Technology

Per JOBS Act, Small Firms Raise Funding on Their Websites

A new plug-in makes it easy for them to take advantage of the Act's general solicitation rule.
Marielle SegarraApril 25, 2014
Per JOBS Act, Small Firms Raise Funding on Their Websites

It’s been about eight months since the Jumpstart Our Business Startups (JOBS) Act general solicitation rule went into effect. Now companies are starting to raise money on their own websites as permitted by the act, in some cases easing the process by using a plug-in from Alphaworks.

For example, Quibb, a social network for professionals that launched a year and a half ago, is using the plug-in to let accredited investors among its users buy equity in the firm, according to a post on Gigaom. Quibb’s founder has also lined up traditional seed funding, and indeed it likely will be common for companies to use the general-solicitation rule to acquire supplemental funding.

Under the JOBS Act general solicitation rule, small companies can advertise a private placement broadly — on a website, Twitter or a sign at the local grocery store — as long as they sell equity only to accredited investors. The Alphaworks plug-in makes it easier to solicit the investments through a widget companies can embed on their website.

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Also, equity crowdfunding platform SeedInvest recently launched a Series A funding round on its site. It previously secured $2 million from venture-capital firms, including Scout Ventures and Great Oaks Venture Capital. “We have almost 3,000 individual investors, and you can imagine it would be very challenging for a company to negotiate terms and valuation with all those people,” says SeedInvest CEO Ryan Feit. “Once a company gets a nod of approval from a lead investor, [the plug-in] makes it easier to open it up for individual investors to join the round at the same terms.”

When the JOBS Act rules on crowdfunding go into effect, likely this year,
firms will be able to raise up to $1 million annually from non-accredited
investors.
For more on the JOBS Act and general solicitation, see CFO’s explainer.