As expected, President Obama signed the JOBS Act into law today, signalling a new era for the raising of funds by emerging companies, often referred to as ‘startups.’
The bill, the Jumpstart Our Business Startups Act, is designed to lessen the regulatory burden on small companies looking to raise money, and allows firms to have more total investors before being forced to go public. Importantly, the bill also allows for crowdfunding of new and small companies.
TNW wrote in favor of the bill, noting that while it does introduce new risk into the market, its potential positives outweigh those concerns. Not all agreed. Earlier today we published an editorial that argued the opposite:
So crowdfunding will let regular people (who are less likely to be able to asses the risk of a potential investment) invest in companies that angels and VCs deemed to be too risky. That’s not good for the health of the startup industry.
And companies that would have been able to raise money before will now be able to raise at much higher valuations. This follows from basic economics: more potential investors and more money equals more demand, which leads to higher prices for startups. That’s not good for the health of the startup industry.
However, that debate is now moot. The Act is law. Let the new games begin. At the signing the President had this to say on the legislation: “Overall, new businesses account for almost every new job created in America. For start-ups and small businesses, this bill is a game changer. Because of this bill, startups and small businesses will have access to a bigger pool of investors.”
For more, read all our coverage of the law.