Skip to main content

Almost Anyone Can Now Invest in Private Companies: SEC Finalizes CrowdFunding Rules


It's been a long time, you and I. We'll try this again for this special news. 

Yesterday, the SEC announced its final guidance for fundraising under the JOBS Act, and the news is overall very good for startups and any private companies that want to raise capital. 

Here's the full 250+-page SEC document (and I expect you to read it all. Quiz on Friday). 

At least two parts are worth paying attention to: 

1) you can invest up to 10% of your net worth if you're not an accredited investor (acc investor has at least $1 million net worth or $200k annually of income)', which means if you're net worth is $10,000, you can invest up to $1,000 in private companies, and

2) up to 30% of a stock offering can come from existing shareholders; the rest comes from the company issuing new stock. It's a built-in path to liquidity for investors, employees, and founders, with a rational limit that should attenuate attempts to dump stock on the unsuspecting general public. 

That 30% rule gives companies a great answer to the "when will I see this money again" question. Until now, the only answers have been IPO, sale of the company, dividends, and stock buyback. 

Dividends require profitability. Stock buybacks require cash on hand, which really should be used to grow the company. IPOs are difficult and unlikely for most companies, and a sale of the company is an awfully radical step just to put cash in investors' pockets. 

I'm not a financial expert by any means, but I'm thrilled by the new rules and look forward to great companies raising capital more easily. That said, I do not look forward to the inevitable absolute and soft fraud that will happen. 

"Soft fraud" is when the company is legitimate, but it oversells its prospects to unwitting investors; the company misleads them in a breach of ethics, but doesn't quite cross the line of legal fraud. 

I'm looking forward to reading the entire document. Ok not really, but I probably will soon. Because, you know, geeks. 


Comments

Popular posts from this blog

Beta Signup

I've been working for quite a while on a new search concept, though the further in I get, the closer the rest of the world gets to what we're doing.

So today I'm inviting you to sign up for the rather modest beta, which will be ready soon if we can nail down a few difficult  details.

Jawaya is a way of navigating the web and getting better results. And that's as much as I can say right now, because we're not a funded startup, and things are moving really fast in this space--it's going to be very competitive. I predict there will be about 10 funded startups in the next 6 months doing something similar. One of them will be mine, and we aim to make it the best.

We're raising a round of capital to fund the team, and are shooting for early sustainability. This is my fifth company; my fourth in the tech space, and my third software company. I think it will be the biggest and can possibly have a positive impact on the world by reducing the amount of time it takes for…

Search & Privacy

I've been using DuckDuckGo.com (DDG) for search recently instead of Google because of its privacy features--it doesn't track you or store your searches. And generally I find it to be useful, delivering relevant content better than or equal to Google's relatively commercial content.

When I want to shop for something, I go to Google because it's a strong engine for that--it's a commerce discovery platform when it comes down to it. Or Amazon.

DDG doesn't track anything, which is meaningful these days when every site and likely every agency tracks what you're doing.

I still think there's a space for curated search, which is what I attempted to do with the unfortunately named Jawaya, a social search or curated search engine of sorts. And I've been building a similar tool for myself as a side project that will approximate that. It's much more powerful with a network of people curating search results. So I might open it up at some point to see if that …

Where Innovation Happens

As I get closer to a go/no-go decision on a project, I've been thinking about the difference about my vision for the project and the supportive innovations to enable the core innovations

The vision combines (in unequal parts) product, core innovation as I imagine it, the application of that core innovation, design, marketing,  developer ecosystem, and business development. The core innovation enables everything else, but it's the application of the innovation that makes it meaningful, useful, and in this case, fun.

This week we're testing initial approaches to the implementation for our specific application, and that's where we'll develop the enabling innovations, which is basically where the rubber meets the road.

The difference is that the enabling innovation happens at the source of real problems only encountered in the making of something, and in a project like this just getting the essence of it right isn't enough; it also has to be safe, the components h…