Leveling The Playing Field
OPOs Are Democratizing Access To Capital For the First Time In Over 80 Years, Keep Reading To Find Out How
For the business savvy who cares about the future of the American economy, here are two important things to consider:
First, minority-owned businesses are vital to the growth of our economy, with most new jobs being created within start-ups and small businesses. It is widely known that minority companies earn the lowest share of funding from investors. Like it or not, venture capitalists, even in this day and age, are still primarily interested in funding all white-owned companies, meaning that often times, even the most brilliant of non-white entrepreneurs end up having to give up on various groundbreaking ideas that could very well have been the next Google or Facebook.
Second, America is quickly heading towards an entirely new era where whites will no longer make up the majority of the population. Instead, the Census Bureau claims that by as soon as 2020, “more than half of the nation’s children are expected to be part of a minority race or ethnic group.” Further, the number of people of color currently enrolled in entrepreneurship programs in major universities or participating as employees in startups has grown significantly in the last decade. It will more than likely lead to an explosion in the percentage of entrepreneurs who are people of color in the coming years.
So what does this all mean? Well, society, for one, is becoming more pluralistic than it has ever been before — that is a reality. In order for America to grow further as an economy and as a country, the time has come for not only ‘rich old white men,’ but people of all races and ethnicities, to receive a fair shot at launching innovative ideas and companies that could potentially go on to change the world. As President Obama mentioned in his 2015 State of the Union Address, it is now or never to “pass an agenda that helps [minority businesses] succeed” and to “tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow.”
Spectacular ideas, in general, should be funded based on the merits of the idea itself, not the color of their creators’ skins. And while most Americans would agree with that, very few entrepreneurs of color are ever successful when it comes to getting people to fund their startup or growth companies. Traditionally, minority (and women) entrepreneurs receive less than 10 percent of all funding given out and usually end up last in the race when competing for investors.
Everything changed with the White House’s “game-changing” passing of the JOBS Act, as numerous barriers in the business community have finally been knocked down in support of minority-owned companies, who can now fight for equal access to capital on a non-discriminating and much more-leveled playing field. Regardless of ethnic background, entrepreneurs of all sorts are able to take full advantage of what is officially known as OPOs (Online Public Offerings) and raise up to $50M from the general public. OPOs open up the floodgates and allow, for the first time in eighty years, non-accredited investors to easily invest in private offerings which provide startups with the finances to get started. Until now, SEC rules have restricted IPO and startup investing to $3.5 million “accredited” investors, but under these new rules, as many as 233.7 million Americans will be able to invest in startups.
The changes are especially great for women, veteran, and black-owned companies who tend to be denied credit, receive lesser loan amounts, pay higher interest rates, and continue to remain in need of funding. With the increased access to capital and the less onerous regulations offered by these new SEC laws, everyone now has the chance to start or build a business. “Entrepreneurs and small business owners will have more ability to take risks, grow and create jobs,” House Majority Leader Eric Cantor has famously saidin an official statement.
Title III further enables “crowdfunding,” which by itself, has already proved beneficial for underrepresented groups in the United Kingdom, which legalized OPOs in early 2014. Minority companies have long faced a sort of “glass ceiling” when reaching for capital, and by allowing unaccredited individuals (or the other 98% of the population) to invest, a radical difference is sure to be made. Essentially, it is taking away the power from venture capitalists and banks to decide which companies are worth funding, and instead, putting it into the hands of the community or the “crowd.” OPOs may very well be the ultimate solution that finally levels the playing field for all ethnic minorities.
“Investment under the JOBS Act provides that extra ‘structure,’ or legal regulatory and communication framework to help communities further connect with each other and support each other” CEO of StartEngine Ron Miller said.
The wealth of America as a whole should indeed prosper along with the implementation of these new rules put in place most recently on May 16th. The potential of today’s minority business community will be fully realized only when capital access barriers are overcome. Only with this newly leveled playing field will entrepreneurs — regardless of race or ethnicity — be able to compete fairly, based on the skills, ingenuity and resourcefulness they bring to the game. By democratizing access to capital, the potential and relevance of today’s minority business community can be fully realized.