I’m Brandon Andrews. I’m the co-founder of Gauge, an AI-driven platform that conducts smart mobile focus groups. I also lead a nationwide casting tour for ABC’s Shark Tank, with the mission to create opportunity for founders in every community. (To learn more about my background, check out the video I sent you last week.)
I was on the ground floor of the movement that brought the JOBS Act to life, opening the doors for everyday Americans to invest in early-stage startups.
And watching Airbnb’s smash-hit IPO earlier this month, I was reminded yet again of how just important the JOBS Act has been to our society.
But many others saw something else… Froth. The foamy effervescent bubble-making stuff that makes bath time fun for children sends chills down the spine of economists because market froth leads to bubbles, and bubbles wreck economies.
During a video interview on the day of his company’s IPO, Airbnb CEO and co-founder Brian Chesky was told that Airbnb was expected to open at $139/share; double the $68 list price. The reporter asked Brian if he was concerned about froth. Undoubtedly, an IPO had been a dream of Brian and his team since founding Airbnb in 2008.
Given the company’s success, rumors of an IPO had been swirling for years, and Brian had been directly preparing for this moment for over a year with a roadshow and interview prep. Keenly aware of how the COVID-19 pandemic has changed the landscape for travel, he knew that a high opening price would bring comparisons to the dot-com bubble. Back then, investors lost billions of dollars because demand drove asset prices well beyond their intrinsic value. In short, he knew to expect questions about froth.
But when the question finally came, he stumbled. This interview was the first time he’d heard a projected opening price that high. While he maintained his composure, he was shaken. The usually well-spoken CEO was tongue tied. Eventually, in reference to the opening price, he uttered “I’m very humbled by it.”
The thought of billions of dollars in value being created for employees, investors, and his personal piggy bank affected him; a feeling few people have had the pleasure of experiencing. Eventually, all that prep kicked in. Brian recovered and no one thought less of him for his authentic response to a momentous piece of news.
While listening to the rest of the interview – Brian waxed eloquently about safety being first and promised to work hard to keep pace with market expectations – I thought: “I wish I could’ve invested in Airbnb back in the day.” I bet you wish you could’ve invested in Airbnb too!
The reality is, for most people, even if you knew Brian in 2008, you couldn’t have invested because you weren’t an Accredited Investor. As you may know, for decades, the United States Government has restricted who can invest in startup companies. These Accredited Investors qualify by making enough money or by having a net worth high enough to be deemed smart enough to make investment decisions.
In 2020, the SEC defines an Accredited Investor as a single person making $200K/year in consecutive years, a couple making $300K/year in consecutive years, or someone with a net worth over $1M; not including their primary residence. These are the people who have unfettered access to invest in startups.
A very small number of Americans qualify as Accredited Investors. This group does not match the diversity in our nation, and yet these Americans have an outsized impact on the world we live in and the choices we have. Their dollars fund the apps on our phones, the movies we stream, the new brands we buy, and the stores those brands are sold in. Our “choices” as consumers are often a function of the investments they made years prior to our purchases.
Beyond that, this group gets the almost exclusive right to invest in startup companies before they are listed on a public exchange (Nasdaq, NYSE, etc.)… Startup investing can be risky, but for investors in companies like Airbnb, most of the value is created prior to an IPO or other public listing. The SEC’s Accredited Investor Rule means that the rich have an opportunity to get richer, while others are barred from the opportunity to educate themselves and build wealth.
What would it mean for the millions of Airbnb hosts to have had the opportunity to invest in the company? What would the IPO have meant for communities around the country? Unfortunately, we will never know.
Seeing this inequity and seeking to solve the perennial “access to capital” problem for startups, Congress authored and passed the Jumpstart Our Business Startups (JOBS) Act. President Barack Obama signed the JOBS Act into law in 2012 and opened new opportunities for entrepreneurs and investors across the United States.
Airbnb was founded in August 2008. While Brian and the team were creating the next unicorn, I was settling into a new position in the United States Senate. During my almost 5 years on Capitol Hill, I would have a front-row seat to the legislative process that led to the passage of the JOBS Act and the democratization of startup investing opportunities.
