

How The JOBS Act will hurt the startup industry - nextstep
http://thenextweb.com/2012/04/05/how-the-jobs-act-will-hurt-the-startup-industry/

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SlipperySlope
From the article:

"As demand for developers increases, developer salaries will shoot through the
roof. Remember, it will be easier than ever for startups to raise money, so
they’ll spend a lot more of it on tech talent. I can see salaries for lead
developers climbing upwards of $300k a year (in many cases they’re already
getting $150k-$200k)."

Hey, why is that a bad thing???

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evro
Exactly what I was thinking. I'm a developer at a small startup that can't
afford to pay their developers as much as other companies in the area, but I
enjoy my job and couldn't picture myself anywhere else for a while. If my
salary goes up, I'm not going to complain.

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joedev
Good article. It's funny to me that HN readers simultaneously deride Groupon
for shoddy financial reporting in its IPO yet cheer "crowdfunding" and the
JOBS act which removes any audited financial reporting requirement.

Which is it: do you want the true scoop before investing in an IPO or do you
not? You can't have it both ways.

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joedevon
Good idea. Yes, can we have it both ways? Easy for startup companies to not
deal w/ this nasty reporting yet make shysters illegal. Haha. P.S. great name
you got there ;)

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shawnee_
Nice try, but the logic doesn't quite cement. Overvaluations are fueled by
hype that's resultant from scarcity. Facebook is so "hot" right now because
the average person can't get a piece of the pre-IPO value. Upon the IPO the
scarcity is decreased, but by then, a lot of the value has already been
extracted and returned to the high tier investors.

The JOBS Act is going to be awesome for startups and entrepreneurs. Any
company that has even an infinitesimal chance of becoming a publicly traded
company will be able to attract investors (few or many) to raise money and
grow. And as that company raises money and becomes more prominent on the
radar, those who got in early will realize a greater return.

It's going to create an incentive for investors to seek out and invest in the
obscure. Not to mention, it'll likely create an ancillary benefit: reducing
the cost of IPO-ing.

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skylan_q
I wouldn't dismiss it that easily. Legislation like this helped to fuel
speculation on real estate. The average person became an investor in a
specific asset class. The JOBS act could do the same thing with start-ups.

The potential benefits you mention will probably materialize. But seeing as
this is an economic issue, we have to look for what the tradeoff is.

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jorgem
>> The average person became an investor in a specific asset class.

I don't know... "average" people could buy houses. I think it's when you push
it out to the edge so everyone gets involved, then you have problems.

Currently, "average" people can't even do these investments. Probably, won't
be so bad, unless it becomes a bubble.

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kmosher
It seems to me that there is currently a gap in funding options between "sign
away all of the company for buckets of cash (that you need to spend _now_ )"
and "invest all of your own money and grow slowly because you're cash
starved".

I know that angel funding can bridge some of that, but doesn't JOBS create an
opportunity to raise smaller amounts of money on better terms so you can build
a more sustainable company and still retain a lot of ownership?

This seems like Kickstarter on a grander scale, and Kickstarter has made a lot
of interesting business ideas newly viable.

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yo-mf
Most people assume that this bill will have the most impact on tech startups,
but I am not sure that is right. Rather, I see small, non-tech, local
businesses reaping more of the rewards of this bill.

And as for salaries, that is a total red herring argument. As more startups
are created and salaries rise, more people will choose programming as a career
and balance out the wage inflation. But hey, so what if programmers are making
as much or more than bankers and lawyers...

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skylan_q
"As more startups are created and salaries rise, more people will choose
programming as a career and balance out the wage inflation."

I beg to differ. Have you met a high school student or college student
recently? ;)

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eli_gottlieb
What do you mean?

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SarahKay
I'm reasonably new to the world of startups, so I'm hoping someone can answer
this question for me:

Are there really that many people who wanted to invest pre-JOBS and couldn't?
It seems I've heard dozens of stories about how some suburban family invested
in their neighbor or brother-in-law or drinking buddy. I don't think I've ever
heard or read someone complaining that they wanted to give money to an
entrepreneur and just weren't allowed to. What am I missing?

