As of May 16th, the American JOBS Act took effect and the rules of startup funding changed. The act, designed to help increase the flow of capital to stimulate economic and job growth, now allows average Americans to make small investments in promising ventures.
Right now, startups are struggling to find capital to start and grow their businesses – the capital available to early stage companies has become extremely limited. At one point time, access to capital through venture capital or bank financing was much easier. Over the years, it’s become more and more difficult to secure these investments, which in turn has hindered innovation in America.
With the JOBS Act, the pool of capital available to entrepreneurs has expanded significantly.
This is also an exciting change for average Americans. Through an SEC-registered portal, such as Jumpstart Micro, you have the opportunity to make small investments in startup companies, help an entrepreneur and get equity in return, something that before the JOBS Act was reserved for only accredited investors (high net worth individuals).
So how does it work? Maybe you have put money into a Kickstarter campaign. Equity crowdfunding is similar – but now you get stock in the company making the products and benefit from its future success.
Entrepreneurs work with funding portals through a business planning process to offer stock or debt in their company. For example, a new venture might need to raise $300,000 and is willing to give up 20% of its company. The shares might be priced at $1.00 per share. As an investor you could invest $500 and get 500 shares in the new venture. You never know, you might just help fund the next big thing!
Investing in startup companies is very exciting and in addition to an investment opportunity you are helping an entrepreneur launch a business venture. Always remember that it’s risky to invest in startups; but you can make investments as small as a few hundred dollars and consider diversifying into more than one.
To learn more about the current opportunities, register as an investor.