Why is Title III a big deal? It removes the long-standing law that only “accredited investors” could take equity stakes in startup businesses — and benefit from the incomparable financial windfalls that startup acquisitions can reap on founders and their investors. My friend Eric invested his own $100,000 in a food company four years ago, only to receive a $700,000 check this year. Investors call this a “7x” (or 700 percent returns) over four years — unbelievable returns to any investor.
This law could dramatically level the playing field for entrepreneurs who've dreamed of raising money to rapidly scale what they believe is a mass-market product, but didn't have connections to a community of angel investors. Many refer to the JOBS Act as the next step in democratizing wealth.
When I was first raising capital for DailyWorth, I spent hours cataloging names I found on TechCrunch and AngelList, most of which seemed to revolve around the same cast of angel investor characters — mostly men, many of whom have built enormous wealth (in the millions and billions), most of whom are inundated by startup founders shopping ideas. Just getting a meeting, if you’re lucky enough and connected enough, can take months and months. If I was raising capital today, I'd start by checking out Plum Alley, a new crowdfunding website created by financier Deborah Jackson specifically for women entrepreneurs.
While I’m not advising you to run out and crowdfund your seed round, if you know you’re a mogul in the making, you should be paying very close attention to Title III. The JOBS Act is a giant experiment that could go up in flames. Most new businesses fail, so most new angel investors will lose a lot of money as the market learns how to balance the real risk — the BIG risk — and losses that come with angel investing.
But in the long run, I believe this enormous change to security laws will help ignite incredible growth in innovation among entrepreneurs, especially women who’ve historically struggled to find investors for this business. Stay tuned to CreateWorth — we’ll keep you informed as the JOBS ACT becomes real and we see this exciting new era in entrepreneurship materialize.