How the JOBS Act Turns Ordinary Joes Into Venture Capitalists

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Jobs BillOn Thursday afternoon, President Obama signed the JOBS Act, and among the changes it will bring to the world of business startups is one that makes use of a rising trend: The power of crowdsourcing.

The SEC will have 270 days to interpret the basic concepts in the Jumpstart Our Business Startups Act and turn them into practical regulations, but businesses are already preparing for the tectonic shifts in the way they acquire investors.

The Right to Solicit Broadly

The first change, coming in 90 days, will allow businesses engaged in private offerings to publicly solicit funding -- in short, they'll be able to let the broad community of investors know they are raising money. Previously, it was illegal for a small private startup to solicit funding like that, unless it was ready to make an initial public offering. And IPOs are major proposition, typically reserved for startups weill beyond the early stage, with serious capital behind them.

Bill Clark, CEO of MicroVentures, an Austin, Texas-based firm dedicated to helping startups raise capital or connect with angel investors, sees this change as opening up a bright new frontier for the little guy.

"Now you can finally tell your network you're raising money," Clark said.

Naturally, the SEC will regulate this on the advertising and promotion front.

"The fear before was that people were going to be targeting people who didn't have a good background in investing," Clark said. "We're not going to say 'We have the new Facebook: You're going to get a 10-times return on your money.' Any time you promote something or guarantee money or use those terms, it's a red flag for the SEC."

Crowdfunding and Spreading the Love

The new rules on crowdfunding, scheduled to take effect in 2013, will allow laymen and unaccredited investors to buy into these small businesses. At the moment, regulations limit companies to 500 shareholder accounts, and the people who hold them must be vetted and approved. Next year, that number jumps to 2,000 for accredited investors, and becomes unlimited for everyone else: Any average Joe will be able to take flier on the entrepreneurial spirit.

"Now almost anyone can get involved," Clark said, "And that takes a lot of money that's sitting on the sidelines and puts it into play, and that's going to open the door for a lot more companies to get funded."

Previously, small companies looking to raise money without registering their securities with the SEC had to use what's known as Reg D 506, a "safe harbor" exemption for specific types of private offerings, but soon startups will be able to use the crowdfunding exemption.

It Takes a Village

This shift at the legislative level reflects some of the changes that have taken place across the economy, and the national culture. After 3 years when unemployment teetered around 9%, there's a clear need to funnel capital into creating new businesses or expanding existing ones to provide more jobs. And in today's social and technological environment, it has become ever more common to harness the power of collective energy to bring these projects and businesses to fruition.

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For example, the popular fundraising website Kickstarter has been used to crowdfund upwards of 15,000 creative projects such as indie bands' albums or low-budget movies. The business has been especially energetic of late: Kickstarter had two separate million-dollar campaigns meet their goals in February. Elevation Dock, a company that created a holding dock for iPhones, was the first Kickstarter campaign to hit seven figures, and Double Fine Adventure, a campaign to fund the creation of a new game by Tim Schafer and 2 Player Productions, became the second.

In a further sign of the times, Palo Alto-startup Crowdtilt allows users to create online campaigns to "group fund anything."

"Instead of funding a $40,000 documentary, the site is being used to fund weddings, bachelor parties and backyard barbeques," Crowdtilt's 25-year-old co-founder, James Beshara, told DailyFinance in March.

And the incentive is often as much for the creative partners as for the seed investor. "Kickstarter and the like have proven that these large numbers of engaged users have the appetite to take part in these projects to get something later on," Clark said. "Not only are you going to help me create this but if it does become successful, you are going to get a chunk of this."


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How the JOBS Act Turns Ordinary Joes Into Venture Capitalists

Japanese retailer Uniqlo has set out to make utilitarian clothing -- with features like milk protein softening fibers -- cool, whether you're 16 or 60.

Uniqlo's concept is sort of like an Apple Store (AAPL) for fashion; it showcases affordable apparel in a modernist setting, with items like $12.90 camisoles featuring Heattech, its exclusive heat-retaining and moisture-resistant technology.

Showcasing high-performance, stylish clothing in a sleek setting is how Uniqlo hopes to "revolutionize" mass retailing in the U.S., Shin Odake, CEO of Uniqlo USA, told DailyFinance during a tour of its new 64,000-square foot outlet in New York City.

"Think American Apparel, but done a little better." That describes Joe Fresh, according to Craig Johnson, CEO of retail consultancy Customer Growth Partners. The Canadian retailer is expanding in the U.S., and is on a mission to "solve the family's fashion needs," with an affordable range of "accessible, of the moment style," for women, men and children, as well as beauty products, says the Joe Fresh Facebook page.

Adds Joe Feldman, managing director of retail consultancy Telsey Advisory Group: "Joe Fresh is the new kid on the block in the fast-fashion space. It has a clean look and attractive pricing."

Watch out H&M, Mango and Zara: The British are coming. U.K. retailer Topshop is quietly making a mark on the U.S. retail scene, bringing its twist on fast-fashion to the States.

The retailer is "an upscale -- but not luxury -- fashion-driven business which imports tremendous fashion and shoe merchandise from the U.K.," Gilbert Harrison, founder and chairman of Financo, the boutique investment firm, tells DailyFinance. Now the chain is expanding in the U.S. and Canada.

The retailer opened in-store boutiques in 14 of Nordstrom's department stores in September.

But while Topshop's merchandise is edgy in the fast-fashion tradition, "It appeals to a broader swath of customers than either Zara or Mango, and is a little higher priced, but better quality, than H&M," for example, Johnson says.

GAP) might be struggling, but it's online division Piperlime has been a bright spot for the retailer.

Unlike the mother chain that sells clothing exclusively under the Gap brand, Piperlime features apparel, shoes, handbags and accessories from a host of fashion brands, ranging from 7 For All Mankind and Calvin Klein, to Anne Klein, BCBG, Badgley Mischka and Kenneth Cole to Naturalizer and Nine West.

Piperlime also plays the role of your personal stylist. The site features guest editors like stylist Rachel Zoe, who dispense fashion advice and offer their picks of hot trends and products available on the site.

The retailer expanded with the addition of men's clothing this fall.

Glenn Murphy, Gap's CEO, has said the retailer is a growth vehicle for the chain. And there are whispers that Gap might open Piperlime stores.

Charming Charlie sells affordably priced earrings, necklaces, bracelets, handbags, scarves and belts for women of all ages in a variety of looks, from vintage, modern, glamorous and global fare to bohemian and punk rocker-inspired styles. Named "hot retailer of the year" by the International Council of Shopping Centers in 2010, it's reminiscent of Claire's, the teen accessories chain, but for a broader audience, Johnson says. And it's "very hot and expanding right now."

Chris Burch opened his first C. Wonder store in New York City's trendy Soho neighborhood this year, selling upscale clothing, jewelry, handbags, accessories and home decor "at astonishing values," according the retailer's web site.

C. Wonder, which is now expanding to mall locations, features classically designed fashion and accessories in some unexpected colors, like chartreuse and ecru. Merchandise is showcased in a store designed to delight the senses, featuring ever-changing floor and window displays.

While C. Wonder "may look a bit like Tory Burch, only with a green versus orange motif, [but it's] more than a bit less expensive," Johnson says.

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