CareerFuel

CAREERFUEL® LAUNCHES PETITION TO KEEP CROWDFUNDING REGULATIONS BY SEC ON TRACK

Press Release   •   Jul 19, 2012 12:57 EDT

Summit, NJ, July 19, 2012—Earlier this week, CareerFuel.net launched a petition to advocate that the Securities and Exchange Commission (SEC) meet their year-end deadline for the launch of new regulations that will enable crowdfunding for equity, a key provision of The JOBS Act signed into law on April 5, 2012.  

The SEC failed to meet the first deadline for this critical initiative, which had been set for July 4, 2012.

Under current regulations, startups can raise an unlimited amount of money using crowdfunding, but they cannot offer equity within their company. As a result, many startups are forced to rely on less meaningful incentives such as free products, services and even t-shirts to raise vital capital. Once regulations are complete, businesses will be able to offer equity in exchange for investment, which should dramatically broaden the pool of potential investors for resource-constrained startups.

Raising capital is the biggest hurdle for entrepreneurs. According to the 2012 Small Business Access to Capital Survey, recently released by The National Small Business Association (NSBA), cash-flow issues continue to plague America’s small businesses. In a recent interview with The Associated Press, Karen Mills, Administrator of the Small Business Association (SBA), said “Over the past several years, the greatest challenge that small business owners faced was access to capital.” 

This limitation is a critical problem for our economy. According to a 2010 report by economists Haltiwanger, Jarmin and Miranda, startups disproportionately contribute jobs to the U.S. economy relative to all older firms (both small and large).  Haltiwanger, et al. concluded “Business startups contribute substantially to both gross and net job creation.”

Due to the recession that began in 2007, new business “births”, as they are called by the Bureau of Labor and Statistics, have experienced the steepest decline since 1994. There were 550,000 births in 1994, 667,000 in 2006 at the peak and in 2010 they were down to 505,000. Additionally, the number of jobs created by firms less than 1 year old has decreased from 4.1 million in 1994 to 2.5 million in 2010. Startups, the most fertile ground for job creation, have seen significant decline in growth and investment.

Once regulations are complete, entrepreneurs will have a new means to raise capital—crowdfunding for equity—fueling business growth and job creation. This will enable startups and small businesses to turn to the people who know them best, such as friends, family, and former co-workers for investment in their businesses.

Crowdfunding for equity will also enable the small investor to participate in the potential financial upside of investment in early stage businesses. Until now, that opportunity was largely limited to wealthy angel investors and venture capitalists. In the case of Google, early stage investors saw a 149X return on their investment while IPO investors have seen a return of 6.5X

Ultimately, crowdfunding for equity has the potential to benefit small businesses, job creation and growth, individual investors and the American economy, but it can’t happen until the regulations are created.

About CareerFuel

CareerFuel is the first site that offers job seekers and aspiring entrepreneurs both the information and inspiration needed to find a job or start a business.  Our curated content is designed to take the work out of finding work or starting businesses.  Visitors will find our content is fresh and dynamic, reflecting the constantly shifting landscape of news, apps and social networks.  CareerFuel’s original blogs and videos profile success stories. Entitled “How America Works,” CareerFuel’s original videos inspire and teach Americans by telling the stories of real people who have obtained jobs and started businesses.