Raising money for startups is about to become easier in the United States thanks to a new bill that was backed last week by the US House of Representatives.
While sites like Kickstarter have made crowdfunding a popular way for individuals and small companies to secure philanthropic funding of projects, the new Jumpstart Our Business Startups Act (Jobs) will do the same for startups.
The Jobs Act will allow small-scale investors to invest up to $10,000 (or 10 percent of their annual income, whichever is less) in companies they back.
Startups will be able to raise up to $1 million through crowdfunding and companies that provide investors with fully audited financial statements will be able to raise up to $2 million. Currently, small businesses with more than 500 investors must open up their books to US financial regulators. In the proposed bill, that threshold is raised to 2,000 in the hopes of reducing red tape and cutting the costs of running a business.
Vancouver angel Mike Volker feels that “entrepreneurs in Canada should at least have the same, preferably better, access to capital” than the US. In his recent blog post titled Capital Prohibitions and Crowdfunding Volker suggests that Canada can improve on the Jobs Act by not putting caps on investment.
Canada’s under-capitalized companies already compete against US firms that have about three times their funding. Now the US is adding legislation that will make it easier for small investors to invest in startups.
Canada must respond to the Jobs Act or risk being left behind as tech entrepreneurs choose to launch their businesses where they have access to crowdsourced capital south of the border.