Obama to Sign Crowdfunding Act on Thursday; What Startups Need to Know
Apr 2, 2012
President Obama is expected to sign the JOBS Act on Thursday, which will allow startups to begin crowdfunding up to $1 million per year from non-accredited investors.
“Access to capital is not as broadly dispersed around the nation as it should be,” said Startup America chairman Steve Case on a conference call Monday. While investment may not be scarce in Silicon Valley, other areas of the country can expect a boost once the bill is signed.
If startups do decide to crowdfund, they’ll have to comply with a variety of annual financial disclosure requirements: self-certified financial statements or tax returns (for startups raising $100,000 or less), independent accountant reviews ($100,000-$500,000), or audited financials (more than $500,000). In addition, companies must disclose their capital structure. The SEC has 270 days to formulate these and other rules around crowdfunding.
The JOBS Act also lifts a longstanding, often-broken restriction on “general solicitation,” or publicly advertising that you’re raising money. Here, the SEC has 90 days to come up with a specific rule – say, to prevent telemarketing to old folks in Florida, joked Naval Ravikant, founder and CEO of AngelList.
Startup America, a private-public partnership with over 6,000 startup members, has supported crowdfunding as a path to more jobs and innovation – in technology as well as traditional retailers.
“This is the first step … in trying to make sure that the nation doubles down on its commitment to innovation and startups,” said Case. “But there’s still more work to be done on other fronts to keep pushing this entrepreneurship agenda.”