JOBS Act Brings Washington DC Together to Provide More Funding to More Startups

When Republicans and Democrats get along it can be like catching your parents making out. It makes you uneasy–what’s going on behind the scenes? What will this behavior mean for me? Today’s lovefest may actually beget something other than trepidation. The Republican House passed a bill that President Obama was eager to sign. It’s his JOBS Act, which stands for Jumpstart Our Business Startups, and it clears the way for more people to invest in more companies.

Word is that most tech people are pretty happy about it. One is Steve Case, co-founder of AOL, who looked like he was going to leap onto the shoulders of the president during the signing. (I wonder if he lobbied by sending the White House unsolicited piles of CD ROMs?)

So what is this thing?

Think of the success of the website Kickstarter, which describes itself as the “world’s largest funding platform for creative projects.” It’s where anyone with a bank account can fund any number of hopeful startups. Now add some zeros and throw in some deregulation help from the federal government, and you have the JOBS Act–a huge change to how venture capital will work. With JOBS small companies can seek out funds from a pool of thousands of investors online, even using social networks to raise money for their company. This will make it easier for average folks to invest in what could be the next Google or Apple. Hopes are that the JOBS Act will spread the wealth from beyond Silicon Valley and into investment-starved areas like, say, Detroit.

What the President referred to as a “game changer” will change how the Security and Exchange Commission (SEC) works with small businesses. Some of those alterations include:

• Companies will now have five years (instead of two) to adhere to Sarbanes-Oxley audits. Some restrictions may apply, like if you get way too big too fast (like a billion dollars big.)
• Exemptions from select SEC requirements used to only apply to companies raising less than $5 million. That’s been bumped to $50 million.
• Investors can now come from more places meaning that the SEC and companies alike need to define who exactly that will be, and how they can be vetted.

The downside?

• Scams. Fraud. Rampant failure. Lawsuits. Liability. And boatloads of potentially really bad IPOs. Anything that kicks open the doors to money means that there will be both losers and losers; those who take advantage of people and those who lose their money to them.
• And there’s also the fact that many businesses simply will not make it, which means more opportunity for more investors to tank. That’ll keep the lawyers busy.

  

• Deregulation? Now? Some people might be wondering if we didn’t learn from the first Dot-com bust that relaxing regulations leads to speculation and eventually to Flooz.

For the most part it seems that both small and big players alike are feeling the love from DC. ComputerWorld ran a piece featuring Tim Miller, CEO of Boulder’s Rally Software. He was invited to the signing and came away feeling pretty good. Miller found that the JOBS Act has renewed his faith in government, “much more so than the gridlock we have seen over the last several years.”

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