Obama Signs: And Crowdfunding is Legal in the US!
Yes, the title above is correct….and as the photo here shows, President Obama yesterday signed into law, the new US JoBS Act which among other things legalizes crowdfunding as a way for startups to receive funding for equity…and that’s a good thing, eh!
It will change the way startups do business in a lot of ways, most notably by making it easier for them to accept smaller investments from a larger number of investors. And we believe itâ€™s a good thing that less wealthy Americans who donâ€™t qualify as accredited investors will now be able to put their money into young businesses and reap the rewards.
Think about it. You invest even say $100 in a brand new startup – as do hundreds of others. You receive an equity position in return (read shares). You watch carefully as the startup works their magic, growing and nurturing their product as they acquire new users and that means that there will be interest in more sales and that means that as time passes your equity has grown in it’s value. You invested. And you can reap the rewards too.
The JoBS Act bill classifies startups as â€śemerging growth companiesâ€ť that can turn to online investors to raise much-sought-after startup capital â€” similar to how websites such as Kickstarter let users raise money for films, books or other projects. And those companies would also be able to sell up to $50 million in shares before having to register with the Securities and Exchange Commission and have up to 1,000 shareholders â€” double the current limitation.
â€śOne of the great things about America is that weâ€™re a nation of doers,â€ť said President Obama at a White House signing ceremony, where he was flanked by members of Congress and some of the nationâ€™s top entrepreneurs.
â€śWe think big, take risks and believe that anyone with a solid plan and a willingness to work hard can take even the most improbable idea and turn it into a solid business.â€ť
Sounds perfect, right? Well, I’d agree too…but there are a couple of cautions to consider too….for instance how about fraud. Claims have been made here, in an infographic about Crowdfunding and it’s current “donation” sites like kickstarter and Prosper, that so far there has never ever been a case of fraud….but there are some “clinkers” in that story here and here.
What I’m saying is that the new JoBS Act has to address those concerns and now that the Act is law it moves over to the US SEC, where they will deliver on exactly what is needed for a website to “act” as a crowdfunding site…an initiative that we’ll be watching closely. As far as we can tell, there is no time-line yet on how soon the SEC has to put up the criteria to use as a standard in becoming a new crowdfunding website…the Act gives them up to 270 days to implement same…but there will be news on same and yes, we’ll report on that too as soon as it breaks.
Till then, here’s the question. Hello Canada?
What are we going to do to “combat” this JoBS Act ourownselves? I would – surely as I’m sure most Canucks would – like to see our own startups funded here….which begs the question, when can we look at a similar law change here?
In 271 days, the US will be crowdfunding their startups – let’s try to ensure that they’re not crowdfunding our own!