Why Wait for the JOBS Act? Crowdfunding for Startups is Already Here.

Why Wait for the JOBS Act? Crowdfunding for Startups is Already Here.

The Jumpstart Our Business Startups Act (or JOBS Act) was created to encourage funding of US small businesses by easing various securities regulations. It was signed into law in early April 2012 and several provisions took immediate effect, but many of the changes required additional rule making and are still making their way through a tedious SEC review.

Fortunately, small players don’t have to wait for the end of this long process to start investing in businesses. As staff writer J.J. Colao on Forbes.com writes, “Crowdfunding for startups is already here.”
Kickstarter, for example, has long been a go-to for working businesses looking to finance hardware and creative projects. But these days, with businesses like Penny Arcade and Code School seeking funds for more run-of-the-mill operations, it seems as though the crowdfunding gatekeepers are starting to loosen their rules.
And really, as Colao points out, “For startups, aside from an out and out grant, this is the absolute best source of capital around…The stodgy, share-hungry crowdfunding platforms legalized by the JOBS Act seem like a mess of regulation and dubious value in comparison. Why would anyone give up equity – and deal with the whims of swarms of amateur investors – when better options are increasingly available?”

Colao also points to the interesting case of Rally, a company that runs a crowdfunding website for donations for social and political causes, and the crowdfunding approach of its CEO, Tom Serres. He writes,
Tom “decided to source an entire $7.9 million round of Series A venture financing through AngelList. With the backing of Reid Hoffman and Floodgate Capital’s Mike Maples, most companies would have simply done the rounds on Sand Hill Road, but Serres broadcasted the opportunity out to hundreds of investors over the web. He then culled through 200 emails and spent eight days taking 70 meetings according to PandoDaily. The result: Serres agreed to take money from a mix of venture funds and angel investors, including Greylock Partners, Google Ventures, Tim Ferris and Eric Ries.”

Colao continues,

“What’s so fascinating about the Rally case is that the result isn’t much different from any other round of top-tier fundraising. The quality and mix of the investors is familiar, but the means are entirely different – all done with stunning transparency and frenzied competition.”
Read more at Forbes.com.