The Jumpstart Our Business Startups Act and Crowdfunding Over the Past Decade

by | May 27, 2022 | Business

The Jumpstart Our Business Startups Act is now 10 years old. Signed into law in April 2012, with Title III of the Act enacted in May 2016, this piece of legislation, including all of its addendums has provided businesses with access to means of crowdfunding as never before because it has enabled funds to be raised based on equity.

The impact of equity crowdfunding from the JOBS Act has expanded throughout numerous industries, including real estate, technology, and construction. The JOBS Act and crowdfunding have advanced considerably from the early days of non-equity crowdfunding through Indiegogo and Kickstarter.

Crowdfunding Expands Under the JOBS Act
The Jumpstart Our Business Startups Act impacted crowdfunding in the following significant way. For the first time, unaccredited investors were able to access equity stakes in business by engaging in solicitation online. At the same time, proper channels still had to be followed through authorized accredited crowdfunding portals. Before this change, the idea of crowdfunding was associated more with platforms that profited from creative projects, including Kickstarter and Indiegogo. These platforms could also function as a preorder hub without guaranteeing the quality of products or performance by the solicitor of funds.

The JOBS Act allowed equity crowdfunding in which startups could sell securities online – a big change. The Act enabled this by allowing non-accredited investors to engage in crowdfunding based on Title III and Title IV.

Crowdfunding After Title III
The expansion of crowdfunding has also helped the boom of Initial Coin Offerings (ICOs) from 2016 until the present. The Jumpstart Our Business Startups Act had a part in facilitating this boom, but not altogether. The boom in ICOs was also due to technology outpacing the law. The SEC had to warn companies that in most cases ICOs were going to be designated as securities. Crowdfunding has expanded beyond ICOs to construction loans and real estate loans. The possibilities through crowdfunding in the aftermath of Title III implementation are greater than ever.

Whether the SEC will further enlarge crowdfunding potential with alternatives to current funding methods is unknown. Regardless of what the future is with that, crowdfunding is certainly now a viable means of growing and supplementing existing funding plans.

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