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2012 | Buch

The Jobs Act

Crowdfunding for Small Businesses and Startups

verfasst von: William Michael Cunningham

Verlag: Apress

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On April 5, 2012, President Barack Obama signed the Jumpstart Our Business Startups Act, better known as the JOBS Act. The act is designed to “reopen American capital markets to small companies,” defined in the act as Emerging Growth Companies. This is one of the most significant legislative initiatives in finance since the Securities and Exchange Acts of 1933 and 1934, and it opens up funding to a slew of companies previously shut out of the capital markets.

Here’s the good news: Small businesses and startups will be able to raise up to $1 million in equity (or debt) funding online via what are called Crowdfunding Platforms—online communities and websites. Imagine an eBay-like site that allows you to post your idea for a commercial venture online and then allows investors to purchase equity shares or stakes in it. As one journalist put it, it’s “social media meets venture capital.”

How can you get in on the new funding opportunities? That’s what The JOBS Act: Crowdfunding for Small Businesses and Startups is all about. Investment expert William

Michael Cunningham shows how the new law will enable you to use the internet to raise significant amounts of capital funding for your startup. After discussing briefly the development and implementation of the law, what it means, and how it will impact the business startup marketplace, he delivers the nuts and bolts of how to take advantage of the JOBS Act to access new sources of capital for your small business or startup. As you’ll see, the act has the power to unleash a new wave of innovation, increase employment, and set many more average entrepreneurs and investors on the road to wealth.

Not just for entrepreneurs, The JOBS Act: Crowdfunding for Small Businesses and Startups will benefit investors, securities lawyers, community development specialists, educators, venture capitalists, and those offering services in the new crowdfunding arena. It is, simply, the most current and most comprehensive compendium of information on the law and its impact on this new market.

Inhaltsverzeichnis

Frontmatter

Summary of the JOBS Act

Frontmatter
Chapter 1. The JOBS Act
Summary and Definitions
Abstract
The JOBS Act (Jumpstart Our Business Startups Act) is a revolutionary development in the world of startup and small business financing. Among other things, for the first time, startups and small businesses can use the power of the Internet to raise equity capital from investors across the country and around the globe. The act allows small companies, including startups, to raise, via crowdfunding (described later), up to $1 million per year, subject to five-year time limit, along with a $700 million market-value limit. For such companies, the act has also created exemptions to accounting and auditing rules, as well as to rules that require public companies to report details concerning executive compensation and other financial data.
William Michael Cunningham
Chapter 2. Startup Financing Environment
Why the JOBS Act Now?
Abstract
Ask anyone who has tried to start a business over the last five years, or has been in business for a while, and he or she will tell you that this has been an extraordinarily tough environment. Yes, there are those for whom capital is not an issue, but these are the exceptions. Even long-existing companies have seen their lines of credit reduced, or eliminated overnight, by banks claiming that they were required to do so by regulators. When banks are told to reduce risk, small businesses, especially startups, are the first to see credit levels reduced—and lenders claim that this is an appropriate response to new regulatory guidelines.
William Michael Cunningham

Disclosure and Crowdfunding in the JOBS Act

Frontmatter
Chapter 3. Emerging Growth Companies
Facts, Figures, and Potential
Abstract
Of the 29,169,212 companies listed in the Manta1 database, 25,346,594, or 86.9%, have less than $1 billion in reported revenue.2 These are emerging growth companies in the United States. The JOBS Act targets these firms and allows them to raise up to $1 million in equity capital via crowdfunding on an annual basis. In this chapter, we examine the potential EGC market in general. At the end of the chapter, we show how EGC firms have used existing crowdfunding platforms to raise donations, but not equity. This will help us better understand how these platforms will help EGCs gain funding.
William Michael Cunningham
Chapter 4. Accounting, Reporting, and Other Standards in the JOBS Act
Relief from Regulatory Burdens
Abstract
The Securities Act of 1933 mandates that to sell or even offer to sell securities in the United States, those securities must be registered with the Securities and Exchange Commission, the SEC. The SEC, in turn, requires security sellers (broker/dealers) to disclose a great deal of information about the company doing the selling, the company investors are buying into (not the funding portal or broker). This set of information tries to provide, comprehensively, all relevant information about the firm’s past and future prospects. The Act of 1933 allows certain companies to skip the registration process under a limited number of conditions. These security registration exemptions generally allow a firm to sell its securities if it is selling them to “accredited investors,” generally high-income, high net worth people.
William Michael Cunningham
Chapter 5. Crowdfunding
Abstract
Perhaps the most exciting part of the JOBS Act relates to crowdfunding. This chapter describes crowdfunding in detail and reviews how small businesses can use the technique to raise money.
William Michael Cunningham
Chapter 6. Portals
Working with Your Partner
Abstract
In order to crowdfund, you need a portal. In this chapter, I expand on the JOBS Act rules governing these critical entities.
William Michael Cunningham

