Beginning Monday, startups can raise up to $5 million every year from ordinary people who can get a proportionate slice of the company in return.

Why it matters: The changes take effect amid a retail investing mad dash, kicked into high gear by the pandemic and the extra money in (some) people’s pockets.

• It gives regular investors the opportunity to participate in a private company’s upside (or the opposite, if a company goes under).

Catch up quick: Previously companies had been limited to raising a little more than $1 million in “regulation crowdfunding” per year.

• This higher threshold could draw a new crop of later-stage companies into the crowdfunding equity trend that may have felt the $1 million wasn’t worth the effort.
• “There’s kind of a snowball effect: When more companies do this, they’re bringing their audience and customers, which brings in a whole bunch of new investors in the market,” says Brian Belley, founder of Crowdwise, an equity crowdfunding research site.

Other changes taking effect today: Retail investors are now allowed to invest higher amounts this way each year, and companies can essentially pool crowdfund investors into a single line on the cap table.

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Before Melissa Bradley taught at Georgetown University, before she served under Presidents Clinton and Obama, and long before she launched a nonprofit accelerator to help minority entrepreneurs, she was a young college graduate trying to build her first business.

She went to the Small Business Administration for help with her startup financial services company, and she was turned down flat.

“They told me there was no way in the world I would get funding because I was Black, I was a female, and they didn’t know any successful Black women in financial services,” Bradley said.

That frustrating experience revealed the institutional roadblocks for female and minority entrepreneurs, and it set her on a lifelong path to remove them. At her nonprofit 1863 Ventures, Bradley’s mission is to close the wealth gap in the United States by helping more Black, Brown, and female founders get their businesses off the ground. Her programs provide mentorship and instruction that goes beyond the typical lessons about pitching and fundraising. She wants new entrepreneurs to learn management, marketing, technology and digital skills. Read More>>

Venture capital funding globally has more than doubled to $50.5 billion so far this year after a record fourth quarter as investors searching for the “Next Big Thing” poured money into promising healthcare and tech businesses, Goldman Sachs said.

The 130% surge in year-to-date funding was led by Robinhood, Cruise Automation, Lalamove, Didi Cargo and Databricks, which cumulatively have raised over $9.4 billion, data from the U.S. investment bank showed on Tuesday.

Online broker Robinhood alone raised over $1 billion of fresh capital from existing shareholders last month, having been strained by high volumes of trading.

“The story of Venture Capital is the search for the Next Big Thing,” said Goldman researchers led by Heath Terry. Read More >>

Most governments are eager to nurture promising startups with lots of growth potential. Such startups can generate new jobs, spur innovation and new patenting, and, in the best of cases, bolster an entire local economy.

It’s no surprise, then, that local politicians are often willing to offer up financial support. For instance, some cities and states have extended loans and grants to the startups they deem most promising. Yet this strategy requires that governments choose the right startups, which is a difficult task even for experienced investors, let alone for government agencies.

But do tax credits for angel investors actually produce the kind of broader economic boom that politicians expect? Read More >>

You know the tubes from “Futurama,” where you step in and are accelerated at super-high speed to your destination? That’s how asset manager Daniel Cohen describes the SPAC process. He should know: His SPAC has just taken used-car sales company Shift public. For many involved, doing a SPAC is a totally new experience, full of peculiarities that you might not expect. But despite the work and the learning curve, SPACs are more popular than ever. They have already raised over $41 billion this year: more money than in the last 10 years combined, according to Bloomberg data. But deciding to do a SPAC is just the start of the process. Next, companies have to find a SPAC to merge with. Those SPACs — essentially blank-check investment vehicles taken public with a large chunk of investor cash — meanwhile, are out looking for companies. They usually have specific sectors in mind. In all likelihood, SPACs will neither be the future for everyone, nor will they be consigned to the trash can of defunct financial inventions. Read More >>

‘Venture capital’ has become a household concept. There is a proliferation of funds, valued at almost US$300 billion globally. It has turned into an asset class of its own – generating interest from traditional sources of finance like pension funds and family offices but also the retail investor who wants a slice of the entrepreneurial action. We see the rise of the professional entrepreneur, a career path that seems as normal as banking or engineering. Venture capital, just by the size of the funds under management today, has become a ‘financial art’ of sorts. It has not only become institutionalised, one could say that it has indeed become commoditised. Consider the portfolio approach to investments, where one bets on the probability that some will pay off while others won’t. The “1 in 10” thought process also means that venture capitalists today have to be brutal about cutting off the losers and backing the winners, doubling down on those that may stand that 10x chance of winning the odds. Has the time come for us to rethink VC in today’s world? Business, if treated as a force for good, can only create a system that generates returns in an ethical, balanced way.  Read More >>

The morning of February 26, 2020, Y Combinator is publishing a 70-page Series A guide based on its work with 190 YC companies over the last couple of years. It’s part of an initiative launched in 2018 to help these alums understand how Series A rounds work — and how to make them work to their advantage. The idea is that Series A rounds were understood on the investor side — that they are looking for ARR, plus profit, then comes funding. It’s entirely possible to raise a great story and no metrics, versus great metrics and no story. There’s a lot of preparation required; they advise against companies going out to market because of a false signal. They also explain how to work through a diligence request by an investor. It’s really important that founders ask instead about what the VC is trying to learn from the diligence request, then call those customers so they are ready. If YC can help companies build bigger companies and level the playing field, that’s just overall good for the rate of innovation in the world.  Read More >>

Over the past few decades, marketplaces like eBay, Airbnb, Uber and Lyft, Alibaba, and Instacart, have become some of the most impactful companies in the world economy. Collectively, millions of individuals and small businesses make a living operating on these platforms, where hundreds of billions of dollars of goods and services trade hands each year. The Marketplace 100 is a ranking of the largest and fastest-growing consumer-facing marketplace startups and private companies. One key takeaway from this is that a handful of companies dominate. The fastest growing categories exemplify why marketplaces can be so powerful for consumers and suppliers: they create new channels in markets with pent-up demand, unlocking new transaction behaviors. The fastest-growing startups reveal emergent consumer categories. Some categories are competitive and fragmented, while others have a clear winner. Scaling the mountain is much harder than one would think.  Read More >>