Something shocking happened in 2008...
No, it wasn’t the collapse of the housing market...
Or the implosion of our country’s oldest financial institutions...
And it had nothing to do with the subsequent stock market crash that followed.
However, I’ve come to believe that this event could have a bigger impact than all the others combined.
And it all has to do with this one chart...
This Chart Changed Everything
You see where those two lines meet in the chart above? Well, that meeting point marks one of most important economic events of the last 100 years.
The top line represents the number of new companies getting started in our country every year…
And the bottom line represents the number of companies closing their doors.
In 2008, we crossed a critical threshold: for the first time in modern American history, more businesses shut their doors than opened them.
And here’s why that’s so important...
Why Are New Businesses So Important?
You might not know this, but most of our country’s job growth comes from small businesses. In fact, two-thirds of new jobs come from small enterprises.
If small companies aren’t getting created, neither are jobs…
Without jobs, people can’t spend money…
And nearly two-thirds of America’s $17.9 trillion GDP comes from consumer spending.
When consumers’ money stops flowing, our economy comes to a grinding halt.
Once our nation’s leaders realized what was happening, they recognized that they needed to take decisive action…
They knew they needed to figure out how to get more businesses off the ground.
Mission: Launch More Businesses
To help more businesses get started, they realized that these businesses would need seed capital.
Unfortunately, back in 2008, the Government wasn't in a position to offer much financial support.
To avoid disaster after the financial crisis, it had just spent trillions of dollars bailing out the banks, and propping up the housing and automotive industries.
But now the well was dry.
So it had to come up with a new way to help new businesses get funding.
In a stroke of brilliance, the U.S. government turned to a new website for inspiration...
“Crowdfunding”
Just as we were coming to grips with the massive crisis our country was facing, a tiny new website was just getting off the ground: Kickstarter.com.
Kickstarter was the world’s first “crowdfunding” website.
Thousands of regular people come to Kickstarter each day and donate money to help new ideas and products get off the ground. In return, these early backers receive a free reward from the company—usually the product they helped fund, whether it’s a cool new watch or a signed copy of a film that got made.
It started out as a small experiment, but in a short period of time, Kickstarter helped thousands of new businesses get off the ground. To date, it’s helped them raise nearly $2 billion.
Kickstarter’s only shortcoming was that if the tiny projects it helped fund eventually turned into big businesses, the early backers didn’t receive any additional upside.
For example, a small virtual reality company called Oculus used Kickstarter to raise funds for its headset. Two years later, Facebook bought the company for $2 billion.
Unfortunately, early backers of the company didn’t receive a penny.
It’s estimated that if they had received a stake in Oculus (instead of a free product sample), they could have walked away with nearly $200 million in profits.
Introducing: “Equity Crowdfunding”
So the government proposed the creation a new type of crowdfunding website—one where early backers would receive an actual ownership stake in the businesses they helped fund.
This way, if they turned into billion-dollar companies (like Oculus), early backers would get their share.
The only problem: ever since The Great Depression it had been illegal for most investors to put money into private companies. Essentially, only very wealthy investors were able to back early-stage companies.
So Congress approved a new set of laws that would rewrite the rules around investing in early-stage businesses.
If you’re a longtime reader, you’re probably already familiar with these laws. They’re known as The JOBS Act.
For the first time in 83 years, The JOBS Act makes it legal for all investors to back small, early-stage companies—and hopefully cash out for big gains if those companies turn into big successes one day.
There’s Still Work To Do
The JOBS Act was approved by Congress in 2012, but it took another four years for it to be fully implemented...
Which is why I wasn’t surprised when I came across this recent CNN report »
As you can see, we’re at our lowest level of start-up creation in nearly 40 years...
However, that data was from 2014—well before the JOBS Act went into effect.
I’m excited to see what the data looks like two years from now. Once millions of everyday investors come to understand the profit potential in early-stage investing, my bet is they’ll flock to equity crowdfunding in droves.
In fact, that’s the bet we made when we launched Crowdability.
We envisioned that there would be a flood of new investors entering this market, and that they’d need someone to help guide and protect them.
As a Crowdability reader, you’re already ahead of the curve. Not only do you understand the potential gains to be had in this market, but you’ve taken steps to educate and protect yourself before you get started.
And if you haven’t pulled the trigger yet to make your first private investment, keep an eye on your inbox next week…
We’ll be sending you information about an upcoming special event that’ll help you finally dip your toe in the “equity crowdfunding waters.”
So stay tuned!
Best Regards,
Founder
Crowdability.com
