The Jumpstart Our Business Startups Act (JOBS) was signed by President Obama in April but the SEC has yet to approve the crowdfunding aspect that is designed to spur investment in startups and entrepreneurial ventures.
Crowdfunding offers new access to capital from a broader investing public through the internet.
Here’s how it works, theoretically.
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Entrepreneurs create an online campaign to bring attention to their business idea, then enlist online services such as Kickstart and Indiegogo as the mechanism to raise capital.
Investors can contribute online and often will receive perks or small gifts. Current legislation requires startups to fund themselves or take out loans from a bank. Investors must also be accredited.
The JOBS Act would enable young businesses to raise $1 million annually from the general public—non-accredited investors.
Advocates of the JOBS Act note that entrepreneurs create jobs and making it easier for new businesses to get started will boost the economic recovery.
But there are many details about crowdfunding that are uncertain. Does the would-be company have to register with the SEC as a broker/dealer? How will funding portals operate?
As these questions wait to be answered, momentum is gathering
for crowdfunding which could become a major investment component of 2013.