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Startup Companies And General Solicitation

English: Diagram of venture capital fund struc...

English: Diagram of venture capital fund structure for Venture capital (Photo credit: Wikipedia)

Startup Companies And General Solicitation

The Security and Exchange Commission (SEC) has lifted restrictions on the solicitation of startup funding.

The JOBS Act - Jumpstart Our Business Startups - changed the rules back in July, putting the new way into effect on September 23, 2013.

Companies looking for capital can now contact potential clients directly to solicit funds. They can utilize social media like Twitter and YouTube to get the word out - not only about their product or service, but that they are opening seeking cold hard cash to make it happen.

No longer will pitches have to be made in boardrooms and hotel lobby bars. The seeking of venture capital will now be out in the public eye where it belongs. New companies will be able to reach more people with their cries for cash, thereby increasing their potential investor base.

Given the creative nature of entrepreneurs, it is likely the solicitations for startup funding will be over the top at times. Viral videos, public stunts, and late night pitches in high volume infomercials. However, the SEC is looking for ways to neuter their new regulations slightly, in order to ensure that any solicitation doesn't go too far or become dirty.

The proposed amendments require that startups file registration with the SEC before their general solicitation commences. At this time, it is unknown whether these amendments stand a chance at being put into effect. They may work against the spirit of startups, in that they would cause undue hardship on new businesses. In that case, the amendments would not pass the Regulatory Flexibility Act standards, and would be ditched.

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 Patrick Stevens
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