The JOBS Act authorized the SEC to create the regulatory environment allowing non-accredited investors to invest in startup companies. Equity crowdfunding or crowd investing began as an idea, something mentioned offhand by staffers here and there. Eventually, a group of like-minded members of Congress coalesced around the idea of giving everyday people a shot at startup investing. This group pushed the JOBS Act forward and garnered President Obama’s support.
You won’t find the JOBS Act on any top-10 lists of greatest accomplishments from the Obama Administration, but it should be. Unleashing education, investing, and fundraising opportunities for the ~95%+ of Americans who aren’t Accredited Investors was significant and the accomplishment becomes more consequential by the minute. Each day, through investing portals, everyday people are investing in and fundraising for companies building solutions for our world.
Importantly, millions of Americans now see themselves as investors and are educating themselves about the business world. One thing they’ll learn is that change is constant. The JOBS Act was the first step, but more change is needed to bring full equity to capital markets.
Earlier this year, I led a group of entrepreneurs in writing a letter to the SEC pushing for more changes to crowdfunding rules. This year, the SEC enacted new rules increasing the amount entrepreneurs can raise and the amount non-accredited investors can invest each year.
The SEC also amended the Accredited Investor definition – the first change to this classification in over 30 years. Now, passing certain FINRA exams and working for an investment fund qualify you as an Accredited Investor. (My thought: why weren’t investment professionals already considered accredited?)
The JOBS Act opened the door for people like you and me to invest in innovative companies. More changes are needed to make these opportunities better. Investor education is critical to any opportunity. I look forward to keeping you posted on proposed changes and how they impact you as an investor. One day, we won’t have to look back and wish we could’ve invested in a company about to IPO; we’ll be part of the story, and our families, communities, and country will be better for it.
We’ll talk soon,
Brandon Andrews
I was on the ground floor of the movement that brought the JOBS Act to life, opening the doors for everyday Americans to invest in early-stage startups.
And watching Airbnb’s smash-hit IPO earlier this month, I was reminded yet again of how just important the JOBS Act has been to our society.
But many others saw something else… Froth. The foamy effervescent bubble-making stuff that makes bath time fun for children sends chills down the spine of economists because market froth leads to bubbles, and bubbles wreck economies.
During a video interview on the day of his company’s IPO, Airbnb CEO and co-founder Brian Chesky was told that Airbnb was expected to open at $139/share; double the $68 list price. The reporter asked Brian if he was concerned about froth. Undoubtedly, an IPO had been a dream of Brian and his team since founding Airbnb in 2008.
Given the company’s success, rumors of an IPO had been swirling for years, and Brian had been directly preparing for this moment for over a year with a roadshow and interview prep. Keenly aware of how the COVID-19 pandemic has changed the landscape for travel, he knew that a high opening price would bring comparisons to the dot-com bubble. Back then, investors lost billions of dollars because demand drove asset prices well beyond their intrinsic value. In short, he knew to expect questions about froth.
But when the question finally came, he stumbled. This interview was the first time he’d heard a projected opening price that high. While he maintained his composure, he was shaken. The usually well-spoken CEO was tongue tied. Eventually, in reference to the opening price, he uttered “I’m very humbled by it.”
The thought of billions of dollars in value being created for employees, investors, and his personal piggy bank affected him; a feeling few people have had the pleasure of experiencing. Eventually, all that prep kicked in. Brian recovered and no one thought less of him for his authentic response to a momentous piece of news.
While listening to the rest of the interview – Brian waxed eloquently about safety being first and promised to work hard to keep pace with market expectations – I thought: “I wish I could’ve invested in Airbnb back in the day.” I bet you wish you could’ve invested in Airbnb too!
The reality is, for most people, even if you knew Brian in 2008, you couldn’t have invested because you weren’t an Accredited Investor. As you may know, for decades, the United States Government has restricted who can invest in startup companies. These Accredited Investors qualify by making enough money or by having a net worth high enough to be deemed smart enough to make investment decisions.
