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New Law Incorporates Small Business Feedback: JOBS Act Creates Crowdfunding Opportunities, Eases IPO Rules

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New Law Incorporates Small Business Feedback: JOBS Act Creates Crowdfunding Opportunities, Eases IPO Rules

By Karen Mills, Former SBA Administrator
Published: April 5, 2012 Updated: July 19, 2016

Today, President Obama signed the Jumpstart Our Business Startups Act (JOBS), making it easier for small businesses and entrepreneurs to obtain much needed access to capital. This new law creates an enhanced environment for growth.

Last year, senior SBA officials traveled around the country listening to high-growth entrepreneurs.  We heard your concerns and learned about the barriers to expansion particularly for high-growth industries and the need for a simplified process-one that any business could use to grow and create jobs.  We know that small businesses have struggled to find access to capital in this environment, not just in lending, but in equity financing as well, and in all stages of the company’s development.

The SBA has already helped thousands of high-growth businesses.  The Small Business Investment Company (SBIC) program - a great source of equity capital for high-growth companies - licensed twice the number of funds in half the time in FY 2011 compared to the average from FY 2006 through FY 2009. In FY 2011, the SBIC Program provided a 50-year record high of $1.6 billion in financing for small businesses.  SBA also revitalized the Small Business Innovation Research (SBIR) program and helped agencies distribute $2.5 billion in funding to qualified small businesses. 

We are also constantly reevaluating other parts of the market to ensure that our businesses are successful- from the earliest stages of growth to their ultimate peak where they are ready to make their initial public offering (IPO) for investment on the public markets.

The JOBS Act benefits both Main Street small businesses as well high-growth entrepreneurs.  Before the JOBS Act, a coffee shop in Akron that wanted to franchise itself would be limited to investors that are “accredited” according to the SEC or angel investors, slowing the process for growth significantly and giving an advantage to wealthier investors and the small businesses they have relationships with.  Recognizing the difficulty of finding streams of capital at the earliest stages of expansion, this measure creates more opportunities for small businesses to raise money from customers and investors in their communities.

The JOBS Act also addresses some of the barriers for small businesses ready to make their IPO. These changes to the Securities Exchange Commission (SEC) rules include measures to streamline the process- making it easier to reduce the cost and complexity. This change is something small businesses, not just the big guys, can benefit from. 

The bipartisan bill signed today by President Obama is yet another step toward the Nation’s economic recovery.  The Obama Administration is committed to ensuring growth for small business- the engines of job creation in the American economy.  By reducing burdens for our high-growth businesses and expanding opportunities for more Americans to invest locally, the JOBS Act empowers our small businesses to do what they do best:  grow and create jobs.

About the Author:

Karen Mills

Former SBA Administrator

Karen Gordon Mills is the Former Administrator of the U.S. Small Business Administration. The SBA helps both Main Street and high-growth small businesses get access to capital, counseling, federal contracts, disaster assistance and more.


Small and medium businesses have the highest growth rates, and many of them go on to hire a large portion of the workforce. Investing in startups is a great way to help boost the employment in the country. Besides funding, many of them also need professional advice and mentorship programs.
Crowdfunding ("investors") will ultimately make educated informed investment decisions based on conducting due diligence until they feel comfortable with the investment. Although significant disclosure is not required, those companies seeking to successfully execute a crowdfunding offer will find that by supplying potential investors with a well thought out professional business plan and due diligence materials; their ability to obtain funding will be greatly increased.
I believe the recent steps undertaken by Congress and Obama Administration will create further opportunities. Introducing regulations such as the HIRE Bill followed by FATCA and now the JOBS act will create sufficient opportunities throughout the country. Apart from most of these laws, I believe FATCA is the only regulation that has received much criticism since it aims to impose tax on American citizens who are living outside the United States and may have not even visited the US in over 20-30 years. Yes, JOBS Act will clearly support both SMEs and larger corporations.
While on the surface, crowd funding sounds like a good idea – allowing companies tap into a new source of financing and giving average people new investment opportunities – there are many risks that could prove disastrous. Crowd funding creates problems for those on both sides of the transaction, and there are many better and safer ways to get capital into the hands of entrepreneurs. When average citizens buy traditional equities, they can see audited financial statements and company disclosures, giving them an opportunity to honestly evaluate the firm. Also, they can sell their shares to a market of buyers at any time they choose. Investing in a small business as a member of the crowd gives the investor none of these freedoms. The proposed law would not require audited financial statements on companies raising under $1 million, meaning that investors could purchase a firm whose value is based on potentially flawed numbers. There also could be hidden liabilities – for example, workers comp claims, lawsuits and unpaid back taxes – in the company that the crowd now owns. While crowd funding opens new opportunities for investors and entrepreneurs, it is riddled with risks.
Where can we know more about crowdfunding opportunities?
I think the new law is great from the point of view that it should be easier for startups and small business to raise money from the public. My concern is that the new ability might be abused by unscrupulous scammers to take advantage of less sophisticated investors. On the whole, I believe it will be beneficial. Here is an opportunity for a business: Although there are “crowd funding” sites out there, they seem to be aligned more for supporters and not investors. How about a for profit site to take advantage of the new law and open it to small time investors {where the investors will take a piece of the companies that want funding in exchange for cash}. Sure there will be a lot of failures, but there might also be a Google or Facebook in there.

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