Access to capital is essential for startups and small businesses seeking growth. Title II of the JOBS Act has transformed the way businesses can secure funding, making it easier to tap into broader investor pools. Traditionally, companies needed to be publicly listed to advertise investment opportunities. However, Title II JOBS Act provisions allow businesses to publicly promote their offerings while maintaining private status, significantly easing the capital-raising process.
General Solicitation for Wider Reach
Under Title II, companies can engage in “general solicitation” – advertising investment opportunities to the public. This opens doors to a wider range of investors who were previously unreachable. Through this provision, businesses can now leverage the Internet, social media, and even television to market their offerings without the hurdles of becoming a public entity. This flexibility is especially beneficial for startups that need to scale but want to avoid the complexities of public listings.
Verification of Investors’ Status
While Title II of the JOBS Act facilitates broader outreach, companies must ensure their investors will fill specific criteria. Only accredited investors – often those with a net worth of more than $1 million USD, or a yearly income greater than $200,000 USD in the last two years – can participate in these investments. To comply, businesses are required to perform “reasonable steps” to verify the accreditation status of potential investors. This process often involves reviewing financial records, tax returns, or other documentation to verify eligibility.
SEC Filings and Exemptions
Another key aspect of accessing capital under the Title II JOBS Act provisions is the filing of Form D with the SEC. Companies must file this form within 15 days after their first sale of securities. While these businesses do not need to register their securities with the SEC as a public company would, the filing process establishes a level of regulatory oversight, while still offering the freedom to raise capital without restrictions on the number of investors or funds raised.
A Path to Growth Without Regulatory Red Tape
By utilizing Title II JOBS Act provisions, businesses can access funding without maneuvering through the complexities of traditional public offerings. This ability to publicly advertise investments, paired with less restrictive regulatory requirements, allows startups to access essential capital quickly and efficiently.
The Title II JOBS Act offers a powerful tool for businesses seeking to scale, giving them the ability to raise significant capital without becoming public while ensuring investor protection through accreditation and SEC oversight.
