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US Government Moves to Promote Startups
Working to unleash the fund raising abilities of the internet and crowdfunding, Washington recently made the Jumpstart Our Business Startups Act (JOBS) law. The CEA expects:
“The JOBS Act will encourage economic growth without any additional government spending or new taxes by removing regulatory blocks, thus making funding more accessible for entrepreneurs and innovators.”
Across the board, JOBS aims to reduce regulation and increase the ability of smaller companies to acquire capital. Significantly, this act takes crowdfunding into consideration. With websites such as Kickstarter, ArtistShare and Pledgemusic, The arts and minor projects have historically benefited from crowdfunding. Now it can now be utilized by small companies to sell investments.
Recently in the data industry we have witnessed a significant rise in small companies offering solutions. With the major providers of business intelligence and analytics beginning to show their age and shortcomings, we can expect continued small business growth in this market. The JOBS act should make this simpler by making capital more easily available, but the bill doesn’t necessarily make crowdfunding the promised land it could be.
The government mandated that all crowdfunding must now go through SEC sanctioned funding portals or brokers. Although this provision is aimed at protecting investors, its immediate effect is to increase bureaucracy and the end cost to Investors and issuers. Stranger yet, JOBS establishes limits on how much an individual can invest through crowdfunding in a given year (5%-10% based on income) and caps the amount an issuer can raise at 1 million a year.
with details regarding liability for SEC sanctioned middlemen yet to be released and the new possibilities yet to be utilized, the full impact of this legislation cannot yet be understood. But one thing is clear: this legislation will significantly influence the growth of the data discovery industry by making it easier for small companies to gather much needed capital. If this move does what washington hopes, then it will bust the door wide open for small startups to challenge the established companies.
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