For startups seeking bank loans these days, they’re getting more doors shut in their faces. And looking for venture capital isn’t any easier. Friends and family typically can’t lend enough to truly help a startup get off the ground, which leaves…what, exactly?
Enter the JOBS Act
President Obama recognizes the importance that startups play in boosting the economy, and to that end, he signed the Jumpstart Our Business Startups Act in April 2012. What it does is make it easier for startups to get funding from nonaccredited investors (read: you and me), which opens up the possibilities of getting funding faster.
There are sites dedicated to what’s called “crowdfunding,” where everyday people can contribute to a startup’s funding request. Sites like EarlyShares, IndieGoGo, and KickStarter allow startups to post a project and the amount they’re trying to raise. Anyone can contribute–or rather, will be able to soon.
Right now the Securities Exchange Commission is working to finalize regulations around the JOBS Act, which means startups are stamping at the startup gate to get this crowdfunding party started. Technically, the crowdfunding sites are on hold until the SEC says “go,” slated to be in early 2013.
How this Will Change the Funding Game
Many speculate that there will be a flood of startups using these sites to fund their businesses, who might not have considered crowdfunding prior to the Act being passed.
Cristina Hermida, Public Relations & Media Manager for EarlyShares, says her company expects many startups to sign up to seek funding once the SEC gives the signal: “However, this does not mean that companies that were not going to be successful, whether or not they got funding, will be a hit. There is going to be a lot of due diligence made in the companies that we register on our site, to secure the effectiveness of the deals and avoid potential fraud.”
There will still need to be a great deal of education, on both the part of startups and nonaccredited investors. EarlyShares is well into its Roadshow to 24 cities, where it offers free informational seminars on how startups can take advantage of the JOBS Act.
So if you’re a startup having trouble getting financing the traditional ways, the JOBS Act could be a boon, if you can wait until the new year. If you can’t, consider entering the Small Business Challenge, where your business could win $50,000. Not a bad start!
If you’re considering seeking funding, you need to incorporate your business! If you haven’t already done so, CorpNet can help. We’ve helped more than 100,000 businesses find the right business structure for their unique needs. Get started now.
Photo: John-Morgan on Flickr