In the world of entrepreneurship, a vital factor in whether or not a startup achieves success or fails, is its ability to access capital. The Jumpstart Our Business Startup Act (i.e., JOBS Act) came on the scene in 2012, and quickly changed the landscape for startups across the nation. This Act included a number of different provisions that altered the manner in which startups could start raising capital. This eventually led to a powerful capital raising vehicle called equity crowdfunding.
The JOBS Act was a significant boon to emerging growth companies, which were no longer hamstrung by various disclosure requirements and regulatory restrictions. This enabled the startups to place more of their energy on growth and innovation rather than jumping through regulatory hoops.
Equity Crowdfunding
The transformation for small businesses in the aftermath of the JOBS Act empowered by equity crowdfunding included their newfound ability to solicit for investors through open advertising. This enabled startups to get the attention of a greater number of investors.
Enhanced Investor Protection and Confidence
The Jumpstart Our Business Start of Act also enhanced investor protection and transparency, requiring businesses seeking to raise capital by the means of equity crowdfunding to file a Form C with the SEC. The filing gave potential investors confidence about the business plans and financial condition of the company, by giving investors access to pertinent information.
Easier Access to Growth Capital
As crowdfunding accelerated, startups gained the ability to raise funds in new and different ways than the past. Startups began to utilize crowdfunding as their main vehicle for accessing growth capital. Since startups no longer faced some of the hindrances posed by various registration requirements and initial public offering conditions, they were able to grow faster.
Greater Pool of Investors
The JOBS Act also allowed investors of all types to invest in startups. This includes individuals investing small sums of money in businesses in which they had a particular interest and supported, enabling them to reap the rewards of their potential success.
Therefore, the Jumpstart Our Business Started Act represented the beginning of a new phase for startups. It helped them obtain much needed capital, fostered the participation of investors, and enhanced entrepreneurship in the United States.
