What you should know about startups and the JOBS Act
Today, the rules around raising money for your startup will change due to the JOBS Act: Title II goes into effect today. This is dry material for those outside the space but if you’re curious, here’s a quick breakdown of what used to be and what is now.
In the past (read: before today), startups were banned from announcing publicly that they were fundraising (Twitter, Facebook, newspaper, etc). It was always fine to be wealthy and publicly state you’re looking for investment opportunities but not the other way around. Furthermore, even if the announcement was not ‘public’ per se, you still had to personally know each individual who heard or read the announcement.
This ban on ‘general solicitation’ came from the SEC and had stiff penalties - if not always strictly enforced. The grey area around the law included the popular ‘demo day’ model (where groups of startups go through a...