NEW YORK — Usually only rich people and venture capitalists invest in startups, but now more regular folks are getting the chance.
That’s because two major changes to a federal law have made it easier for small businesses to sell shares and raise cash from the public. Last June, rules known as Regulation A were updated in an effort to get more companies to raise money from the public. And on Monday, new crowdfunding rules went into effect allowing even smaller companies to raise up to $1 million a year from average Joes and Janes.
Investing in startups is risky. Most fail. Some need the money to hire employees, make a product or open a store. Experts say investors can make money from their investment if the company is bought or if it goes public. None of that is guaranteed to happen, and if it does, it could take years, experts say.
“The bottom line is that Main Street investors should not invest beyond what they are comfortable losing,” said Mike Pieciak, deputy commissioner for Vermont’s securities regulator. Joseph Pisani, The Associated Press
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