Published on April 5th, 2012 | by Tod Whipple5
Equity Crowdfunding legalized via JOBS Act
Earlier today President Barrack Obama signed the JOBS (Jumpstart Our Business Startups) Act . The bill is a compliation of all things great for entrepreneurs raising capital. The crowdfunding component of the bill has huge implications right here at Startup Addict as we migrate our platform from a donation based model with rewards to an equity based model where investors can see possible monetary returns on their investment.
When I first launched Startup Addict in 2007 I was so excited to bring this very concept to the masses only to be stimied by current SEC regulation. We became a destination community where startups could garner resources, tips,advice and donation based crowdfunding. Two years after our launch Kickstarter emerged with a well executed crowdfunding model. To see how far StartupAddict.com was ahead of the crowdfunding curve take a look the Google Insights graph below.
Well I am ecstatic to say my original vision of crowdfunding startups has finally arrived. SA can finally be the haven for entrepreneurial superheros thwarting the forces of mediocrity, where no good idea is left behind. Now for the first time in the United States the average Joe Investor (non-accredited) can make investments up to $2,000 or 5% of their income (if you make under a$100,000 in income or net worth). They will also be able to raise up to $1 million in a 365 day period.
For those of you unfamiliar with “accredited investors,” the term is for individuals that have a net worth of over $1 million, primary residence excluded or make more than $200,000 in annual income.
The skeptics of the equity crowdfunding bill are concerned with entrepreneurs dealing with hundreds of inexperienced investors funding startups. A valid point which could potentially be a disclosure and communication nightmare for startups looking for funding. It could also lead to problems in later rounds of funding from institutional or accredited investors. Although the skeptics have valid points I believe the burden of an effective and transparent system needs to be implemented by the crowdfunding portals themselves. We need to have well crafted terms of service and investor tools along with an ecosystem that eliminates hucksters and brings the much needed capital to startups.
The next step is for the SEC to craft guidelines and rules for the law that crowdfunding portals, investors and entrepreneurs can work with. Stay tune because this is going to be a Startup Revolution America. Let’s get busy!