Now that we've seen Twitter go from small startup to making 1,600 new millionaires, it's easy to dream about hitting it big the same way thanks to the JOBS Act. The Jumpstart Our Business Startups Act allows small businesses to raise up to $1 million in crowdfunding by easing federal regulations and allowing regular people to become investors.
"Before this year, startups couldn't publicly talk about the fact that they were raising money, which meant that unless you were well connected to the startup community, you never had the chance to invest in high-quality startups," says Mike Norman, a serial entrepreneur, and co-founder and president of Wefunder, the leading crowdfunding platform for startups and small businesses.
Thanks also go to Norman, his Wefunder co-founders, Nick Tommarello and Greg Belote, and friends for helping write and pass the JOBS Act. "Our primary goal is making sure the SEC's rulemaking process allows unaccredited investors to invest smoothly," Norman says. "That is why we founded Wefunder-so we could make sure they get it right."
The Wefunder portal follows the rules under the JOBS Act, allowing startups to quickly, easily, and publicly raise funds from accredited investors through a free plan or choose from one of three paid plans. Through the Wefunder website, small businesses can:
- Publish a profile.
- Choose free legal documents.
- Set an escrow target.
- Sign contracts electronically.
- Receive funds quickly.
- Depend on Wefunder to verify investors are accredited.
- Discover valuable investors.
- Update investors.
Instead of working like Kickstarter, where contributors pledge money to receive some sort of end product or service, Wefunder contributors actually receive a slice of equity in the company itself.
"Investors can go to Wefunder and find a number of high-quality startups that were often only available to venture capitalists and professional investors," Norman says. "While you still need to be accredited, once the SEC finishes its rulemaking process next year, everyone will be able to invest."
Starting in summer 2014, everyone, regardless of wealth, will be able to invest as little as $100 in a startup, which is exactly what the three co-founders set out to do from the beginning. They met while working on previous companies out of the Y Combinator in Cambridge, Mass. "We had all raised money for our startups, and had run into all the regulatory issues related with investing in early-stage startups," says Norman. "Primarily, our friends were legally prohibited from investing in our companies because they were not accredited investors, meaning they did not make more than $200 thousand a year or have $1 million in assets. We had run into this same issue ourselves. We wanted to invest in our friends companies, but couldn't."
"We really want everyone to have the opportunity to invest in startups that excite them," Norman says. "Entrepreneurship is the bedrock of this country, but only a small number of us have a chance to participate in it directly. Everyone should be able to invest in a startup they believe in, and then do what they can to help it succeed."
Norman and his co-founders hope Wefunder will be the place where investors go to invest in the startups they are most passionate about. He believes every startup will want to reserve part of its round to distribute through Wefunder since its investors will help promote the company, and make introductions for them.
"That's the vision," he says. "The best startups and the best set of investors providing a unique kind of value that startups can't get anywhere else."