Entrepreneurs Rejoice: SEC Change Allows Startups To Solicit Funding Publicly
Today, the SEC voted in favor of adopting a measure that will allow startups, hedge funds and venture capitalists to publicly advertise that they are raising money. This was done through implementing section 201(a) of the JOBS Act, a board measure that was signed into law by President Obama on April 5, 2012 which intends to encourage funding for small businesses in the U.S. by easing various security regulations.
For decades, startups were only able to raise funds via word-of-mouth and other forms of private communication. This measure will essentially allow startups to seek funding through paid advertisements, mass emailing and even social media outlets like Facebook starting this October when the measure goes into effect.
MIke Norman, of the crowdfunding website WeFunder, told TechCrunch:
“With General Solicitation it will be much easier for investors to find companies they are passionate about supporting,”
The measure, however, is still only limited to accredited investors that hit certain provisions. The SEC still has yet to permit crowdfunding, which would allow people aside from just accredited investors to buy equal stake in start-ups.
Check out this video of President Obama’s outline of the JOBS Act:
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