David Fisher’s talk on Locavesting last week at the TechConKona Conference with Paul Hawken highlighted some of the key challenges with startups and their ability to get the capital they need to grow. Implicit in his talk was the emerging power of crowdfunding, and the expectation that its evolution with the JOBS Act will bring tremendous amounts of investment capital into local, small, and sustainable businesses.
The crowdfunding arena is, at the moment, centered around donations and pre-sales. Through Kickstarter and IndieGogo, contributors can pitch in small amounts of capital either for future goods, for karma, or for other perks. These avenues do provide legitimate sources of capital for small businesses, but many folks, according to Fisher, were looking at the JOBS act to dramatically open the tap to allow capital to really flow to businesses through crowdfunding. The JOBS act, which would allow small businesses to raise crowdfunded capital and give equity in their company to investors through that platform, in theory, provides much greater potential for raising large amounts of capital for startups.
However, according to Fisher, some last minute jostling, poorly worded amendments, and typical politicking led the JOBS Act to be passed as a shadow of its former self, and may result in it being a far cry from its potential. For one, they raised the ceiling on what a small business is to anything under $1 billion in market capitalization, with the consequence of once again taking the focus, and therefore the efficacy, away from helping small business. Only 1 of 7 main principles of the JOBS act was passed as originally intended, according to Fisher.
The SEC will not even rule on the JOBS Act and its limits until sometime in 2013, which probably means 2014, so the impact of the law will not be felt in the near future, and will probably get further muddled.
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