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September 30, 2016 | 3 Min Read

Henry Ford & Ben Franklin Did It & Guess What? It works.

Henry Ford & Ben Franklin Did It & Guess What? It works.

Why Small OPOs Work to Raise Capital

Fact: In pre-colonial days, Benjamin Franklin sold equity stakes in the fire insurance company he implemented and founded. Decades later, Henry Ford crowdfunded among his friends and neighbors to build on what is now Ford Motors.

Case in point? America has already had quite an extensive history with “crowdfunding” — we have, since our nation’s birth, continuously worked together as communities to help smaller-based firms and start-up companies get their chance in the spotlight.

We still do.

Though the rules are now drastically different than they were a century ago, not to mention even a few years ago, it is safe to say that the SEC’s implementation of Rules for Small OPOs (Title III of the JOBS Act) truly represents a first step for policy makers all around the country to finally get in step with America’s proud history of crowdfunding.

For the first time in eighty years, non–accredited investors (those making under $200K a year in income or having a net worth less than $1 Million excluding their primary residence) now have the opportunity to invest in startup companies, which, in turn, opens up a whole new gateway of capital for small businesses — who just so happen to be responsible for generatingover half of all new net jobs in the past 17 years, proving that they are extremely vital for further growth of the American economy.

What is even more important though is that everyone, despite net worth or income, is now able to invest in startups at early stages. It has never been easier to spread the word around, as well as the funds.

It truly is a win-win, despite all the hype surrounding the idea that everybody will now have the opportunity to invest in hot startup deals — which was only previously accessible to accredited investors (i.e. rich old white guys) — as with all new policies, the new Small OPO rules have also been met with minor disapproval from various sectors in this industry.

Many individuals are claiming that the latest rules, though ‘revolutionary’ in itself, are too complicated, too costly, and way too difficult for entrepreneurs to keep up with, especially given all the onerous requirements. As Rory Eakin, founder and COO of CircleUp, once said: “Do I want to go down a path that has much more time, and cost, and uncertainty, or do I want to raise capital?”

Valid point, however, at StartEngine, we fully believe that the ‘hurdles’ involved in Small OPOs will be beneficial for both the entrepreneurs and intermediaries (i.e. broker dealers or funding portals) involved. Like Franklin and Ford so many years ago, we (still) believe that OPOs are a ‘utopian vision’ that is full of remarkable potential. We are learning as we go and knowledge is best gained by experience.

Time, cost, and money aside, the true significance of holding a Small OPO is that it works to raise capital. There is no doubt about it. Franklin, Ford, and numerous other Founding Fathers believed that. “The barriers everyday citizens have experienced in participating in early stage private investing are slowly but surely going away,” writes Chance Barnett in Forbes Magazine.

As the American economy continues to trek forwards, it is safe to say in regards to Small OPOs that taking a few extra steps or spending a couple of additional hours right now will definitely be worth it in the long run.

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