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JOBS Act: Implications for Investors and Issuers

The JOBS Act is the most impactful legislation for the private markets in years, but with the SEC rulings backlogged, the full implications aren’t completely clear. Last Friday, to provide more depth for our Members, we hosted a webinar with Don Carlson, founding partner of The Forefront Group Ltd., a venture law firm based in New York. The webinar covered many of the SEC rulings in the last week, the implications of the law on emerging growth companies, and some of the further developments expected to happen in the coming year. We’ve included the slides below.

Carlson’s take on the JOBS Act is somewhat different from the traditional view that the Act will suddenly pump a lot of money into smaller companies through crowdfunding – in fact, he believes the law will actually make investing less risky for institutional investors. Here’s an excerpt of his thoughts:

“The focus on the immediate implications for primary offerings mostly misses the longer term point. Yes, promising young companies in the tech space have reasonably good access to the tiny population of angel investors and VCs that are actively looking for new investment opportunities. But, the reason so few investors enter that arena is because (1) it is wildly risky, (2) their money is locked up for a very long time with no hope for liquidity short of an acquisition or an IPO.

Believe me, I have plenty of 3-5 year successful angel investments in which I would love to sell half my position. What the JOBS Act does it open up a SECONDARY market for private securities that liberates angel investors like me from the liquidity trap. For the first time, agents acting on behalf of early stage investors will be able to “build a book” by soliciting buyers for their early stage positions, instead of relying solely on vulture capitalists to swoop in and buy from distressed investors at a steeply discounted price.

Once early stage investors are able to achieve (partial) liquidity in under a decade, the whole world of angel investing becomes far more congenial to high net worth individuals and institutional players. The lasting legacy of this legislation will be to turn angel investing from an avocation into an asset class.”

You can download the full slides here: Don Carlson JOBS Act Slides