What does the implementation of Title III entail?

I’ve recently seen a lot of hype around JOBS Act, especially its Title III, yet it seems people can’t reach consensus on this topic, whether it’s the Good, the Bad or the Ugly. So I decided to provide my viewpoint about it. Add my 2 cents, if you wish.

Pros of JOBS Act are obvious. For US entrepreneurs it provides a new and long anticipated opportunity to recieve investment not only from accredited investors (which form about 1% of US population), but also from common Americans. And vice versa, Title III opens the doors to this prominent market of equity crowdfunding for prospective investors.

Cons are a bit more obscure, making it all the more important to mention them. First of all, projects can only raise $1M/year this way. So, considering nowadays it’s normal for an average startup to make $2M+, such limitation will make them to search for additional funding in different sources. Not that much of an obstacle, but inconvenience for sure. Second and arguably more important, to be able to raise money via the Act the founder has to make some risky steps, like paying up to $50K to conduct financial audits even before actual fundraising begins; or providing SEC with periodical reports, which will most probably also be quite costly (especially considering a founder will either have to fill them himself despite probably having no experience with this, or hiring professionals).

So when everything is said and done, my opinion is that despite the overall hype around this emerging market, I actually don’t think it to be that much prodigious or beyond-debate profitable. But still it’s a useful tool for projects not successful or lucky enough to get sufficient funding via traditional sources, or if such sources are for whatever reason are not available for them. Not a crowdfunding panacea, but rather a convenient and somewhat subsidiary way of fundraising.

 

Well, it's not like the idea is completely unviable, but the possibilities could have been much broader.