On September 23, 2013 a new law in the U.S. allowed, for the first time in 80 years, startups to tell the world they are raising money whether through their blogs, email and social campaigns. The process, officially known as general solicitation, is an official declaration to the public that you are trying to raise funds for an organization. Though startups can let the public know they are raising money, they are only allowed to strike deals with private and accredited investors. In order for a company to “go public” and actually sell shares to the everyday investor on an open stock exchange like the Nasdaq, it would first have to file for an Initial Public Offering (IPO), which comes with significant overhead costs and typically only occurs when companies need more than 500 private investors (requiring it to go public by law) or want to accelerate their financing.
No matter how you go about it, though, one of the keys to starting a successful new business is to have the funds necessary to cover the costs of your development, maintenance and potential staff each month. The new business paradigm of trying to borrow enough money from a bank or your friends and family to get started is nearly impossible in current economic conditions. For this reason savvy entrepreneurs are now either bootstrapping their companies or looking towards crowdsourcing and startup accelerators as viable options to raise capital.