Jobs Act Could Expand Funding For Startups

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Lawmakers in the House are expected to vote on a jobs act Tuesday. Part of the legislation would allow the public to make investments in start-up companies and small businesses. These companies could raise money online or through social networks. The bill would lift SEC regulations that restrict soliciting investors.


Here in Washington later today, the House of Representatives is expected to pass the so-called Jobs Act. Among other provisions, the bill will now allow startups to raise money from a potential pool of thousands of small investors online and through social networks.

From Silicon Valley, NPR's Steve Henn reports on the potential impact of this change.

STEVE HENN, BYLINE: Rod Turner has worked for lots of startups. Some have made it big. But he thinks...

ROD TURNER: Venture capital as we know it is kind of history, really - it is an outdated model.

HENN: Turner says the way most tech companies get funding these days is out of whack. The lion's share of all startup investments flows to little companies in Silicon Valley, the Bay Area and a handful of other technology hot spots.

TURNER: Three thousand dollars of venture capital is invested per year, per man woman and child...

HENN: In the greater Silicon Valley area. In comparison, venture capitalists invest just...

TURNER: Sixteen dollars per man, woman and child per year in Michigan.

HENN: Turner hopes the Jobs bill will change that. It expands how startups can raise money - allows them to solicit investors online - and for the first time it clears the way for average folks to invest - instead of just the rich. Turner has plans to launch his own crowdfunding platform with two months. But according to some critics, like Senator Jeff Merkely, a Democrat from Oregon, the original version of this bill could have been a disaster.

SENATOR JEFF MERKELY, DEMOCRAT, OREGON: Basically, a scheme for pump and dump operators seeking to defraud Americans citizens.

HENN: Merkely and a bipartisan group of senators imposed some new restrictions last week, and their amended version is poised to pass the House today. President Obama is expected to sign it later this week.

Steve Henn, NPR News, Silicon Valley.

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