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Law Opens Financing of Start-Ups to Crowds

Entrepreneurs looking to the crowd to finance their big ideas just got a little extra help from the government. On Monday, federal legislation goes into effect to allow “emerging growth” companies — essentially, small start-ups — to ask for equity investments publicly, such as through social media sites or elsewhere on the Internet, without having to register the shares for public trading. Business owners will now be able to raise up to $1 million a year this way. The legislation is part of the 2012 “Jumpstart Our Business Start-ups Act,” or JOBS Act, meant to encourage the growth of new businesses. Entrepreneurs say it will address a central problem they face: that raising significant capital often depends on having personal connections to investors. Under prior rules, this had to be done privately until a business was ready to enter the public markets. “How many entrepreneurs are there across the U.S., even in the Midwest, who have these great ideas but no way to tap into that capital?” said Todd Dipaola, an entrepreneur in Venice, Calif. His start-up, ForeFund Capital, is a would-be platform to let real estate entrepreneurs raise money from potential investors. But others, including noted tech investors like […]

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