Originally posted on Gigaom:
It sounds like a great idea: change the federal legislation that governs investing in startups and small companies so that they can raise money from just about anyone, instead of being restricted to a small cabal of investment firms, venture capitalists and angel investors. That idea gave rise to what is now known as the JOBS Act — a bill that is making its way through the Senate this week and could become law in a matter of days. But is the new legislation really going to help startups and the economy as a whole, or is it just going to increase the number of stock scams and help fuel a dangerous kind of bubble mentality around investing?
In a sense, the JOBS Act is an attempt to take the lessons learned from new startup-financing engines like Kickstarter — which has raised millions of dollars for everything from iPod-based watches to graphic novels and dozens of independently-produced movies — and apply them to the economy as a whole. Supporters such as AOL founder Steve Case (now the chairman of the Obama-created Startup America project) and a startup-financing matchmaker service called AngelList argue that if more startups and small businesses can raise funding at an earlier stage, greater numbers of them are likely to succeed.