JOBS Act boosts startups through ‘crowdfunding’
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Jeremy Hobson: President Obama is slated to sign the JOBS Act into law later today. It’s a plan to spur hiring by easing some regulations on small businesses looking for investors. One provision legalizes something called crowdfunding. Small companies will be able to sell stock on the Internet without going through a stock exchange.
Alex Goldmark reports.
Alex Goldmark: Crowdfunding websites got their start as a way for lots of little donors to finance bigger arts projects. But more businesses are getting in on the game.
Justin Jensen asked for cash his product that didn’t even exist yet.
Justin Jensen: My product is Cineskates, and it’s a set of three wheels that attach onto a tripod.
That rolling tripod makes videos smoother, so he needed money to go from invention to production.
Jensen: It turns out we met that $20,000 goal in about one day. The first day.
By the end, he got almost than half a million dollars, from 2,000 donors. And all he offered in return was his product as a thank you gift. He wasn’t allowed to sell stock. Now he is. Jensen used the crowdfunding website called Kickstarter. There are about a dozen of these, and they stand to gain a lot, now that the JOBS Act lets the sites play middleman between online investors and small startups.
Freeman White: We have to register with the SEC now, we have to register with a self regulatory organization. The professionalization of our industry is already underway.
Freeman White recently launched his site, called Launcht — with a T at the end — because the law looked likely to change. So he’s studied it closely. There will be background checks and document filings and, yes, legal liability for the websites.
Slava Rubin: It’s a game changer for sure.
Slava Rubin heads IndieGoGo, one of the elder crowdfunding sites, at four years old. That head start gives him a leg up on recruiting the coming wave of new business.
Rubin: So will it change things? Absolutely. I think we’ll see a lot of experimentation in the early days and then people will figure it out.
That’s when we’ll find out if these social media sites can really let you and me, try our hand as venture capitalists.
In New York, I’m Alex Goldmark for Marketplace.