SEC To Vote On The Final Part of JOBS Act On Friday
It has been a while since I’ve been excited about reading a press release. The SEC is voting to roll out the rest of the JOBS Act (aka “the good stuff”) on Friday. Woohoo!
If you’re unfamiliar with the JOBS Act let me get you up to speed. In 2012 a law was passed that updates US regulations to allow anyone to invest in private companies, allowing startups and small businesses to crowdfund investments a la Kickstarter. The big difference is that instead of getting pre-orders and t-shirts, backers get stock in the company. Imagine investing in the Oculus Rift back in the day (my guess is that you would’ve made a ~145x ROI). I do like to daydream.
Without the JOBS Act, unless you’re wealthy (e.g. have $1m of Net Worth), you can’t invest. Sorry. You’re not sophisticated enough, even with a PhD in Startupology. This makes it so only the wealthy have access to very lucrative private investments.
After the JOBS Act was signed into law the SEC was tasked with “implementing” the rules and regulations. Congress describes intent, the SEC sorts out the details. The SEC has rolled out pieces, slowly, over the past 3 years.
This piece is the good piece. It actually allows regular people to invest. Prime your money guns, people!
Well, Don’t Go Crazy
It will probably be several months, at least, before these laws go live. And, as we’ve seen in the past, there’s generally a slow adoption curve. And, technically, on Friday the SEC is voting on whether to move forward with the proposed regulations there’ll be further delays if they vote “no.”
In order to use the JOBS Act to invest, companies need to file a special exemption with the SEC when fundraising. Startup lawyers are… conservative about new regulation. Founders may opt to keep fundraising traditionally (i.e. not taking money from “poor people”) in the beginning, at least in investor-saturated markets like tech startups.
But it’s pretty clear to me that this is the future and that in 5–10 years this will be more common than uncommon. And that there are “underserved markets” like super-ambitious startups (e.g. Flying Cars) or many small businesses outside of tech.
2016 is going to be an exciting year.
