The bill, Jumpstart Our Business Startups or JOBS, was signed by President Obama yesterday, April 5, 2012. This bipartisan bill will support startups and small businesses across the nation in raising capital from investors more efficiently. The president believes that it is small businesses and startups that are fueling the economy and job creation.
“America’s high-growth entrepreneurs and small businesses play a vital role in creating jobs and growing the economy,” said President Obama. “I’m pleased Congress took bipartisan action to pass this bill. These proposals will help entrepreneurs raise the capital they need to put Americans back to work and create an economy that’s built to last.”
Several key elements of the job act aim to increase availability of capital to small business while encouraging sound investments. One element is allowing small businesses to raise up to $1 million annually through small-dollar donations using web-based “crowdfunding” platforms that are regulated by the U.S. Securities and Exchange Commission (SEC). Also included is the expansion of the “Mini Public Offerings” from a $5 million to a $50 million cap, which will streamline the process of raising capital and providing investor protections. Finally, the Act simplifies the process of going public for young, high growth firms by providing an “IPO (initial public offering) On-Ramp,” or longer “incubator” period for firms to comply with certain Sarbanes-Oxley auditing requirements.
According to Time, “The JOBS Act reduces many of the regulatory barriers that have, up to this point, made it nearly impossible for young startups to raise much-needed capital from investors. The key takeaway? Capital investment fuels business growth in general, and it’s especially critical to sustain young, high-growth companies (which only make up 1% of all companies, yet generate 10% of all new jobs each year).”
This bill is the product of the President’s September 2011 address to a Joint Session of Congress and more recently, a January 2012 address called, Startup America Legislative Agenda to Congress, where the three pillars of the Act were outlined: allowing “crowdfunding,” expanding “mini-public offerings,” and creating an “IPO on ramp” consistent with investor protections. These pillars were born of ideas conceived last March at a commission of policymakers and key stakeholders entitled, “Access to Capital: Fostering Growth and Innovation for Small Companies.”