In our previous newsletter, we explained Sahoja's business model that defies conventional wisdom. Sahoja has a different vision than maximizing shareholder value for a limited few, rejecting this concept as the key goal for a corporation. Instead, we envision a company where all its stakeholders – employees, vendors, consumers, and members – could also be owners or shareholders.
One means of eliminating financial inequality is to open the company's ownership to all who are part of the company eco system – employees, management, investors, vendors and everyone else who interacts with the corporation.
Although it is possible for anyone to buy shares in companies trading on the stock exchange, by the time a company lists on exchanges its value has gone up tremendously since the time it was founded. This time lag from founding to listing has increased over the last few decades and by the time a company goes public, the majority of the benefits have already gone to investors/shareholders who invested in the company in the beginning or while the company was growing as a private entity. However due to strict securities laws in the US, investors in private companies were limited to ‘accredited investors’ only; those who had a net worth of $1M or an annual income of $200,000. This severely limited small investors or the ‘general public’ from investing, thereby being cut out of the wealth creation process.
But in 2012, the Jumpstart Our Business Startups Act or JOBS Act. was passed by Congress. It is a law intended to encourage funding of small businesses by easing many of the country's securities regulations. One section of the law, also known as the CROWDFUND Act (Regulation CF) creates a way for companies to use crowdfunding to issue securities, something that was not previously permitted.
Crowdfunding (Regulation CF) permits individual investors, over a 12-month period, to invest in the aggregate across all crowdfunding offerings up to $2,200 or 5% of the unaccredited investors net worth or yearly income if they make less than $107,000 per year.
Until recently, a small company like Sahoja could sell shares of up to $1.07M in a year. But recently, companies raising money through regulation crowdfunding can now raise up to $5 million, the United States Securities and Exchange Commission announced last week.
The amendment passed by the SEC comes after much discussion around expanding opportunities to invest in startups. Last month, the SEC changed another rule expanding its definition of an accredited investor.
It has now become even easier for the general public to become shareholders of small companies. These shares can be purchased online through such regulated and authorized agencies as Republic (www.republic.co), Start Engine (www.startengine.com), Trucrowd (www.trucrowd.com), NetCapital (www.netcapital.com) and others. Shares can sometimes be purchased in lots as low as $10 using a simplified online process.
It is Sahoja’s intent to offer its shares to its members through this mechanism.