By Steve Cinelli , CrowdFundBeat Sr. Editor,
For a country that has espoused entrepreneurialism, we may be on the verge of a new economic order of sorts with the formal institution of Title III of the JOBS Act. After a three year wait, it appears that a more democratic version of crowdfund investing may just be upon us. No longer will participation in privately held company securities’
offerings be restricted to those“with means”, but will shortly be opened to the masses. Fundamentally, this is only
natural and sensical, as both our economy’s output and much of the wealth created has emanated from private business. Why should only a small portion of the investment community participate in early value creation of aspiring companies? While the Act’s acronym, JOBS, stands for“jump start our business start-ups”, with the intent
to stimulate the“engine of the economy”, i.e., small business and its practice of creating employment, this is also about enabling all investors to participate in capital assets and their appreciation. We have been inundated with missives discussing income disparity, yet more fundamental to the long term health of our economy is addressing wealth disparity. The esteemed Dr. Louis Kelso developed the theory of binary economics, which articulated a
bifurcated economy, one that observed two types of earners–wage earners and capitalearners. Wage earners’
economic consumption was supported solely by their current income. Capital earners were those that enjoyed invested assets, such as an interest bearing bank account, a share of stock or a plot of real estate. Such assets gained value independent of one’s wages, and enabled climbing the rungs of the wealth ladder in a broader sense. A
manifestation of Dr. Kelso work was the Employee Stock Ownership Plan (ESOP), which developed in the late 1950’s, enabled the workers to participate in the value creation of their respective companies, by incentivizing companies to purchase shares on behalf of their workers. This initiative led to various forms of incentive stock option
programs. And withsuch programs, much of the wealth of the Silicon Valley is attributed.
Title III instituted and deployed can be the 21st century application of binary economics, ameans to enable investors of all colors and creeds (and pocket book sizes) to participate in in next generation companies earlier in their value creation cycles. And while the SEC has been concerned with curtailing risk for the unlettered investor, a noble and appropriate endeavor, the narrative needs also be about availing opportunity to the investing rank-and-file, to
partake in asset building. Done right, we all shall win.