On April 5, President Obama signed the Jumpstart Our Business Startups (JOBS Act) into law. The piece of legislation has many provisions that small businesses will find useful. The act promotes a strong pro-entrepreneurship agenda by making it much more simple for your company to remain private or, if the time is right, go public.
The most popular and most talked-about aspect of the bill is the crowdfunding provision. Under the act, companies will be able to use platforms like IndieGoGo and Kickstarter to annually raise up to $1 million of private equity from individual investors. This is like having a private, baby IPO and will make it much easier for startups that might not have survived due to small credit lines to stay afloat.
In an interview with Forbes, Tanya Prive, founder of Rock The Post, a social networking tool for entrepreneurs, said she expects the Act to drive job creation in the United States.
“Simply, the JOBS Act will make funding more accessible for startups by allowing non-accredited investors to participate in the funding rounds, and this alone, I believe will be the main factor driving the increase in new companies being founded. And with new companies comes the need to hire staff. Without a doubt, this will help the current unemployment rate.”
The JOBS Act can provide a great boost to your private equity firm, but it won’t do everything. In order to get your company in a position to take advantage of the bill’s private equity financing provision, you should follow these few steps:
- Do your homework. Whether you’re pitching to a venture capitalist or someone with a little extra money to throw around who happened to stumble you’re your video, investors want cold hard facts. This means you need to know your business plan frontwards and backwards.
- According to Kickstarter’s webpage, projects with videos succeed about 50 percent of the time as opposed to projects without videos, which have a 30 percent success rate. The lesson here? Start making a video in which you pitch not just your company and business plan, but yourself and your team.
- Prepare to leverage your networks. A good Kickstarter or IndieGoGo campaign will take on an almost “viral” existence as your investors pass word along to each other via Twitter, Facebook and other networks. You need to prepare for the initial blast by getting in touch with some of your key contacts (people with prestige, many followers, etc) and asking them if they wouldn’t mind throwing your crowdsourcing adventure a tweet or two.
If your company jumps into the fray without being prepared, the generous provisions of the JOBS Act will probably not be fully realized. It will take preparation and hard work, but if you have all your ducks in a row, the benefit to your company could be huge and could be the difference between survival and extinction.