JOBS Act leaves most startups out in the cold


Earlier this year I wrote a series of columns about crowdfunding and the JOBS Act, which was signed into law last April with several goals, one of which is to help startups raise money from ordinary investors. Those columns were about the promise of crowdfunding and the JOBS Act while this one is about what progress has been made so far toward that end. For startups, alas, the news is not entirely good. Crowdfunding looks like it may not be available at all for the smaller, needier companies the law is supposedly designed to serve.
It’s one thing to pass a law and quite another to write rules to carry out that law. Title 3 of the JOBS Act required the US Securities & Exchange Commission to write rules for the so-called crowdfunding intermediariesor portals specified by the Act, to choose or create a regulator to monitor those new entities, and to write rules clarifying how deals could be advertised to non-accredited middle-class investors.
A few very smart people can make the difference


A couple weeks from now we’re going to start serializing my 1992 book Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition, and Still Can’t Get a Date. It’s the book that was the basis for my 1996 documentary TV series Triumph of the Nerds and ultimately led to this column starting on pbs.org in 1997.
What goes around comes around.
UpTo social calendar app quietly debuts on Android


Detroit-based social calendar app startup UpTo quietly launched in Google Play, slipping slightly under the public radar onto the Android Platform.
The application was designed to pull information from user calendars and present it in a way that is useful to shaping plans. That means it begins at the present and looks forward at what's coming up, rather than at what's already happened. It's sort of like Plancast, but less focused on events and more focused on individuals and groups.
It's time to worry about the startup economy


As I’ve written many times before, small companies and especially new companies are what create nearly all of the net new jobs in America, yet a new study released last week by the Hudson Institute suggests the rate of job formation by new firms is down dramatically in recent years, from an average of 11 new startup jobs per 1,000 workers at a peak in 2006 down to 7.8 new startup jobs per 1,000 workers in 2011 -- a 29 percent decline. So is the startup economy losing its oomph and should we be worried? No the startup economy isn’t losing its oomph but yes, it’s time to worry.
The Hudson Institute study was written by the think tank’s chief economist Tim Kane. He notes with concern this downward trend in startup job formation but his study doesn’t attempt to explain it, leaving that for the future. He’s not above, however, mentioning the likely negative impact of increased regulation, especially from the impending Affordable Care Act, AKA Obamacare.
We need an IPO renaissance


Third in a series. As many readers have pointed out, the IPO drought of the last decade has many causes beyond just decimalization of stock trading. Sarbanes-Oxley has made it significantly more expensive to be a public company than it used to be. Consolidation in the banking and brokerage industries have resulted in fewer specialists and hardly any true investment bankers surviving. The lure of derivatives trading and other rocket science activities on Wall Street have made IPO underwriting look like a staid and prosaic profession, too. Fortunately, people in positions of influence are finally starting to realize that there is no economic future for this country without new public companies.
One requirement of the JOBS Act, passed last April, was that the SEC look at trading decimalization, and especially tick sizes, to see if there has been an effect on small-cap company liquidity. If the SEC decides there is such a negative effect there’s the possibility that they introduce a new minimum tick for smaller companies of perhaps a nickel (up from a penny) to as much as a dime. I believe this would help the IPO industry, but many people disagree.
Stock market decimalization kills IPOs and ruins the economy


Second in a series. Well it took me more than the one day I predicted to finish this column, which purports to explain that dull feeling so many of us have in our hearts these days when we consider the US economy. Our entrepreneurial zeal is to some extent zapped. For a decade it seemed we needed to jump from bubble to bubble in order just to drive economic growth -- growth that ultimately didn’t last. What happened? Initial Public Offerings (IPOs) went away, that’s what happened.
I wrote several columns on job creation over the last year, columns that explained in great detail how new businesses, young businesses, and small businesses create jobs and big businesses destroy them. Big business grows by economies of scale, economies of scale are gained by increasing efficiency, and increased efficiency in big business always -- always -- means creating more economic output with fewer people.
The Great Recession isn’t really over


First in a series. A couple of years ago, in an obvious moment of poor judgement, the Kauffman Foundation placed my personal rag on its list of the top 50 economics blogs in America. So from time to time I feel compelled to write about economic issues and the US Labor Day holiday provides a good excuse for doing so now. In a sense you could say I inherited this gig because my parents began their careers in the 1940s working for the US Bureau of Labor Statistics. This first of two columns looks at employment numbers in the current recovery while the second will try to explain why the economy has been so resistant to recovery and what can be done about it.
You’ll see many news stories in the next few days based on a study from the National Employment Law Project detailing how many and what kinds of jobs were lost in the Great Recession and what kinds have come back in the current recovery. Cutting to the chase we lost eight million jobs, have recovered four million of those, but, here’s the problem, the recovered jobs on average pay a lot less than did the jobs that were lost, which is why the US middle class is still hurting.
Republicans: Friends of Technology?