The JOBS Act, by Title

Frontmatter
Chapter 7. Title I
Reopening American Capital Markets to Emerging Growth Companies
Abstract
This section of the JOBS Act sets the stage for all that comes later. It defines an “Emerging Growth Company” as a security issuer with less than $1 billion in revenue in the most recently completed fiscal (as opposed to calendar) year. It also states that any company with less than a billion in revenue that issued common stock prior to December 8, 2011 is not eligible to be treated as an emerging growth company. Certain disclosure requirements are lifted. The “firewall,” or limitations between security issuance activities (underwriting) and research, is lifted for EGCs.
William Michael Cunningham
Chapter 8. Title II
Access to Capital for Job Creators
Abstract
To sell securities legally in the United States, the company offering them must register the securities with the U.S. Securities and Exchange Commission. All information concerning the offering has to be presented to investors via a prospectus. A company can bypass this registration requirement via the use of a limited number of exemptions.
William Michael Cunningham
Chapter 9. Title III
Crowdfunding
Abstract
The crowdfunding provision of the JOBS Act gets most of the attention. Section 301 establishes that transactions under $1 million are exempt from certain registration requirements. Note that the act does not specify that only EGCs can use these provisions. The crowdfunding exemption is broadly available to even very large or very old firms.
William Michael Cunningham
Chapter 10. Title IV
Small Company Capital Formation
Abstract
Some have called Title IV the most important part of the JOBS Act, since it expands what are known as Regulation A exemptions. Regulation A allows the SEC to remove registration restrictions from any class of security if it determines that doing so is in the public interest. Securities issued under a Regulation A exemption had been previously limited to $5 million. The JOBS Act raises that limit to $50 million. This is a very large increase, a change we don’t normally see.
William Michael Cunningham
Chapter 11. Title V
Private Company Flexibility and Growth
Abstract
If a company has fewer than 750 shareholders and less than $1 million in assets, long established rules exempt that firm from having to register its securities with the SEC. The JOBS Act revamps these limits to $10 million in assets and either of the following:
  • 2,000 shareholders or
  • 500 nonaccredited investors.
William Michael Cunningham
Chapter 12. Title VI
Capital Expansion
Abstract
Title VI of the JOBS Act focuses on banks, and does for them what Title V did for other companies. It says banks don’t need to register with the SEC until they have $10 million in assets and a certain number of shareholders. It also expands the number of those shareholders for these institutions from 500 to 2,000 before triggering the registration requirement, with no qualification concerning accredited vs. nonaccredited persons.
William Michael Cunningham
Chapter 13. Title VII
Outreach on Changes to the Law
Abstract
This title of the JOBS Act follows a pattern established by Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the creation of an Office of Minority and Women Inclusion at 29 federal agencies to “monitor the diversity efforts of the agencies, the regulated entities and agency contractors.”
William Michael Cunningham
Backmatter
Metadaten
Titel
The Jobs Act
verfasst von
William Michael Cunningham
Copyright-Jahr
2012
Verlag
Apress
Electronic ISBN
978-1-4302-4756-2
Print ISBN
978-1-4302-4755-5
DOI
https://doi.org/10.1007/978-1-4302-4756-2

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