Chapter 11
Meet the JOBS Act
11.1 Introduction
In an effort to jump-start the entrepreneurial economy, the JOBS
(Jumpstart Our Business Startups) Act created a new provision in
the Securities Act of 1933 Section 4(6) that allows Emerging Growth
Companies (EGCs) to raise up to $1 million in any 12-month period by
selling securities through authorized intermediaries, subject to certain limi-
tations on the matter of the offering and by limiting the amount any per-
son is permitted to invest.
EGCs are a new category of issuer. EGCs are those with (1) less than
$1 billion total annual gross revenues in their most recent scal year, and (2)
have not had a registered public offering before December 8, 2012.
The JOBS Act (signed into law April 6, 2012) facilitates nancing across
the spectrum from seed capital to public offerings. Following are some of
the most important aspects and implications:
Permitting “crowdfunding
Easing restrictions on fundraising from accredited investors
Easing mandatory reporting triggers under the SEC Act
Increasing the amount of money companies may raise in “mini-IPOs
Reducing many burdens on EGCs going public
Providing more capital to entrepreneurs and EGCs, creating jobs and
providing opportunities for non-accredited investors to invest in both
community-based businesses and entrepreneurial companies
228The Guide to Entrepreneurship: How to Create Wealth for Your Company
For the last several years, the number of VC nancings in the U.S. has
continued to drop—approximately 3500 VC-led deals; VCs are raising
less capital and continue to nance only larger opportunities with sig-
nicant IRR potential and with exits of greater than $50 million
Although Angel statistics are difcult to obtain, they funded nearly as
much as VCs
Fewer than 10% of all accredited investors in the U.S. invest in private
nancings; except as friends or family, non-accredited investors have no
exposure to private nancings
There are 25,000,000 EGCs in the U.S.; many are looking for funding
and banks are not lending; identifying investors is extremely difcult
given securities laws
11.2 The JOBS Act at a Glance
The JOBS Act seeks to accomplish this goal by, among other measures,
relaxing certain provisions of the Sarbanes-Oxley and Dodd-Frank Acts
insofar as those provisions apply to a class of newly public companies
dubbed EGCs. A primary goal of the legislation is to facilitate the ability of
growing companies to raise capital, as follows:
Removes the prohibition on general solicitation in connection with
transactions dealing with Rule 508 or Rule 144A, provided that sales are
limited to qualifying investors
Allows the thresholds that trigger registration of a security under
Section 12(g), including a different threshold for banks and bank hold-
ing companies
Provides, to a new category of EGCs, relief from requirements and
other restrictions applicable to IPOs and on a transitional basis for up to
5 years, relief from certain reporting requirements
Adds a “crowfunding” exemption
Authorizes the SC to increase the amount permitted to be raised in a
Regulation A offering to $50 million in any 12-month period
Modications to Rule 506 will provide substantial freedom for issuers to
promote their offerings to a wider group of investors
Anyone who can convince the investing public that they have a good
business idea can become an entrepreneur

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