How Does the JOBS Act Help Millennial Entrepreneurs?

The Obama administration passed the Jumpstart Our Business Startups (JOBS) Act into legislation in 2012. Two years later, the JOBS Act has been amended several times and the market for IPOs has seen some stark changes in the right direction as a result.

Accessible Capital Ventures

The JOBS Act in its initial form legalized equity crowdfunding in an effort to create more jobs. The legislation allows individuals to invest in start-up companies in exchange for equity. This act was designed to foster growth of start-up companies and create more jobs for young professionals. Furthermore, entrepreneurs were given new outlets to fundraise for their budding enterprises.

Last summer, the Securities and Exchange Commission (SEC) added an amendment to the JOBS Act. Title II removed an eight-decade-old ban on general solicitation or advertising for private enterprises that were not formally registered with the SEC.

By requiring the SEC to remove this general solicitation restriction, Congress sought to make it easier for a company to find investors and thereby raise capital.

The success of many companies depends on the timing of their first public sales. When the JOBS Act made it possible for companies to conduct their initial paperwork behind closed doors and control the time of their public announcement, many new companies jumped on the bandwagon.

In 2013, the number of initial public offerings (IPOs) increased by 70 percent. The biotech industry has seen an incredible boom thanks to the JOBS Act. Biotech investors and CEOs of emerging companies are pushing for further legislation to make access to capital easier so they can focus on breakthrough developments and treatments for HIV/AIDS, cancer, and diabetes.

Jumpstarting Young Professionals

What does all this mean for young professionals eager to launch their own business ventures? With more control over IPOs and easier access to investors, Millennials are more likely to land investors. Rather than depending on one main investor, emerging companies can acquire several smaller investments from various investors.

For Millennials, perfecting the art of investor relations will be a key component of their start-ups’ success. Young business proteges interested in the tech or biotech industries have lots of room to grow and should start creating connections with investors.

Title III of the JOBS Act opened up the opportunity for companies to crowd investing. Individuals who invest online into private companies do not have to be accredited, though there are certain limitations set for these individuals. For example, a potential investor with an income below $100,000 can invest at most 5 percent of his or her income or net worth.

For Millennials who are interested in launching a company in an emerging market and seeking private investors, websites like RealCrowd exist. RealCrowd is an investment website dedicated to the real estate market.

Lastly, it’s imperative for start-up companies to get to know their investors. The JOBS Act allows for emerging growth companies to learn their investors’ motives and style. Because IPOs are now private, companies can back out of deals without public backlash.

The market is ripe for start-up companies – not only do they stimulate the economy, but they also create job opportunities. The JOBS Act benefits job seekers, entrepreneurs, and investors and makes it easier for start-up companies to become successful.

Natasha Paulmeno

Natasha Paulmeno is an aspiring PR professional studying at the University of Maryland. She is learning to speak Spanish fluently through travel, music, and school. In her spare time she enjoys Bachata music, playing with her dog, and exploring social media trends. Contact Natasha at staff@LawStreetMedia.com.