In April 2012, the Jumpstart Our Business Startups (JOBS Act) was signed by the President of the United States into law. The JOBS Act designed to encourage IPOs, eases restrictions on private placements, permits crowdfunding and increases ownership thresholds before companies are required to publicly register. Certain provisions of the Act became effective immediately, but the Securities and Exchange Commission (SEC) has yet to make a ruling on equity-based crowdfunding guidelines.
After the passing of the 2010 healthcare reform called the Patient Protection and Affordable Care Act (ACA), the Congressional Budget Office (CBO) predicts that this policy will lead to 33 million more Americans trying to gain access to drugs and medical products over the next decade.
By reducing regulatory burdens on startups and small companies trying to raise capital, the JOBS Act has facilitated the legalization of crowdfunding, which allows small private companies to raise up to $1 million in capital annually from any investor (not just deep-pocketed “sophisticated” investors). Crowdfunding minimizes the cost for the investor to perform legal diligence, background checks, finders’ fees and other such processes that make it prohibitively expensive to back innovations and ideas. This is where crowdfunding can be beneficial to both investors and entrepreneurs.
Biotech IPOs have been profitable this year as compared to their tech counterparts and VCs have been rewarded for their investments. This is reassuring and demonstrates an appetite for new drugs, devices, diagnostics and healthcare management products.
The time is ripe for crowdfunding platforms such as MedStartr, a healthcare/Biotech industry specific crowdfunding portal. We enable small healthcare companies, biotech startups and research programs to seek investment from non-accredited investors within certain constraints.