Private financing hasn’t been easy for small- to mid-sized companies in the past 15 years. Ever since Enron and Sarbanes-Oxley (SOX), regulations and associated fees have crippled the ability of startups to source money by severely limiting their options to do so.
The Jumpstart Our Business Startups (JOBS) Act, however, aims to reverse this by basically making it easier for small investors and small companies to connect without the prior regulatory hoops to jump through.
Essentially, as an individual investor now you can become an early shareholder in a private company you have confidence in. Before, your only window for investment was the IPO (unless you are an accredited investor). But now you have an earlier opportunity to get in at the ground floor, ahead of lofty valuations.
We won’t go into exhaustive detail here, but we did find this infographic helpful, especially for those seeking a clearer picture of how the JOBS Act and by extension crowdsourcing will transform how startups raise money. Click here to view the crowdfunding infographic fullscreen.
Know of any other finance or business-related infographics? Share them on SprinkleBit!
Updated: 2019
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May 2, 2012Hi Virginia! There are definitely similarities, but also important differences. Microfinancing usually involves small loans, often to low-income clients. Crowdfunding on the other hand, especially with the new JOBs Act, involves the purchase of securities (equity, revenue share, etc.) by the crowd. This essentially enables you to invest earlier in a company before venture capital firms and other investors. There’s a bit more risk when investing this early, but the multiplier on your money is much higher than if you were to invest at a later date (which was the only option available for everyday folks until now).
Hope this helps!
Virginia
May 1, 2012That’s a great info graphic. First time I’ve heard of crowd funding. It’s an interesting concept but isn’t that the same thing as what microfinancing is doing in Third World Countries?