through the process of creating a scalable company.

People with business experience who have managed a team and a budget, and who want to launch or grow a company beyond local markets will benefit from this course. The Hub will take applications in mid-February.

Cathy Swain is the executive director of The Hub of Human Innovation, 500 W. Overland, Suite 230. Email her at

To learn more

For more information on The Hub or any of the programs described here, please check, call 321-3125 or email


Workforce Solutions: Making STEM a priority

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Workforce Solutions_ Making STEM a priority – El Paso Inc- 1-26-14

Posted: Sunday, January 26, 2014 6:00 pm

Mike Acosta, STEM consultant for Workforce Solutions Upper Rio Grande, speaks about the STEM program at Thursday’s STEM Summit.

Mike Acosta, STEM consultant for Workforce Solutions Upper Rio Grande, speaks about the STEM program at Thursday’s STEM Summit.

Workforce Solutions Upper Rio Grande is making education in the STEM fields – science, technology, engineering and math – a priority for the region, as part of its goal to bring high-skill, high-wage jobs to the region.

To help with that, Mike Acosta, an El Pasoan and former IBM engineer, has joined Workforce as its STEM consultant.

“Acosta is a pioneer in STEM that will influence key stakeholders and our community to see the significance of STEM education and careers,” said Lorenzo Reyes Jr., CEO of Workforce Solutions.

During Acosta’s long career in engineering, including 18 years at UTEP, he has served as national president of the Society of Mexican American Engineers and Scientists, focusing on STEM education.

At a STEM Summit on Thursday, Acosta announced a STEM Fiesta that will be held in May. The event will feature hands-on science and engineering activities for students, including gaming and robotics, while highlighting the importance of STEM careers.

Workforce Solutions Upper Rio Grande is organizing a regional STEM Taskforce for upcoming initiatives.

If your company, institution or organization is interested in participating, contact Acosta at

Austin Company Prints Breast Tissue 3D-Printer

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Austin Company Prints Breast Tissue with 3D Printer – Austin keyetv 11-7-13

For the video of this story please click here.

Valerie Schwarzwaelder will never forget that day when her battle with cancer would take an intimate piece of her.

“I just remember sitting in my bed with my cap on at that moment saying I don’t want to do this because I was scared,” she says.

Twenty minutes before she went into surgery for a double mastectomy she took a picture for her father. Valerie says she had her I don’t want to do this face on.

“I was trying to smile for my dad, he was taking the picture, but I couldn’t,” Valerie said. “I wanted to hop off that bed and run.”

When Valerie woke up from surgery she says it was like part of her identity, her sexuality was cut out of her and she didn’t know if she’d get it back.

“I remember waking up and them taking off the bandages and seeing what I looked like and I cried for weeks because they were gone,” she says.

Valerie’s breast reconstruction took months, but a woman’s journey to become whole again is about to radically change thanks to a 3D printer.

“We did start with a simple ink jet printer,” said Laura Bosworth who is the CEO and Co-Founder of TeVido BioDevices.

But there is nothing simple about what that printer is producing. TeVido BioDevices is using a woman’s cells to print breast tissue.

“Our first product would be for rebuilding the nipple,” said Bosworth.

The lab is at the University of Texas El Paso. Bosworth says they started out with a modified HP Deskjet printer and instead of filling the cartridges with ink they injected them with biomaterial and printed out skin.

“We have a combination of living cells and ingredients that we use inside these cartridges and layer by layer we build up either the nipple or lumpectomy void to match what is what you need and what you are missing,” Bosworth said.

“We would be able to use a woman’s own cells and match whatever she has existing and create something that would be more permanent.”

Plastic surgeon Dr. Ned Snyder says it has the promise to be a game changer for breast reconstruction.

“It’s pretty exciting,” Snyder said. “They’re going to print a nipple and areola that basically goes on as a single phase but secondly the outcomes are going to be significantly improved.”

And, unlike skin flaps and tattoos the entire look and feel of the breast will be more natural. “It’s going to be much more lifelike,” said Dr. Snyder. “They’re going to be able to mimic pigments from the other nipple and it’s going to be real skin.”

Dr. Snyder says as the technology improves they’ll be doing 3D printing of entire breasts.

Valerie’s hopes the technology is tweaked tested and approved when it comes time to replacing her implants in about ten years. TeVido BioDevices say it will be doing clinical trials over the next two years and hope to be using this 3D printed breast tissue for surgeries in the next three to five years.

Valerie’s journey through breast reconstruction was not easy but she smiles in pictures again. One of her favorite pictures after she was whole again was when she completed a 5K mud run.

“That’s the first time I’ve ever done a 5k run,” Valerie said.

Now after beating breast cancer Valerie says she smiles with her I made it face.

