JOBS Act opens up online funding to startups

Entrepreneurs can raise as much as $1 million per year

Starting today, entrepreneurs have a whole new world open for raising investment funds for their new businesses.

A part of the Jumpstart Our Business Start-ups (JOBS) Act takes affect today, allowing owners of startup companies to ask for equity investments in the public forum, such as through social media sites such as LinkedIn and Twitter as well as other places on the Internet. According to the legislation, these “emerging growth” businesses may raise as much as $1 million per year online.

The purpose of the JOBS Act was to give the job market a boost by encouraging the growth of new businesses. And entrepreneurs couldn’t be happier, saying the legislation addresses the recurrent problem of having to have the right connections to raise enough capital in some cases to get a business going.

“How many entrepreneurs are there across the U.S., even in the Midwest, who have these great ideas but no way to tap into that capital?” Entrepreneur Todd Dipaola, owner of ForeFund Capital, told the New York Times. ForeFund is a platform that will allow real estate startups to raise money from investors.

Critics, however, believe there is a lot of risk in the new legislation, warning that deregulating the way entrepreneurs raise funds opens up the possibility for fraud or not-so-serious startups to get money they may not deserve.

Previous to the JOBS Act, entrepreneurs had to raise all of their funds privately—at least until they were ready to enter the public marketplace.

Read more about this story on the New York Times.

For more InsideCounsel stories and columns about the JOBS Act, see:

Technology: Delay in crowdfunding rulemaking creates questions and opportunities

How the immigration policy stalemate is hurting businesses and the economy

Regulatory: The JOBS Act and materiality determination in private placements

 

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Cathleen Flahardy

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