The feds are finally making it easier for entrepreneurs to raise money.
You’ll soon be able to put out the call for capital—on Facebook, Twitter, blogs, billboards or even T-shirts, as The Wall Street Journal pointed out—without running up against the law. This week, the Securities and Exchange Commission said it would get rid of the rule that made it illegal to advertise fundraising efforts unless a company was selling registered shares.
“This is just the beginning of what will be a huge change for entrepreneurs,” said Tanya Prive, co-founder and COO of Rock the Post, an online fundraising platform. It’s especially exciting for women, who have a harder time fundraising, she said.
The change is the first big step in implementing the Jumpstart Our Business Startups Act, which President Obama signed last year. Until now, businesses were limited to raising money by word of mouth, from people they knew—now, they’ll be able to reach a whole new universe of investors, and get their hands on capital faster and with less effort.
Even bigger changes will come when another part of the JOBS Act goes into effect, changing the limitations on who can invest in your business, a shift that Prive expects in 2014. Right now, companies can still only let “accredited investors”—people with at least $1 million in assets or $200,000 in annual income—put money into their businesses.
All these rules were originally put into place to protect investors from scams, and it’s crucial to avoid making misleading or unsupported statements when you’re soliciting funds, Prive said. Plus, you’ll have to keep your mouth shut for a few weeks more—it’s going to take 60 days for the new rules to take effect.
After that, go big and grow big.
Photo courtesy of Tanya Prive.