So the SEC recently released a statement about the Jobs Act, Title III that should have MASSIVE implications on the overall angel investing & VC landscape. Basically, this opens up the everyone to be able to invest in any start-up they want.
It seems like opening up this massive funding source will only be good news for start-ups that should have an easier time raising $. The question is, how will this new competition hurt existing VCs or Angel investors?
Protecting Mr. Average Joe
Of course, with some limitations to try and protect the average investor from losing everything when they are convinced their nephew is developing the next Facebook and takes an early withdrawal from their i401k and the $21,300 life savings and invests it with said nephew....
The Proposed Rules:
From the SEC:
Under the proposed rules:*A company would be able to raise a maximum aggregate amount of $1 million through crowdfunding offerings in a 12-month period.
* Investors, over the course of a 12-month period, would be permitted to invest up to:
- $2,000 or 5 percent of their annual income or net worth, whichever is greater, if both their annual income and net worth are less than $100,000.
- 10 percent of their annual income or net worth, whichever is greater, if either their annual income or net worth is equal to or more than $100,000. During the 12-month period, these investors would not be able to purchase more than $100,000 of securities through crowdfunding.
Sounds pretty awesome.
Implications for Wall Street Oasis
To be honest, this new rule is really tailor made for a business like Wall Street Oasis. I've toyed with the idea of selling small stakes to a variety of our top users to continue to encourage them to help us grow and help me navigate the crazy world of online anonymous forum ownership. The issue is the advice I have ALWAYS gotten is to wait because it would be too messy / complex to get it done.
Now the business is doing fine since we run it pretty lean and I already have access to capital if I needed it, but part of me thinks selling a small stake to dedicated members would do more for the business than any other source of capital.
2016 Should be a Boom
Whatever happens here at Wall Street Oasis, this news is pretty massive for small startups here in the US. I think it's smart legislation like this (that provides some safeguards but still allows participation from more than a select few accredited investors) is what will help the USA remain the start up capital of the world.
That's some nice easing of regulation for you Americans. If I remember correctly, last time I checked, Australia required you to be an 'accredited investor' to invest in any crowdfunding/startups. Its a shame but this is a relatively new area of capital markets, so hopefully we get on the same page as you Americans soon.
Are there any disclosure requirements with investors of this kind?
How much?
....still waiting.....
ha, that really depends on how much we grow and what future prospects look like. I'll take Facebook's valuation at 100+ trailing P/E or 37x forward ;-)
I think our userbase is at least 3x as valuable (on a per user basis) and our growth prospects much better -- given that we don't have over 1 billion users yet, I'd argue we have much more room to grow.
Honestly though, discussions about valuation are very preliminary at this point. Jobs Act Title III still has to pass and then even then, I may reach out to a handful of users to gauge interest first before deciding one way or the other.
WallStreetOasis.com I think this is a great idea and although many on WSO don't agree or understand why anyone would invest in a crowd funding portal its a great alternative for those who want to invest in P2P lending or real estate development where they can diversify their investment portfolio rather than dumping money into stocks.
Pretty interesting concept - imagine the possibilities that could spring up if there's a mass interest in this? You could have a secondary crowdfunding market... (well maybe, in Aus equity is willable usually, IDK about the legal treatment/restrictions in the US).
That plus this awesome article I came across http://www.economist.com/news/leaders/21677198-technology-behind-bitcoi…
You could very well see a secondary market for early start-ups not borne on an exchange, but some sort of bitcoin-tech-related exchange. In that case you'd be able to ensure transparency and accountability with transactions (since this no doubt is gonna be abused by scammers).
More on topic - it opens up an interesting option for you to employ people obviously, those interns you want to hire etc, if you can incentivise with say a small slice of equity at the end of their stint - you could build a sustainable working culture behind the forum.
I think it's a pretty cool idea on the surface. WSO raises some money while dedicated contributors take some ownership (literally and figuratively) in the site. Would obviously need details, but it's a promising idea.
It's an interesting idea but I honestly don't think that tech is really what they are aiming for here. If you ask me this is ripe for an industry such as 3D printing and small scale specialty fabrication. These days you can launch a tech start up with little to nothing at all other than skill and drive. The intensive need for capital isn't there anymore. The type of funding they are talking about here is more like series A if not B. I would be hesitant to invest in a tech start up that needed capital before it had an actual product.
Does this mean foreign investors can also invest now?
Researching this. As a small business owner, could you recommend or post any sources of credible info that outline the proposed rules/implications, aside from the SECs publications that you've read into or have been using as a guide... Seeing a lot of info out there, but much of it is contradicting and doesn't go into much detail.
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