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Olivia Uribe: Why the Jobs Act Is Right for America, and Jim Hightower Is Wrong
[Noozhawk’s note: A representative of a company cited below, Vere Sandals, has responded to this article and noted that its products have been delivered, contrary to what was reported originally in another publication. “At the time of publication of this article, April 7, we had shipped hundreds of pairs of sandals to our backers,” the representative said. “So there were backers of our project who are getting their rewards.”]
However, The Associated Press reported that some Democrats raised concerns that the legislation softened investment protections enacted after the dot-com bubble and Wall Street meltdowns. Strong liberal voices responded with a range of opinions, from hesitation to distrust and indignation.
“The Repubs and their Democratic allies have committed their own fraud in order to pass this bill, deceptively titled it the ‘Jobs Act’ (even though it doesn’t actually create any jobs),” columnist Jim Hightower said in an April 5 commentary for Noozhawk.
It’s important to note that, while the bipartisan bill was signed, the Securities and Exchange Commission still has 180 days to review and approve the regulations included in it.
Steve Case, co-founder of AOL, best encapsulates that the “goal of the Jobs Act is to provide better access to capital for a wide range of companies, in a variety of sectors and regions — and provide new options for accessing capital at each stage of a company’s life cycle.”
The bill does two things:
» IPO On-Ramp: Case best describes the IPO on-ramp as a change that “will enable more companies to consider an IPO by lowering their initial compliance costs. These companies will still be subject to the vast majority of the disclosure requirements, but if they meet the “emerging growth company” criteria, they will have some time (either five years, or until they exceed $1 billion in revenue or $700 million in market value) to comply with all of the Sarbanes-Oxley Act provisions.
» CrowdFunding: Start-ups and small businesses will be allowed to raise up to $1 million from small-dollar investments via Web-based platforms that are monitored by the SEC.
For anyone who’s been paying any attention, it’s clear that as a nation we have become followers rather than leaders, and failing industries have been saved during their last dying breath. To get out of this situation, there needs to be vision. If it will not be one vision that will make us unified and successful as a whole, such as the task of putting a man on the moon, perhaps it will be a collection of visions of individuals that pursue their entrepreneurial goals. This bill capitalizes on that very notion and, while there are legitimate needs for regulatory oversight, as is always part of a responsible society and vigilant electorate, it should be praised and not disparaged.
There are two highlights of collaboration in this endeavor, the first being the rare bipartisanship of this bill. Given that it’s a presidential election year during which each elected official pulls further to his or her side of the spectrum, the opportunities for collaboration are few and growing more elusive as the election cycle grinds on.
The far more exciting element of collaboration is in the crowdfunding piece of this bill. The democratization of funding start-ups by many non-“1 percent” individuals getting in on the ground floor of promising start-ups is revolutionary!
Sure, there are theories about crowdsourcing and in The Wisdom of Crowds, James Surowiecki lays out the way in which crowds make smart decisions and conditions that must be met in order for these to occur, including diversity, independence and decentralization. Group think, mobs and riots are the flip side of intelligent crowd-scourced decisions of which we must be aware, but that doesn’t mean there aren’t more upsides than downsides to collaboration.
Funders — as always — must do what they can to protect themselves, including due diligence research. Additionally the crowdfunding portals have utmost responsibility to protect the funders, and even this is facilitated in a digital world in which our identities, track records and connections are maintained online. When a funder seeks to invest in a start-up, he or she has readily available connections to the start-up’s founder and team members’ information, including their LinkedIn, Facebook and Twitter accounts, which are increased verifications of identity.
One concern of this model are allegations of fraud, as in the case of Vere Sandals, in which 1,091 backers raised $56,618 in March 2011 and basically never got anything out the deal, not even a pair of sandals.
[Noozhawk’s note: In response to this article, a Vere Sandals representative noted that the company’s products have been delivered, contrary to what was reported originally in another publication. “At the time of publication of this article, April 7, we had shipped hundreds of pairs of sandals to our backers,” the representative said. “So there were backers of our project who are getting their rewards.”]
The most important mistake here is that there was never an official contract between the backers and Vere Sandals, however. So while there is a lot to be said about SEC regulations, Crowdfund portal responsibility — ultimately — is up to the individual to the fullest extent possible on their end. Cross all the Ts and dot all the Is before closing a deal.
The IPO on-ramp, as pointed out by Case, is “likely to be particularly helpful to the many companies in sectors that haven’t typically had ready access to capital (manufacturing, consumer products, business services, retail, restaurants, etc).” Because the greatest job creation often occurs after a company has gone public, there is greater incentive to diminish barriers to this process as a way to stimulate the economy. Should there be concerns, certainly. However, concerns are only useful when they lead to quantifiable purposeful action, and not just knee-jerk reaction.
On the crowdfunding piece, one of the SEC regulations raises to 2,000 from 500 the number of shareholders a company or community bank can have before it must register with the SEC. The predecessor to crowdfunding was the donation model, such as Kickstarter, in which the average “investment” is $25 and individuals don’t receive ownership. What will change is that, with the crowdfunding model, the investments will include ownership. Now an American with a little money to invest and vision can do so on another American’s ideas and innovation. Not everyone has the same talents, and this opportunity to collaborate banks on the best that each individual can bring forth.
This bill is a two-stepped jobs bill. It does not in and of itself create jobs, but rather the platform to create them. The combination of the right timing and the opportunity in the continuum of this nation’s history to be in a place where we can only go up because we’ve fallen so far from where we’ve come, is really thrilling. The fact that we will have to collaborate to get this economy going, and that everyone can have a hand in this recovery is very exciting.
Sure, life is not all good, and there will be successes and plenty of failures. But what’s the point of taking the ride without ever betting on big visions?
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