Ten years ago the bipartisan Jumpstart Our Business Startups (JOBS) Act of 2012 was signed into law providing expanded pathways for capital formation for small businesses and startups.

While the JOBS Act represented a significant legislative step, many businesses still struggle to raise needed capital and struggle with costly regulatory burdens, particularly following the pandemic.

Republicans on the Senate Finance Committee have released draft legislation - JOBS 4.0 - in response to struggles startups have faced throughout the pandemic to encourage more IPOs, enable innovation by reducing barriers to capital access, and provide more opportunities for investment for main street investors.

Your Startup Founder Feedback Requested!

The US Senate is soliciting feedback on the draft, your insights on how the JOBS Act of 2012 impacted the startup ecosystem, and any other comments on what else the committee should be pursuing to better enable capital access for startups and help you as a founder.

Below is a summary of a few of the proposals within the draft courtesy of Engine.

Improving Retail Investor Opportunities

• Improving Crowdfunding Opportunities Act - This provision would improve upon Reg CF from the 2012 JOBS Act to make crowdfunding more viable by preempting registration under state securities law for secondary transactions and reduce regulations on crowdfunding portals.
- Question for founders: Do you have any experience with Reg CF? Are there other changes that would make crowdfunding a more viable options?

• Equal Opportunity for All Investors Act - This proposal expands the pool of accredited investors by allowing self-certification of accredited investor status and granting status to those who pass an SEC-administered exam, regardless of income level. It would also allow anyone to invest up to 10% of their income in Reg D securities.
- Question for founders: Does this expansion go far enough? Are there other reforms that could be helpful?

• Facilitating Main Street Offerings Act - This proposal would exempt Reg A Tier 2 offerings from state securities law registration for secondary transactions. This would improve Reg A secondary markets, and also help primary offerings, given that investors would then better be able to sell their securities down the line. 

Improving the Market for Private Capital

• Expanding Access to Capital for Rural Job Creators Act - This proposal would require the SEC Small Business advocate to study capital access in rural parts of the U.S.
- Question for founders: If you are a rural startup, what are some capital access barriers you’ve faced? How could the SEC (or the SBA) better enable capital access for you?

• Expanding American Entrepreneurship Act - This provision would boost capital and diversify potential funders by reforming 3(c)(1) funds to raise the cap on exempted funds from $10 million to $50 million and double the number of permitted investors from 250 to 500.
- Question for founders: Are the thresholds of the $50 million cap and level of 500 investors high enough?

• Unlocking Capital for Small Business Act - This bill would ease regulations for finders—individuals who help small businesses locate investors but don’t handle funds. Finders and private placement brokers would be treated differently than broker-dealers, which would reduce cost burdens for small businesses, making it easier for small businesses to identify investors.

Encouraging Companies to IPO

• Emerging Growth Company Extension Act - This proposal would lengthen the period for Emerging Growth Company (EGC) status from five to 10 years, in hopes of reducing the early financial burden that comes with going public.
- Question for founders: Is ten years long enough?

• Main Street Growth Act - This proposal would allow for the SEC to create venture exchanges in support of small and emerging growth companies that may not qualify for larger securities exchanges. The goal is to increase visibility and access to capital for small businesses and give investors more access to small companies’ growth opportunities.
- Question for founders: Are there other secondary markets improvements that would be helpful?

This section-by-section review provided by the committee is also helpful and touches on all of the proposals included in JOBS 4.0.

Deadline:

If you are a startup founder or otherwise active in the Orange County startup ecosystem, please email us your feedback.

As the committee deadline is in early June, we would like to receive your thoughts by May 26.