Investing in startups might sound like a foreign idea to a lot of people. You might think you need to be some sort of venture capitalist or part of an angel group. You might think it’s something only people with a lot of money can do. Well, you might be right for now, but after the full implementation of something called the JOBS Act, you will be able to get in on the startup investing game too.

What even is the JOBS Act?

The JOBS (Jumpstart Our Business Startups) Act was signed on April 5, 2012 and incorporates seven titles, however, the first three titles are the most relevant.

Title I went into effect when the JOBS Act was signed into law and effectively lifted the cap on the number of investors a company could have before facing increased disclosure requirements from 500 investors to 2,000. While seemingly minor, this change now allows companies to stay private longer than they used to – meaning that a greater share of value creation can take place before a company goes public.

Title II went into effect on September 23, 2013 and lifted an 80-year old ban on general solicitation – better known as advertising. Now, for the first time since the Great Depression, yes THE Great Depression, companies can advertise that they are engaged in a fundraise – whether that’s on the radio, TV or online. There is a catch though. Although a company can advertise to whoever they want, they can still only accept investments from accredited investors and also face increased requirements in terms of proving the accreditation status of their investors.

Title III, the most significant title, has yet to go into effect, although rules have been proposed by the SEC. Title III will bring about true crowdfunding, where companies can not only advertise the fact that they are engaged in a fundraise but also accept investments from non-accredited investors. Title III will open up a whole new asset class to the approximately 98% of Americans who are currently regulatorily barred from participating. That’s you!

Why are you assuming I’m not accredited?

Because you probably aren’t.

Accredited Investors are currently the only type of investors allowed to take advantage of the opportunities presented by the JOBS Act. In order you be accredited you have to meet one of the following criteria:

1. Have an individual income exceeding $200K for each of the past two years with a reasonable expectation that the $200K threshold will be reached in the current year.
2. If filing jointly with a spouse, you must have a joint income exceeding $300K for each of the past two years with a reasonable expectation that that threshold will be reached in the current year.
3. Have a net worth that exceeds $1 million (excluding the value of a primary residence)
4. An Accredited Entity must have at least $5 million in assets, or be completely  owned by accredited investors who meet the first three criteria

Non-Accredited Investors are the 98% of America who don’t meet the above criteria.

If I’m non-accredited then why should I care?

Because, cry not, one day the chains separating accredited and non-accredited will be shattered!

With the implementation of Title III, (Remember? That’s the one that hasn’t been implemented yet…) the currently non-accredited majority of the country will be able to invest in startup companies who are now publicly soliciting. Once the SEC hammers out the rules and regulations in this area, you will be allowed to invest with the big dogs.

While this progression may still be in development, it’s not a bad idea to get familiarized with the startup landscape. See what’s out there. What are accredited investors already investing in? What companies are interesting to you? Think a startup is the next big thing? Soon enough you’ll be able to help make it happen.