It’s Christmas-time in Startup Land, and Jolly Ol’ St. Nick — a.k.a. the SEC — has delivered an ultra-special bag of goodies by lifting the General Solicitation Ban as part of the JOBS Act.
What this means is that startups raising money can advertise their funding rounds and encourage private investments from just about anyone, not just accredited venture capitalists.* This legitimizes crowd-funding platforms like Kickstarter, as well as lowering the barriers to entry for a notoriously clubby industry.
Th provision, of course, did not go down without a fight. Former auto czar Steven Rattner wrote in the NYTimes that amateur investors should “buy a lottery ticket instead,” which are bold words coming from a guy banned from appearing in front of a public-pension fund until 2015.
Fred Wilson of Union Square Ventures, however, is no such curmudgeon, and encourages us all to perform due diligence before following our guts.
“Diversify your risk. Prepare to lose money,” writes Wilson.
Other soothsayers (a.k.a. analysts and policy-makers), of course, are already predicting what sort of disruptions this new open-door policy will incur. TechCrunch predicts a rise of investor match-making sites. State regulators, particularly in the South, have denounced the 4-1 ruling as a dangerous legalization of scandal and dubious high-risk ventures.
Personally, I think finance startups like Motif, which allows consumers to invest in “ideas-based” portfolios, are going to dominate the new landscape if they play their cards right. To that extent, I guess I’m…bullish? Is that the lingo? Gonna have to get used to all this finance mumbo-jumbo now that I’m a VC…
*The ruling also affects hedge funds and buy-out firms, but this is StartupBook — so we don’t discuss real businesses here.