Dear Friends, a lot of froth can be perceived in the startup world nowadays ! The week didn’t took off to a flying start, as the Kaufman Foundation announced, in its last report, that the U.S rate of new business creation dropped by 5.9% in 2011, compared to 2010. Still, the startup creation rate is higher than before the recession, which is a sign of dynamism ! As a collateral effect, young companies create less jobs and stay smaller than they were last year, which could have a bad impact on job creation throughout the US in 2012.
Yet, a lot of new initiatives, both public and privates, are being developed to help young companies succeed and assist the entrepreneurs in their endeavors. Last week the US Senate passed the Jumpstart Our Business Startups” Act, which enables a series of new measures and regulations to facilitate access to capital for young startups. Among the most important aspects of the bill :
- IPOs regulations have been loosen up a little, raising the limit of shareholders a company can have without becoming public from 500 to 1,000, excluding employees. This will allow the companies to seek new sources of financing without going to public markets too son
- A new category of company has been created, called “The Emerginig Growth” (less than $1B revenue), that will be entitled to bypass some of the IPO regulation imposed by the Sarbane Oxley Act, for the first 5 years following their IPO. This measure is intended to make the IPO process less burdensome for young companies, and so more advantageous.
- The crowdfunding has been officially recognized as a legal way to raise fund and issue shares, opening a new source of financing for companies. Platforms like Kickstart must be thrilled by the decision !
Let’s hope the effects of this bill will be visible soon enough for startups !
On the other hand, can too much support be bad for startups ? As the number of accelerator, incubators and other development program for start ups is growing at a very fast pace (about 150 are actually existing in the U.S, and several are created monthly), could there be a “fashion effect” carrying this phenomenon ? That’s the theory defended by Paul Graham, founder of Y Combinator, one of the two biggest Startup Accelerator program in the country (the other one being Techstars). As these accelerators and programs are popping all over the country, some experts are already evoking the term “bubble” ! Find out about Paul Graham’s opinion in this great article.
That’s all for today folks, and see you next week for great news !