The JOBS Act is a set of laws passed by Congress in 2012.
Effectively, these laws relax the restrictions around how individual investors like you can invest in private, early-stage companies.
There are two major pieces to the JOBS Act:
There’s Title II, and there’s Title III.
Title II went into effect in 2013. It allows a start-up to publicly advertise that it’s raising capital.
You see, since 1933, it’s been against the law for a private company to tell the general public that it’s accepting investments.
If a company wanted to advertise to attract new potential investors, first it had to go public in an Initial Public Offering and then list itself on a stock exchange like the NASDAQ .
But going public is time-consuming and expensive—which is why only large and more mature companies tend to go this route.
Historically, for a young, private company to raise capital, it needed to have a pre-existing relationship with its investors—for example, people that were friends or family of the company’s founders.
This might help explain why you haven’t had too many opportunities to invest in private companies before.
But Title II of the JOBS Act lifts this restriction about advertising:
Now, early-stage companies can advertise publicly that they’re accepting new investors. If they wanted to, they could put up a billboard in Times Square.
But most companies don’t put up billboards on the street…
Instead, they use the Internet...
Specifically, they post their deals on special websites known as “equity crowdfunding sites.”
These websites play matchmaker between entrepreneurs looking for capital, and investors like you who are looking for early-stage investments that have big upside potential.
But to be clear, just because these opportunities are online now, that doesn’t mean everyone can invest in them.
Currently, only the investors known as “accredited investors” can invest…
An accredited investor has a net worth of at least $1 million, or earns at least $200,000 per year.
But if you’re not yet accredited, don’t worry—because equity crowdfunding is about to become accessible to EVERYONE...
This is where Title III of the JOBS Act comes into play…
To be clear, Title III of the JOBS Act hasn’t gone into effect yet, but it’s about to...
And when it does, it will allow all investors, regardless of their income or net worth, to invest in early-stage, private companies.
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