By  on September 23, 2013

Thanks to President Obama’s JOBS Act, start-ups can now generally advertise that they are looking for investors starting today.

Advertising and solicitation can be in print, over the Internet or in any broadcast medium, such as television or radio.

Joe Wallin, a partner in the law firm Davis Wright Tremaine, posted on his Startup Law Blog that prior to this significant change, entrepreneurs were limited in whom they could speak with regarding potential investments in their firms. And entrepreneurs typically go back to existing investors for additional funding. The change allows these individuals to reach out to new potential investors, and even publicly acknowledge they are raising money in response to media inquiries.

Jeffrey Hollender, a life-long entrepreneur who took environmentally safe household products firm Seventh Generation public and then private again, is one of a group of individuals who worked to get change effected.

“I think it opens the possibilities even wider. I might have 1,000 contacts on LinkedIn that I can’t use under the old rules. Under the new rules, it will make it easier for entrepreneurs to raise capital.…This was needed to get the economy going. I hope the new rule also helps to create additional jobs,” Hollender said.

Solicitations on Kickstarter don’t fall within the Securities and Exchange Commission rules, since those providing contributions are receiving products and not securities in exchange for the donations.

A client alert from the law firm Morrison Foerster said that while the prohibition against general solicitation in certain private offerings of securities has been relaxed, the rules governing potential buyers of securities meeting the “accredited investor” requirements are still in place.

Currently, accredited investors generally need to have annual income of $200,000 a year for the last two years or have $1 million in net worth, excluding their primary residence.

Rory Eakin, cofounder of equity-based crowd-funding site CircleUp, said while the change “empowers individual investors,” his firm still has the advantage in that it “provides a service that makes it easier for investors to locate information” to do their due diligence on prospective investments.

Nicole O’Rourke, the chief operating officer of Rock Your Hair, said her firm is using CircleUp as its primary means of finding investors despite the rule change. That’s because CircleUp vets the investors on its site.

“We wanted to raise money working with a registered broker. Doing it correctly is important to us.…If we sell securities to an unqualified and nonaccredited investor, we’d get into trouble with the SEC. The rules regarding net worth and whether they are considered qualified is not what we do. CircleUp does this for us, and they take on the liability of doing the checks,” O’Rourke said.

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