Today, in the Rose Garden at the White House at about 2:40, President Obama signed into law the Jumpstart Our Business Startups (JOBS) Act. This morning when I departed my hotel it was overcast and pretty chilly outside. I suddenly regretted not having my overcoat. But, as the morning past and early afternoon arrived it suddenly was a beautiful day with tulips in full bloom everywhere at the White House. The sun was beaming overhead making it warm and soothing in the crisp spring air. When I think about making the JOBS Act law, this day is a perfect metaphor. From a gloomy start to a sunny and warm finish complete with exploding tulips there was a sense of optimism and renewal for American innovation. This law makes capital formation easier, safer, and better for everyone from the smallest startup in Ithaca to the boldest tech startup in Boulder.
The JOBS Act does not do away with any of the important work of the last decade bringing abuses under control. It moderates and allows startup companies to obtain capital from the smallest of investors previously excluded to allowing the adolescent company to become an adult over a period of years or success. Nothing was eliminated, the rules and regulations were only modified to adapt to the real world of American innovation.
There are so many places that summarize this new Law I’ll just link to them. But let me say this. It is very possible that fifty years from now, the country may look back at the JOBS Act and call it the 12 Act, kind of the like the “34 Act.” The Securities and Exchange Act of 1934, known as the 34 Act was a seminal piece of legislation which put in place regulation and control of financial securities issued by companies following the Great Depression. It created the Securities and Exchange Commission.
In his remarks today President Obama highlighted how important startup companies are to the United States and the world. He cited Bell, Edison, Gates, Google and others that have created whole industries with their big ideas. He cited how important it was that today’s entrepreneurs have access to American capital at the smallest amount. And he emphasized how important that access to the public markets was essential for American to remain competitive and create new jobs. He is so right.
Prior to the signing ceremony I also attended a Roundtable in the Roosevelt Room at the White House chaired by National Economics Council Gene Sperling and Steve Case. There were 20 people in the room from small and large businesses from all over the United States. Crowd Funding was a part of the JOBS Act and it was highlighted in this session to a great degree. I pointed out that at the other end of the spectrum of capital formation that making it easier for growing, successful companies to tap the public markets was essential for two reasons. One it would be source of unlimited capital for expansion leading to new jobs by the millions and to new industries. Two that 90% of the jobs derived from successful startups are created after the IPO. It was pointed out that this bill is also good for large private companies for a variety of reasons. Everyone got something from this effort, that was clear.
My hope is that it will also shorten the lifecycle of risk capital that folks like I put into promising ideas. Recycling capital more quickly means that we all get more swings at bat. It also meant that more of my brethren in the venture business might return to their early stage roots and take chances on unproven but attractive deals, like so many people used to do in decades past.
So all in all, I want to thank the team at the NVCA, and Kate Mitchell and everyone else who contributed to this effort. Mostly, I thank our Congress and our President for doing the right thing as hard as that is in an election year.