In 2020, the SEC defines an Accredited Investor as a single person making $200K/year in consecutive years, a couple making $300K/year in consecutive years, or someone with a net worth over $1M; not including their primary residence. These are the people who have unfettered access to invest in startups.
A very small number of Americans qualify as Accredited Investors. This group does not match the diversity in our nation, and yet these Americans have an outsized impact on the world we live in and the choices we have. Their dollars fund the apps on our phones, the movies we stream, the new brands we buy, and the stores those brands are sold in. Our “choices” as consumers are often a function of the investments they made years prior to our purchases.
Beyond that, this group gets the almost exclusive right to invest in startup companies before they are listed on a public exchange (Nasdaq, NYSE, etc.)… Startup investing can be risky, but for investors in companies like Airbnb, most of the value is created prior to an IPO or other public listing. The SEC’s Accredited Investor Rule means that the rich have an opportunity to get richer, while others are barred from the opportunity to educate themselves and build wealth.
What would it mean for the millions of Airbnb hosts to have had the opportunity to invest in the company? What would the IPO have meant for communities around the country? Unfortunately, we will never know.
Seeing this inequity and seeking to solve the perennial “access to capital” problem for startups, Congress authored and passed the Jumpstart Our Business Startups (JOBS) Act. President Barack Obama signed the JOBS Act into law in 2012 and opened new opportunities for entrepreneurs and investors across the United States.
Airbnb was founded in August 2008. While Brian and the team were creating the next unicorn, I was settling into a new position in the United States Senate. During my almost 5 years on Capitol Hill, I would have a front-row seat to the legislative process that led to the passage of the JOBS Act and the democratization of startup investing opportunities.
The JOBS Act authorized the SEC to create the regulatory environment allowing non-accredited investors to invest in startup companies. Equity crowdfunding or crowd investing began as an idea, something mentioned offhand by staffers here and there. Eventually, a group of like-minded members of Congress coalesced around the idea of giving everyday people a shot at startup investing. This group pushed the JOBS Act forward and garnered President Obama’s support.
You won’t find the JOBS Act on any top-10 lists of greatest accomplishments from the Obama Administration, but it should be. Unleashing education, investing, and fundraising opportunities for the ~95%+ of Americans who aren’t Accredited Investors was significant and the accomplishment becomes more consequential by the minute. Each day, through investing portals, everyday people are investing in and fundraising for companies building solutions for our world.
Importantly, millions of Americans now see themselves as investors and are educating themselves about the business world. One thing they’ll learn is that change is constant. The JOBS Act was the first step, but more change is needed to bring full equity to capital markets.
Earlier this year, I led a group of entrepreneurs in writing a letter to the SEC pushing for more changes to crowdfunding rules. This year, the SEC enacted new rules increasing the amount entrepreneurs can raise and the amount non-accredited investors can invest each year.
The SEC also amended the Accredited Investor definition – the first change to this classification in over 30 years. Now, passing certain FINRA exams and working for an investment fund qualify you as an Accredited Investor. (My thought: why weren’t investment professionals already considered accredited?)
The JOBS Act opened the door for people like you and me to invest in innovative companies. More changes are needed to make these opportunities better. Investor education is critical to any opportunity. I look forward to keeping you posted on proposed changes and how they impact you as an investor. One day, we won’t have to look back and wish we could’ve invested in a company about to IPO; we’ll be part of the story, and our families, communities, and country will be better for it.
We’ll talk soon,
Brandon Andrews
Follow @angelsandentrepreneurs
Brandon–I applaud you for what you have helped achieve. As a minority and a teacher in a very diverse school in Chicago, I recognize the inequity of opportunity you are talking about. We definitely still need to provide more pathways for more people to have the exposure, education, experience, and economic means to participate in the bounty of American entrepreneurship and capitalism. Keep at it!
Brandon…your article was/is extremely “Well Written”. I enjoyed it very much!!! I look forward to your future communications.
Michael Morton
(No relations to the salt people…I am one of the poor Morton’s)