In case you haven't already noticed, it's the quadrennial presidential election season in the United States; the time when the two dominant political parties state their goals and methods of attaining them, and work to put their chosen party leader into the office of President of the United States.
At the Republican National Convention this week, the Republican party both nominated Mitt Romney as its candidate for president, and outlined its platform, its "statement of who we are and what we believe."
Crowd funding: How to limit the risk of getting ripped off


The Kickstarter website has moved crowd funding into mainstream media. There is virtually no news site, newspaper or TV network left out there that has not reported on recent funding success stories. You may have heard about Double Fine Adventure's million Dollar ride that got the ball rolling for some serious game funding on the site, or Pebble, the e-paper watch for iPhone and Android that managed to rake in more than $10 million.
People who pledge a certain amount of money often get something in return. In the case of Double Fine it is a copy of the adventure game that the developers want to produce with the money, and for Pebble, it is one of those iconic watches. Pledges can be retracted for as long as the funding has not ended. Afterwards, the money is only transferred if the funding has reached the desired goal. If that is not the case, backers are not charged a single dime. It gets fuzzy when a project has crossed the funding goal and reached the end of the funding stage. Once the money has been transferred, there is not really any transparency as to what happens with the money from that moment on forward.
Jumpshot: the Linux security stick you give to your clueless friends


With slick marketing, a great sense of humor, and a practical, useful product idea, Texas startup Jumpshot launched its initial public funding round on Kickstarter this week.
The long and short of Jumpshot is that it's a USB stick that removes bloatware, adware, spyware, and malware in a package that toddlers and grannies alike would be able to use. When Jumpshot is cleaning the system in the background, the user can stay connected and browse the Web in a Linux-based sandbox.
We can’t expect regulators to become our crowdfunding coaches


Last in a series. In part one, we learned how important crowd funding can be for helping tech startups and the economy. In part two, we worried about how criminals and con men might game the eventual crowdfunding system when it starts in earnest next January. And in this final part I suggest a strategy for crowdfunding success that essentially comes down to carpe diem– seize the day!
Crowdfunding done right will have a huge positive impact on any economy it touches. But by done right I mean done in a manner that maximizes impact and minimizes both corruption and unnecessary complexity. This is not something that must be accomplished specifically through strict regulation, either. I’m not opposed to regulation, just suspicious of it. I’m suspicious of any government policy that purports to be so elegant as to accomplish economic wonders at little or no cost. That just hasn’t happened in my fairly long lifetime so I see no reason to expect things to change.
Crowdfunding will bring out the crooks and the con men


Second in a series. Legal crowdfunding is coming, as I explained in the first part of this series. Thanks to the Jumpstart Our Business Startups (JOBS) Act, investors big and small will soon have new ways to buy shares in startups and other small companies. This should be very good for growing companies and for the economy overall, but there’s peril for individual investors -- from scammers likely to be operating in the early days of this new law.
Most concerns hearken back to the Banking Act of 1933, enacted to bring order and regulation to the banking industry during the Great Depression. It was the collapse of the banking industry, not the stock market crash, that did most of the damage during the Depression. Also called the Glass-Steagall Act, it established federal insurance for bank deposits, keeping banks in the savings business and out of investing, leaving the trading to stock brokers and investment banks, which were not allowed to take deposits. Glass-Steagall along with the Securities Act of 1933 and the Securities Exchange Act of 1934 established a regulatory structure that many people thought worked well, until 1999 when parts of Glass-Steagall were repealed by the Gramm-Leach-Bliley Act. Sorry for all the legislative history, folks, but you can’t tell the players without a program.
Why do we need crowdfunds?


First in a series. When President Obama signed the Jumpstart Our Business Startups (JOBS) Act on April 5th, the era of crowdfunding began as individual investors everywhere were promised an opportunity to gain access to venture investments previously limited to institutions, funds, and so-called qualified investors. Come January 1, 2013, we’re told, anyone can be a venture capitalist, but hardly any of these new VCs will know what they are doing. Spurred by the new law we will shortly see a surge of crowdfunding startups giving for the first time unqualified investors access to venture capital markets. And it will be a quagmire.
Like disk drive startups in the 1980s, each of these new crowdfunds will project 15-percent market share. Ninety-five percent of these funds will fail from over-crowding, under-funding, mismanagement, lack of deal flow, being too late, being too early, or just plain bad luck. A few will succeed and a couple will succeed magnificently, hopefully raising all boats. The point of this column and the two to follow is to better understand this phenomenon and how readers can benefit from it or at least avoid losing their shirts.
This is the bubble as we know it


Over the last eighteen months, there has been a lot of public concern about whether we're in the midst of another tech bubble. People outside of Silicon Valley saw the billion-dollar exit for a consumer Internet company that was around for less than two years (Instagram), and couldn't believe such easy money was being made.
Golly Gee Whiz, it must be 1995 all over again!
All you need is a good idea and a little Kickstarter


As a software developer I can appreciate how important it is to have good ideas. The challenge is making them reality. Also it is not enough just to be taught a skill, one needs to be able to put it to work doing something valuable to others. Some of the best ideas come from people who aren't just trying to make a buck, but who love what they are doing and see the real value in it.
Sadly many a good idea never makes it beyond the drawing board. But some people don't give up so easily and with a little Kickstarter amazing things can happen. Recently, I discovered two unique examples of very good ideas turned into reality by taking advantage of this unique website.
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