During a “demo day” in Silicon Valley last August, entrepreneur Mattan Griffel took the stage with a well-practiced, carefully timed pitch.
“We teach people how to code, online, in one month,” said Griffel, adding meaningful pauses between the words. The startup he cofounded, One Month Rails, will “change the face of online education,” Griffel promised.
Such technology salesmanship used to be reserved for a select audience of angel investors, like those who attended the invitation-only Y Combinator event where Griffel’s video was filmed.
But starting Monday, Griffel’s pitch appeared on the Internet, next to a clickable blue button that says “Invest.” Buying into his startup is now almost as easy as purchasing a toaster on eBay.
“Crowd investing” is the idea that anyone should be able to invest easily in startup companies. That idea took a big step forward thanks to new federal regulations that allow startups, for the first time, to invite large swaths of the public to invest in them.
The new rules are part of the 2012 JOBS Act, a basket of regulatory changes that Silicon Valley lobbied for and that are meant to make it easier for small companies to raise money. The rule that took effect Monday reverses a longstanding ban on “general solicitation” or advertising risky securities to the public.
Under the new regulations, startups can advertise their shares anywhere—on billboards, on Facebook, via direct mail, e-mail lists, or via a dozen online crowd investing portals that have been set up to solicit and manage investments from the public at large.
Griffel’s company appears on Wefunder.com. The site, which was founded last year but became fully operational today, allows anyone to navigate through pitches from two dozen companies developing everything from small farms in shipping containers to new ways to transmit money overseas.