Obama Signs Bill To Help Startups | Chemical & Engineering News
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Web Date: April 12, 2012

Obama Signs Bill To Help Startups

Investment: Law will make capital formation simpler for fledgling businesses in need of financing
Department: Government & Policy | Collection: Entrepreneurs
Keywords: biotechnology, startups, capital formation, JOBS Act
Obama signed the JOBS Act in the Rose Garden earlier this month.
Credit: Official WHite House Photo by Pete Souza
President Barack Obama signs the JOBS Acs in a ceremony in the White House Rose Garden, surrounded by legislators and other VIPs.
Obama signed the JOBS Act in the Rose Garden earlier this month.
Credit: Official WHite House Photo by Pete Souza

President Barack Obama has signed into law legislation removing regulatory barriers to investment that promises to make it easier for biotechnology companies and other startup businesses to raise capital.

The bill, the Jumpstart Our Business Startups (JOBS) Act, “will help entrepreneurs raise the capital they need to put Americans back to work and create an economy that’s built to last,” Obama said during a signing ceremony in the White House Rose Garden on April 5.

The legislation exempts companies with up to $1 billion in annual revenue from certain Securities & Exchange Commission corporate governance and financial disclosure reporting requirements for their first five years on the public market. The provision is expected to save these firms up to $2 million per year in compliance costs.

“This law will incentivize and encourage capital formation for small, emerging biotechnology companies that do not yet have products on the market,” says James C. Greenwood, president of the Biotechnology Industry Organization, a trade association.

“By allowing companies to focus their limited funds on research rather than on compliance, it will speed the development of new cures and treatments for patients living with debilitating diseases such as cancer, diabetes, Parkinson’s, and HIV/AIDS,” Greenwood remarks.

The JOBS Act will also facilitate private fundraising by making it easier for a small company to go public and give entrepreneurs the chance to advertise investment opportunities to the general public. In addition, it will broaden the investor base by allowing firms to be financed through “crowdfunding,” that is, using the Internet to sell small amounts of stock to many individuals.

“For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in,” Obama said. “Of course, to make sure Americans don’t get taken advantage of, the websites where folks will go to fund all these startups and small businesses will be subject to rigorous oversight.”

The Senate passed the bill on March 22 by a vote of 73-26 after inserting requirements to ensure that investors are advised of the risks they are taking and to prevent fraud. The House of Representatives approved the measure (H.R. 3606) a week later, 380-41.

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