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How The JOBS Act Could Change Startup Investing Forever

How The JOBS Act Could Change Startup Investing Forever

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Published by Crowdsourcing.org

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Published by: Crowdsourcing.org on Mar 16, 2012
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02/03/2013

 
How The JOBS Act Could Change StartupInvesting Forever
RYAN CALDBECK
 
posted 3 hours ago
[Editor's note: The following article isby Ryan Caldbeck, the founderof  
,an equity basedcrowdfunding website. He clearly hassomething to gain from the topic -- but asan investor, he's also particularly well-informed. So we're running this guest post. But, for reference, check out thesecriticisms by 
 and 
.]Last week, the U.S. House of Representatives passed the 
,a bipartisanbill aimed at supporting small businesses by making it easier for them to accesscapital. A key feature of the bill enables crowdfunding, the process by which smallcompanies raise growth capital from a large number of individual investors.While many people are debating the impact of the bill on investors, what seemslost in the debate is what types of businesses are likely to benefit, and howcrowdfunding can change the way we all think about early stage investing.Today, startup investing is reserved for the 1%. Less than 
 and less than 1% of all small businesses receive outside equityinvestment. (This despite significant investor returns, according to the 
). Within this narrow band, the distributiontightens further
 – 
a
 angel investments go to technology drivenindustries. And, 80% of angel investors are men. As a result, a vast majority of theeconomy
 – 
entrepreneurs, investors, and whole industries
 – 
are left out of thisvirtuous cycle.Crowdfunding will open up new funding possibilities for these neglected areas of the economy. A good example is the consumer products industry, which comprisesroughly 15% of the U.S. economy but less than 5% of the angel investment market.Investors like to invest in what they know
 – 
one reason technology is so well

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