Ever wonder why you didn’t invest in Google (or some other start-up) way back when and cash out?
Put simply, you couldn’t. But you can now, thanks to a key feature of the JOBS Act.
Investing in start-ups has historically been reserved for “the 1%,” thanks to regulations. Only very wealthy accredited investors could buy into new companies before they went public.
But by the time a company is available for public trading, “in most cases, the real appreciation has already occurred,” says Dara Albright, founder of the NowStreet Journal.
Now, JOBS has authorized the practice of crowdfunding—a way for start-up companies to raise growth capital from a large number of individual investors, each contributing small amounts of cash.
Some people fear this deregulation could increase fraud. “There’s a risk that you could lose all your investment,” says Albright, but adds that the new law includes parameters to protect smaller, individual investors (see Power Point, above).
With crowdfunding, you can seed a company with an investment as small as $50 or $100. And if it takes off, well, perhaps you could get in on the next Google.