SEC Change Allows Startups To Use Social Media and Ads To Seek Funding

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Today, startups will be able to publicly seek funding due to the JOBS Act signed into law by President Obama this past April. In the last 80 years, it was against the law for a startup to announce a round of funding publicly. With these changes, companies can now announce that they are seeking funding through their website, social media channels including YouTube, Facebook, and Twitter, as well as paid ads both online and off.

What’s the catch?

  • The SEC requires that you notify them 15 days before you make any sort of announcement.

  • Companies will now have to take extensive measures to make sure prospective investors are ‘accredited’ (wealthy) or risk a one-year ban on seeking funds publicly. Before, companies could simply just take someones word for it and technically raise funds from people who aren’t necessarily wealthy.

A few companies have already begun taking advantage of this SEC change, notably TechShop, a membership-based do-it-yourself workshop that announced today that they going to use the new rules to raise $60 million dollars.

What about crowdfunding?

According to Forbes, the SEC is in the process of finalizing the rules of crowdfunding, which will essentially allow companies to annually raise up to $1 million from ‘regular’ people. This would be a game-changer if this happens because it will essentially allow ‘regular’ people to make small investments for equity in a company. Basically, think Kickstarter, but instead of prepaying for products, you actually own a piece of the company.

Are you guys excited for this rule change? Comment below on your thoughts!

Source: Forbes, TechCrunch

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