“I was so happy after finishing it. I just felt so good,” she says.

By Walt Maciborski

SEC Proposes Crowdfunding Rules

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SEC Proposes Crowdfunding Rules – Forbes 10-23-13

To submit a public comment please click here.

This is a guest post by Brian Korn, a securities lawyer with Pepper Hamilton.

Getty Images

In an important first step towards regulating businesses that fund their ventures online, the Securities and Exchange Commission unanimously approved theproposal of rules that will govern the subject. The full text of the SEC’s proposed crowdfunding rules download here as a PDF.

Crowdfunding–raising money online to fund projects, causes and even companies–to the public has been stuck in an odd state of limbo after receiving the thumbs up in early 2012 from the Jumpstart Our Business Startups Act, or JOBS Act. Meanwhile, it has become white hot with popularity, with websites like Kickstarter, Indiegogo and Prosper turning into household names.

The JOBS Act, which passed 390-26 in the House and 73-26 in the Senate, was designed to ease restrictions on capital-raising across a broad spectrum of finance, from IPOs to private placements and start-up seed financing. It left regulation to the SEC, where the subject has been mired in rulemaking delays. Crowdfunding remains one of the last provisions of the JOBS Act to be implemented.

Today’s proposal comes with a 90-day comment period, followed by another meeting of the Commission to give the final okay. That means we should see the equity crowdfunding rules finalized by sometime in February, 2014. The Commission meeting will be accompanied by an adopting release that gives general guidance on the final rules, summarizes comments received and highlights any deviations from the proposal.

Under the JOBS Act, the Commission was to propose equity crowdfunding rules by Dec. 31, 2012. Its delay is puzzling today’s proposed rules are a virtual reprint of the parameters outlined in the JOBS Act.  Here’s a summary of the proposed rules:

  • Crowdfunding caps an amount an issuer can raise to $1 million in any 12-month period.
  • Crowdfunding caps the amount a person can invest in all crowdfundings over a 12-month period at 10% of annual income or net worth (incomes of $100,000 or more) or the greater of $2,000 or 5% of annual income or net worth (incomes of less than $100,000).
  • Crowdfunding must be done through a registered broker-dealer or registered “funding portal.” Broker-dealers and funding portals may not solicit investments, offer investment advice or compensate employees based on sales. Traditional investment banks have shown little interest in crowdfunding, leading to speculation that crowdfunding will be facilitated by lesser-known financial institutions with little or no retail investment track record.
  • Crowdfunding requires a disclosure document to be filed with the SEC at least 21 days prior to first sale, and requires scaled financial disclosure, including audited financial statements for raises of over $500,000.
  • Unlike Regulation D Rule 506 private placements to accredited investors following the JOBS Act, crowdfunding does not allow advertising except solely to direct investors to the appropriate broker/funding portal.
  • Annual reports must be filed with the SEC by a company which completes a crowdfunding round.

The proposed rules are extremely impractical because of the restrictions and procedural hurdles a crowdfunding issuer, investor and funding portal will have to endure to raise capital. Compared to other forms of crowdfunding and capital raising, equity crowdfunding to the public has the worst “bang for your buck” in all of corporate finance.

One might expect that many of the investable start-ups who do not seek or obtain venture capital financing will resort to crowdfunding to accredited investors – which are generally people with at least $200,000 of gross income per year–$300,000 for a married couple or $1 million net worth. Websites are already lined up to facilitate this process. Another provision of the JOBS Act which went into effect Sept. 23 enables advertising and “general solicitation” of accredited investor transactions.

Let’s not forget costs, too. To produce an offering disclosure document, enlist a funding portal, run background checks and file an annual report with the SEC year after year might well cost upwards of $100,000. The high expenses compared to the low maximum amounts that can be raised by a company and invested by an individual make public equity crowdfunding one of the costliest forms of (legal) capital raising.

Ironically, the amendments to restrict crowdfunding in the Senate before passage of the JOBS Act have actually made it more risky. Start-ups by their nature are risky. Excluding start-ups that receive venture funding and excluding start-ups that engage in accredited investor crowdfunding leaves the firms will no other option. Unfortunately, add a quotient of fraud that sometimes accompanies online transactions and you have the recipe for a train wreck. (See “JOBS Act Gives Full Employment To Journalists.”)

In order for equity crowdfunding to the public to serve as a useful tool, as intended, Congress needs to amend the JOBS Act to make it less onerous and costly. Unfortunately, the SEC’s hands are tied since the JOBS Act itself creates most of the restrictions in the proposed rule. The SEC, for its part, did not tighten restrictions from the JOBS Act. This might be signal that even the SEC thinks the JOBS Act is too restrictive. Time will tell.