Buoyed by a pledge by President Obama to sign into law the Jumpstart Our Business Startups (JOBS) Act, the legislation aimed at stimulating entrepreneurship across the nation is being greeted with
cautious optimism by some business leaders in Memphis.
The bipartisan JOBS Act that overwhelmingly passed in the House on Tuesday after being tweaked by the Senate paves the way for lots of small-money investors to use crowd-funding to help launch startups. That could boost the profile of the local entrepreneurial ecosystem.
"Looking at this from a positive standpoint, this will allow many individuals in our community who may not have considered investing in startups before to do that now," said Eric Mathews, interim executive director of business accelerator EmergeMemphis. "I envision an increase in community engagement here and around the country, and I'd like to see the day when there's a Memphis crowd- fund network."
Allan Daisley, director of innovation and sustainability initiatives for Memphis Bioworks Foundation, agreed.
"I think this has the potential to be great for the Memphis entrepreneurial community and an incentive for more people to invest in start-ups," Daisley said. "At its best, this will provide the lifeblood that's vital for young startups."
Unlike investment-eager areas like Silicon Valley or even cities such as Atlanta and Boston, where investors are more risk tolerant, Memphis' entrepreneurial community has been stymied by funding issues.
But while the new legislation will open the door for smaller investors, there's the potential for many of them to get burned by bad decisions.
"Overall, it's a good thing, and the protective provisions that were put in at the last minute should provide some protection to investors," said Jan Bouten, a partner at Innova . "It'll be good for good startups, as they'll have more financing options, but there will also be a lot of bad startups that will get funded and a lot of individuals will end up losing a lot of money. Investing in startups is not as easy as many people think, and this act will likely demonstrate that over the next five years."
Supporters say the new legislation will alleviate some of the strain associated with startup costs, making it possible for startups to raise up to $1 million through online fundraising sites. That could be especially useful to a program like Seed Hatchery, based at Emerge, that offers mentoring, training and one-time investments of $15,000 for each of a half-dozen startups.
By allowing those startups to receive additional backing from myriad small investors, the companies could graduate from the Seed Hatchery program on more solid financial footing. And because participants are heavily scrutinized before admission to the program, investors may feel more comfortable helping fund them.
"The Seed Hatchery platform offers several light bulbs that investors may look at to determine which is the brightest and which one they want to invest in," Mathews said. "Without the benefit of this type of expertise and investor information, it's certainly a lot more difficult to make solid investing decisions, so we're committed to offering as many details as possible."
That includes an upcoming forum Mathews wants to host on startup funding and the implications of the JOBS Act. Plans for the event are still being ironed out, but the program likely will be held at Emerge in the next few weeks. For updates, check emergememphis.org .
Learn more about small businesses and entrepreneurship in Memphis at The CA's startupmemphis.com
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