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Last year, the Jumpstart Our Business Startups Act, or JOBS Act, was signed into law. The new law changes the model of the past few years, crowdfunding. Traditionally, donation-based platforms, such as Kickstarter and others, allow entrepreneurs to ask the general public for helping starting a project of product. In turn, funders are eligible to receive reward such as a product swag, samples or VIP status. The JOBS Act, however, changes that model by allowing entrepreneurs to actually sell a stake in their company to anyone regardless of whether they’re accredited investors. At a time when banks typically don’t consider you unless they can show two years of financials, this new law of the land could is particularly helpful for young entrepreneurs in need of capital. Here are four things to know about the JOBS Act: 1. Tell a good story. Entrepreneurs will be able to publicly post information about their business on their own “funding portal”. Fundraising success will depend on the entrepreneur’s ability to engage potential investors and tell their story in a compelling way. 2. Look to local investors. Gaining local support from those who frequent your business and know your products and services best, can be the easiest way to fund an expansion, a new location or new product. These are your existing customers that are now financially tied into helping your business grow. It’s a win-win. 3. Share yourself. Soliciting investments means that you will likely have to share business financials, personal information, and projections. Don’t’ forget that committing to crowdfunding often means that you’ll have to open yourself and your business up for evaluation. 4. Consider the “secondary” effects. One investor can lead to an introduction to an advisor or a new hire. Someone always knows someone who knows someone that can help you out somehow. The ancillary benefits of crowdfunding are worth considering. For more info, click here
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