President Obama last week signed the Jumpstart Our Business Startups (JOBS) legislation, which could have a very interesting impact on startup and possibly even ongoing businesses.
Much has been written about the ‘crowdsourcing’ or ‘crowdfunding’ aspects of the bill, which are unique. What hasn’t been said is how it all works. First, it’s regulated, we think, to US companies, but no one really knows. It’s possible that the US Securities and Exchange Commission (SEC) might open up worldwide funding for startups; they will be in charge of regulating the process by making crowdfunders put their idea up on a SEC-sponsored website. Nothing is expected to happpen until 2013, but we suspect this is a genie that will stay out of the bottle regardless of who wins our election.
Second, ‘crowdfunding’ basically means a bunch of small investors (‘crowd’) can fund an idea, Once you go on the SEC sponsored website, you’ll be able to determine terms under which you can invest in a company. It’s isn’t known what, if any restrictions, might be on the investment. We’re thinking the process might be much like the existing microloan process, but the amounts of investment might be much smaller.
Third, there is a crowdsourcing website, www.crowdsourcing.org, where you can stay up to date on this process. There also appear to be some entrepreneurs who might jump the gun on the SEC and put together their own rules, setting up their own sites for brokering investments. Take a look at this site.
At this point, it’s not clear if established businesses could use this process for gaining additional equity funding for expansion, but it’s certainly technically possible. We will keep you advised.