Monday, April 16, 2012

The US JOBS Act, short for "Jumpstart Our Business Startups", is one of those nice broad conceptions that falter in the details.  There seems to be fairly universal agreement that small business is the bedrock of North American economic growth, and that the last few years have been tougher than usual on these companies.  And as a small business person working with small businesses, I can pretty much vouch for that.  So the idea of supporting small businesses and helping them grow without entangling them in too much bureaucracy is appealing.  Hence the JOBS Act -- a small sampling of the massive associated media response is headlined at the end of this entry.

The catch is that at least some of those bureaucratic entanglements have to do with governance and investor protection, things that Wall Street has demonstrated -- at the very least -- a reluctance to deal with seriously, permanently, and comprehensively. Wall Street seems to be thrilled with the bill, which is enough to make many small investors worry.  The big investment banks see profit potential in combination with reduced regulation:  the same combination that triggered the freefall in 2008.

It is important to invest in our start-ups, and it would be very positive if more people considered them as part of a diversified portfolio.  However, as consultants we try to encourage ambitious start-ups to treat themselves as public companies from the outset, especially in terms of governance and disclosure.  Here we have a bill that seems to be encouraging companies to do the exact opposite.  Hmmm.  Wonder how attractive that will seem to private equity investors.

Wall St. Examines Fine Print in a Bill for Start-Ups By SUSANNE CRAIG and BEN PROTESS (April 4, 2012)
Now Everyone Can Lose Big Investing in Startups
Obama’s new crowdfunding bill democratizes venture capital, for good and for ill. By Will Oremus|Posted Friday, April 6, 2012, at 12:59 PM ET
U.S. Jobs Act doesn’t mean Wild West for companies
By Olivia Oran
Posted on Monday, April 9, 2012 7:38AM EDT