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.

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When you decide to start a business, you need to get all of your ducks in a row. Financially. Mentally. And legally.

The JOBs Act has helped a lot of new businesses sprout up over the last year, and crowdfunding sites like Kickstarter have proven to be the catalyst that a lot of budding entrepreneurs needed. Crowdfunding and earlier access to funding is making it easier for people (especially young people) to start their dream of being self-employed sooner than ever before.

While all of this new business development is lubricating our economy, creating opportunities for employment, and adding to the overall landscape of innovation and creativity, it is also raising legal questions.  As I’ve touched on previously, the SEC has gone through many adjustments and set in place regulations to protect both the entrepreneur and the investor.

Here’s a list of the most recent crowdfunding regulations (thanks, Forbes!).

• The amount an issuer can raise is capped at $1 million in any 12-month period.
• The amount a person can invest in all crowdfundings over a 12-month period is capped at 10 percent of annual income or net worth (incomes of $100,000 or more) or the greater of $2,000 or five percent of annual income or net worth (incomes of less than $100,000).
• Crowdfunding must be done through a registered broker-dealer or registered “funding portal.” Broker-dealers and funding portals may not solicit investments, offer investment advice or compensate employees based on sales. Traditional investment banks have shown little interest in crowdfunding, leading to speculation that crowdfunding will be facilitated by lesser-known financial institutions with little or no retail investment track record.
• Crowdfunding requires a disclosure document to be filed with the SEC at least 21 days prior to first sale, and requires scaled financial disclosure, including audited financial statements for raises of more than $500,000.
• Unlike Regulation D Rule 506 private placements to accredited investors following the JOBS Act, crowdfunding does not allow advertising except solely to direct investors to the appropriate broker/funding portal.
• Annual reports must be filed with the SEC by a company which completes a crowdfunding round.

Law firms specializing in business law need to accommodate the new influx of startups and stay up to date on the ever-changing and developing market, and I can’t stress enough the importance of speaking to someone who knows the exact you need to take. Startups have high risk potential, so it’s important that when presenting your idea to investors or to future clients you have everything organized appropriately. Many law firms, such as Manhattan’s Cohen Schneider & O’Neill, are taking note of the new potential market opportunities. One of this firm’s main areas of focus is on entrepreneurship and startups, for which they offer a comprehensive package for those ready to venture out on their own. For example, they can help the budding entrepreneur with particulars such as: required document preparation in the appropriate jurisdiction; compliance requirements and training, drafting and executing bylaws, resolutions, and stock issuance; tax ID registration; as well as brainstorming and consultations with a legal startup team.

So, basically, although things are getting easier in the market for new businesses, you still need to lawyer up, because it’s never easy when things aren’t done by the books. Save yourself some time and lots of money and take care of the legalities before you finish designing your logo.

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Alexandra Saville (@CapitalistaBlog) is a PR & Media Outreach Manager. She has experience in the publishing and marketing worlds and started her own publishing company right out of college.

Alexandra Saville

Alexandra Saville is the Media and Writing Specialist at Law Street Media. She has experience in the publishing and marketing worlds and started her own publishing company right out of college. Her blogs, The Capitalista and Capitalista Careers, focus on the young and the entrepreneurial.

The post Have a Great Startup Idea? Find a Good Legal Team First appeared first on Law Street.

In 2011, a couple of friends concocted a plan. What if they could buy a beer company? Why not?

After (we assume) throwing a few back, the pair decided it would be a great idea to take to social media to figure out if they could raise the $300 million it would take to buy Pabst Blue Ribbon. They managed to raise $200 million with the promise of free beer and stock options. Inventive? Yes. Illegal? Incredibly. At a recent Bloomberg Law event on the JOBS Act, Karl Kilb said that the point of the changes to the rules regarding funding is to find investors who not only understand but can withstand the risks involved.

It’s been a year since Obama signed the JOBS Act, and things are still being ironed out. How will the act, which provides start-ups and other businesses more options to access capital and an ease of communication with investors, fit in with laws regarding investor protection and compliance? A panel of lawyers discussed this at at Bloomberg Law’s event.

And Twitter. I was surprised that among the suits, name tags, and legal jargon, there was a heavy flow of communication around social media. The takeaway? Not only is it here to stay, but it’s a game changer.

The JOBS Act takes into consideration the fact that people have communication literally at their fingertips by considering how social media affects IPOs. Will tweeting to investors still be classified as confidential? There are so many questions that the abundance of new communication tools create.

As an entrepreneur myself, I know the thing that all people starting a business venture come to know: It is always more expensive than you hoped. Not sometimes. Always. The act initiates a way for start-ups to take their big ideas and cast a wide net over a large pool of investors. Great in theory. This coincides with the popping up of countless crowdfunding sources. These new methods to gain capital just might add fuel to the fire of countless ideas and create jobs. However, we have to figure out how to navigate the potential legal mine fields because they muddy the waters that the SEC is working to preemptively clean up.

This is a discussion that is fueled with opinions and flooded with debate. One thing is certain, though. The name of the new game is #balance.

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Alexandra Saville (@CapitalistaBlog) is the Media and Writing Specialist at Law Street Media. She has experience in the publishing and marketing worlds and started her own publishing company right out of college. Her blogs, The Capitalista and Capitalista Careers, focus on the young and the entrepreneurial.

Featured image courtesy of [Talk Radio News Service via Flickr]

Alexandra Saville

Alexandra Saville is the Media and Writing Specialist at Law Street Media. She has experience in the publishing and marketing worlds and started her own publishing company right out of college. Her blogs, The Capitalista and Capitalista Careers, focus on the young and the entrepreneurial.

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