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muhfuhkuh
I'd love to fund a startup without going completely broke (something like
$1-2000 or something). It's just nice to have even minuscule fraction-of-a-
fraction ownership in something that might be the Next Somethingorother.
Kickstarter isn't really an angel investment vehicle, and Prosper is _mostly_
for people who are trying to repair their credit or buy a car/house, not
really as sexy as funding a startup.

What are the options?

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runako
A securities offering doesn't have to be registered until it crosses a
threshold, which is set by law:

<http://www.sec.gov/info/smallbus/qasbsec.htm#eod6>

Reg D, Rule 504: "Rule 504 provides an exemption for the offer and sale of up
to $1,000,000 of securities in a 12-month period."

So your colleague's business can likely sell you shares now. However, unless
they register, they can't market the shares for sale.

Crowdfunding will expand this and allow you to market your securities for
sale.

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websymphony
Developers will have more job opportunities, they will get higher salaries.
There will be more companies that will get started which will employ people
from other trades as well. And this is all bad. Can please someone explain it
to me how?

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damoncali
Aside from the author's bubble argument (which I don't really buy), a possible
outcome is that quasi-legal fraud will get out of control and bring this all
to a very public halt, at which point the politicians will rush in to "fix"
things.

Human nature is what it is. People will lose money. People will get ripped
off. People will blame each other and sue. All of that is bad. The question is
will the good outweigh the bad, and will anyone notice?

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olefoo
The real startup opportunities here are in enabling and informing the new
markets that this act creates.

Three opportunities that matter:

1\. Due diligence (verifying the existence of the team, and the software; fact
checking the prospectus, filtering out the outright scams)

2\. Team and talent aggregation, think of the old hollywood studio guys who
could pick up the phone and pull together the right team for the project in
ten minutes; automate that process and scale it up.

3\. Startups wanted (hat tip to pg) find out what this large new pool of
investors wants to put their money on. Form new companies designed to appeal
to these investors. Since that will be changing rapidly the skill of quickly
putting together an offering that has high potential to return investors money
will be a valuable one.

There is a lot of detail in those three opportunities, and each one will
probably be served by multiple organizations.

I'm interested in talking to people about these new opportunities; if you're
interested in building the new new economy and don't want it to flame out in a
bunch of scams that give startups in general a bad name; and you're interested
in releasing the latent talent and ingenuity that's been sidelined by the
economic crisis. Drop me a line.

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BerislavLopac
It seems that the startup "community" has become so obsessed with raising
funding that the most importand thing about a startup has been forgotten:
paying customers.

Let me put it this way: if your startup is able to attract a large number of
people willing to give you small(ish) amounts of money so you can create your
product, they are essentially your customers. And customers are not interested
in any equity in your company, which may or may not bring them any profit
several years down the road -- they are interested IN YOUR PRODUCT, and as
soon as possible so they can use it to solve their problems and keep on
living.

This is why I don't expect crowdfunding to have any significant impact on
startup funding. It's great for indie arts and movies, and perfect for funding
open-source development, but it's just not suited to startups.

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rargulati
FTA: "What’s more, given an overall dearth of talent, in some cases
unqualified developers will be put into positions of lead developer or CTO
when they shouldn’t be"

How is this necessarily bad? I've read many a story on HN where a developer
was placed in an adverse situation and excelled. I know I've stumbled my way
to success on more than one occasion. Then from n=1 on, isn't being thrown
into the fire an efficient path to growth (and necessary in a startup)?

Just wondering what the general consensus is. I assumed that it was fine to
"fake it 'till you make it" in startup-land.

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jbooth
It's what happens about 2 stages before a bubble collapse. It's not that it's
bad in itself, it's what it heralds when 98% of those companies go bust.

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dmor
Maybe, how TNW will hurt the startup industry?

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jderick
Who is the marketplace for these new crowdfunded startups?

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jsmith72
I can understand some of the logic but it sounds like someone is afriad of
competation. Startups like ours (I4 exchange ) will be able to get the funding
and support we have lacked so far due to limited exposure to investors.

