Startup investing
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Startup investing is the action of making an investment in an early stage company also known as startup company. The solicitation of funds became easier for startups as result of the JOBS Act.[1][2][3][3]
Evolution of startup investing
Startup investing was a word of mouth activity since the implementation of the Securities Act from 1933. This rule introduced a ban on general solicitation and on startup companies to be able to advertise that they were raising funding. With the general solicitation ban lift introduced with the Title II of the JOBS Act, starting September 23, 2013, startups were finally allowed to generally solicit and use methods such as email newsletters, social media, blog posts, or other methods to announce a private offering.[4][5]
Startup investing rounds
When investing in a startup, there are different types of stages in which the investor can participate. The first round is called Seed round. This Seed round is generally when the startup is still at the very early days of execution when their product is still at a prototype phase. At this level angel investors will be the ones participating. The next round is called Series A. At this point the company already has traction and potentially making revenue. On Series A rounds Venture Capital firms will be participating alongside angels or super angel investors. The next rounds are Series B, C, and D. This three rounds are the ones leading to the IPO. Venture Capital firms and Private Equity firms will be participating.[6]
Startup investing online
With the passing of the JOBS Act and the donation crowdfunding model, startup investing platforms like Rock The Post or CircleUp started to emerge in 2011. The idea of these platforms is to streamline the process and resolve the two main points that were taking place in the market. The first problem was for startups to be able to access capital and to decrease the amount of time that it takes to close a round of financing. The second problem was intended to increase the amount of deal flow for the investor and to also centralize the process.[7][8][9]
References
- ^ "Startups, VCs Now Free To Advertise Their Fundraising Status". The Wall Street Journal. accessed September 23, 2013.
{{cite web}}: Check date values in:|date=(help) - ^ "All-comers join web party for a punt on best start-ups". Financial Times. accessed September 26, 2013.
{{cite web}}: Check date values in:|date=(help) - ^ a b "Startups Remain Cloudy on the New General Solicitation Rule". Bloomberg Businessweek. accessed September 20, 2013.
{{cite web}}: Check date values in:|date=(help) Cite error: The named reference "Bloomberg Businessweek" was defined multiple times with different content (see the help page). - ^ "Newly Legal: Buying Stock in Start-Ups Via Crowdsourcing". ABC News. accessed September 24, 2013.
{{cite web}}: Check date values in:|date=(help) - ^ "Levine on Wall Street: Chrysler's Unwanted IPO". Bloomberg. accessed September 24, 2013.
{{cite web}}: Check date values in:|date=(help) - ^ "With the new JOBS Act a new era of investment banking?". Nasdaq. accessed September 24, 2013.
{{cite web}}: Check date values in:|date=(help) - ^ "Shout it out: New rules allow startups to advertise fundraising". UpStart Business Journal. accessed September 23, 2013.
{{cite web}}: Check date values in:|date=(help) - ^ "General Solicitation Ban Lifted Today - Three Things You Must Know About It". Forbes. accessed September 23, 2013.
{{cite web}}: Check date values in:|date=(help) - ^ "For broker/dealers, crowdfunding presents new opportunity". Washington Post. accessed March 28, 2013.
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External links
