Friends often tell me they want to invest in the cannabis industry but feel it’s too late or they want to participate but they don’t think they have the means. Instead of giving financial advice, I tend to just put things into perspective and tell a true story about a small tech startup and the power of private equity:
Dropbox was a scrappy tech startup in 2007. When the founders of the file-sharing company raised $1.2 million from a venture capital firm, shares were valued at just two cents.
Today, 11 years later, Dropbox has been valued as high as $12 billion, and in its first day of public trading in March 2018, the stock opened at $29 per share. Had I invested $500 in Dropbox back in 2007, my shares would now be worth roughly half a million dollars. But I can’t beat myself up. At the time I was legally prohibited due to SEC regulations from investing in Dropbox, Facebook, Amazon, and other promising startups—and you probably were too.
But things are different now.
How Regulation A+ Democratized Investing
Before 2015, you weren’t legally allowed to invest in private equity unless you were an accredited investor, which is a person or business with more than $200,000 in annual income or $1 million in assets. This rule was designed to protect investors but what it also did was shut out these opportunities to nearly all everyday Americans who just happen to have a lower net worth.
Federal legislation established in 2012, the Jumpstart Our Business Startups Act, or JOBS Act, was designed to fix this inequity and required the U.S. Securities and Exchange Commission to create new guidelines. Enter Regulation A+