Mark April 5, 2012 on your calendars people. It’s a monumental day. Today is the day that President Obama will sign the JOBS Act. For entrepreneurs and startups, the most exciting piece of this is crowdfunding.
As Howard Lindzon says, crowdfunding has been around for years. So what’s the big deal with this legislation? Today, if you’re to invest your hard-earned dollars in a company (for equity ownership) you need to be an accredited investor. This is legacy law from years ago when people weren’t empowered with information to make intelligent decisions, as a protection from scams. Back then, it made sense.
Today, things are different. As Naval Ravikant and Jason Calacanis discussed on This Week in Startups, any idiot can blow their bank on a mortgage or Vegas…but can’t make an intelligent equity investment in a company. Today, there is more social proof and information about companies, startups, and people than ever before…so why not allow any person to benefit by being able to invest in the next Facebook or Zynga…early on? Because of the JOBS Act, they will be able to…and that’s pretty exciting!
Fred Wilson also has a pretty good summary of what’s going on with the JOBS Act, and there are countless discussions elsewhere…so start googling if you want to learn more.
The SEC still needs to put legislation around this, and they have until the end of the year (approximately) to make that happen. So, kick back and relax – nothing’s changing for a while.
Early talks say the legislation that the SEC may put in place could be so protective of the consumer that the laws wouldn’t benefit startups enough and the entire model would fall apart.
There’s talk that angel investors and venture capitalists will look down on companies that go for crowdfunding, but the counter to that is a solid company with a great team, traction, and terms will get funding because they’re worth backing. It won’t matter where previous rounds have come from.
There’s talk that the scammers will come out of the woodwork and ruin things. They’ll certainly come out and give crowdfunding a bad name for a while, they always do. How the ecosystem reacts and adapts to it will be most important.
There will be countless (countless) companies launched to help you as a startup get your crowdfunded investments. It will be overwhelming. When the dust settles, there are some that think the existing “funding incumbents” will come out on top (like Kickstarter, AngelList, etc). Time will certainly tell.
All I have to say is that this is VERY exciting! Not just for startups. Not just for people willing to invest money in startups. But…for our economy…and for our country. This has the POTENTIAL to fundamentally change how we do business, and that is something to get fired up about.
UPDATE: Additional resources
Infographic from CrowdFunder.com
JOBS Act explained by Steve Case