The “Jumpstart our Business Startups” allows small businesses to use the Internet to raise up to $1 million from small-dollar investors, known as “crowdfunding.”
“This is a big deal to us,” said Jan Horsfall, Colorado Springs entrepreneur and co-chair of Startup Colorado, a statewide effort to connect entrepreneurs to capital and technological resources.
Crowdfunding has become popular in recent years for art and technology projects and startups. Horsfall is working with four local startups already using crowdfunding websites like Kickstarter.com, including Devium Dash, founded by Colorado Springs entrepreneur Paul Lizer, which set out to raise $45,000 and raised $72,000.
Kickstarter.com has been successful since its launch in 2008 with nearly half of all the projects on the site fully funded to the tune of millions in public pledges. The average project raises about $10,000 with $25 being the most common pledge, according to the Kickstarter.com website.
The JOBS Act is meant to promote American entrepreneurship and innovation while maintaining important protections for American investors, according to the prepared statement from the White House press secretary.
Under the new legislation, crowdfunding must occur through platforms that are registered with a self-regulatory organization and regulated by the SEC. In addition, investors’ annual combined investments in crowdfunded securities will be limited based on an income and net worth test.
Horsfall said small business and new companies have not had much to get excited about in terms of helpful legislation. But, the JOBS Act, and crowdfunding, could be a huge boost to Colorado Springs entrepreneurs.
The legislation removes some of the previous legal and financial barriers and allows entrepreneurs to be more aggressive about seeking funding, he said. It gives the entrepreneur more flexibility and formalizes the process.
“Positive legislation does not come around very often and when it does you want to applaud the effort,” he said. “This was a very significant piece of legislation for us.”