JOBS Act Impact, Crowdfunding and Social Media
Have you heard about the JOBS Act and crowdfunding?
Here’s an infographic that tells the story in stats.
What’s intriguing to me is section about the numbers behind startups and small businesses: 565,000 new businesses launch every month, which adds up to 6.780,000 new businesses every year.
The average annual initial financing per startup? $78,406.
Where does that money come from? Crowdfunding and . . .
That’s where the JOBS Act comes in.
I’m excited to be talking about the JOBS Act impact, crowdfunding platforms and social media on a power panel with Ruth Wagner of CMP.LY and Dahlia Saper of Saper Law, coming up on January 22 at 1871. Thanks to Kerry Jordan and CFA Chicago for inviting me to speak!
JOBS Act Impact, Crowdfunding and Social Media Event
Interested? You can register online. Here’s the information from the CFA Chicago site.
Date, Time, and Location
Tuesday, Jan 22, 2013
5:30 – 7:30pm
1871 — 222 Merchandise Mart Plaza, Ste. 1212, Chicago, IL
Barbara Rozgonyi, Founder of CoryWest Media, LLC, Founder and President of Social Media Club Chicago, and publisher and host of Wired PR Works. These entities all focus on teaching and enabling clients to become better communicators as they grow their small businesses.
Daliah Saper, Esq., founder of Saper Law Offices and adjunct professor at Loyola University of Chicago College of Law. As a transactional lawyer she helps clients choose the right business entity, drafts bylaws and operating agreements, negotiates contracts and licenses, and provides comprehensive trademark and copyright counseling.
Ruth Wagner, Vice President and Stakeholder of CMP.LY, a social media disclosure, risk mitigation, and marketing optimization firm that works with financial services firms to comply with FINRA and SEC advertising restrictions and regulations.
The Jumpstart Our Business Startups Act, or JOBS Act, signed by President Obama earlier this year, will dramatically change the nature of early-stage funding, public market capital raising, and advertising for firms engaged in selling privately placed assets.
The JOBS Act will enable entrepreneurs to sell up to $1 million worth of equity to the general public through accredited crowdfunding platforms. This early-stage money is essential to entrepreneurs such as those currently working at 1871.
What is 1871?
1871 is a co-working center for digital startups. Located in the famed Merchandise Mart, the 50,000-square-foot facility provides Chicago startups with affordable workspace and access to mentors, programming, educational resources, potential investors and a community of like-minded entrepreneurs.
CFA Chicago Members – $45
Non-Members – $55
Student-Members – $20
(payable by cash, check, credit card or function ticket)*
Attire: Business Casual
Menu: Refreshments and light appetizers
5:30-6pm Registration and Networking
6pm-7:30pm Panel discussion/Q&A/Informal networking
Hosted by: CFA Women Advisory Group
JOBS Act Background
The Jumpstart Our Business Startups Act, or JOBS Act, signed by President Obama earlier this year, will dramatically change the nature of early-stage funding, public market capital raising, and advertising for firms engaged in selling privately placed assets. Under the new legislation, the typically small round of capital that is below the regulatory radar for most startups has been expanded to $1 million annually, with similarly limited oversight from the Securities and Exchange Commission. This early-stage money is essential to entrepreneurs such as those currently working at 1871. The JOBS Act will enable entrepreneurs to sell up to $1 million worth of equity to the general public through accredited crowdfunding platforms. The legislation expands the number of prospective investors in the funding pool. The long-term viability of crowdfunding will be contingent upon the ability to link these two parties and manage the investment process. Many experts are skeptical as to whether proper auditing, reporting and legal diligence can be accomplished in companies that are by definition completely broke, but the crowdfunding sites are laser-focused on providing that level of disclosure and transparency to the masses. Traditional early-stage funding mechanisms will now have some competition. That’s good for entrepreneurs. Equity crowdfunding has essentially created a new era, that of the recreational venture capitalist. The JOBS Act also will mean lighter-touch regulation for relatively small companies that want to go public. The idea is that they shouldn’t be held to the same bar initially as established public companies like Apple or Google, because their costs of complying are, proportionally, a much bigger burden. Among other provisions, the JOBS Act gives so-called emerging growth companies up to five years to fully comply with all the accounting rules required of public companies today.
“Emerging growth companies” must have:
- less than $1 billion in annual revenue
- gone public not more than five years ago
- issued no more than $1 billion in debt
- floated no more than $700 million in stock
Under the JOBS Act, “emerging growth companies” would have to report only two years of audited financial statements when they file to go public (existing law requires three now, and five years of some financial information, according to this analysis). And banks underwriting their IPOs may be able to issue research reports on the stocks ahead of the offerings, a practice prohibited a decade ago. For up to five years, companies that meet the new criteria will be exempt from certain disclosures dealing with executive compensation. They won’t have to have an auditor attest to their internal financial controls, a Sarbanes-Oxley rule put in place after the Enron-era accounting scandals. The JOBS Act also has directed the SEC to remove the prohibitions on general solicitation or general advertising for securities offerings relying on Rule 506. By requiring the SEC to remove these restrictions, Congress sought to make it easier for companies to inform the public that they are seeking to raise capital through the sale of securities. In particular, Section 201(a)(1) of the JOBS Act directs the SEC to amend Rule 506 to permit general solicitation or general advertising provided that all purchasers of the securities are accredited investors. This is of particular importance to private hedge funds and private equity funds.
Over to You
What questions do you have about the JOBS Act and crowdfunding?