Equity crowdfunding is here. Now what?

It’s taken almost four years, but now any American, regardless of their income level, can invest in start-ups. Known as equity crowdfunding, this change to regulation seemingly throws open the door for everyday Americans to invest in companies that aren’t yet listed on public stock exchanges such as NASDAQ or the New York Stock Exchange. As part of the Jumpstart Our Business Startups Act, or JOBS Act, the crowdfunding provision was developed in the hope that it would, as the name says, jumpstart small business formation. And at the same time, with high-growth companies increasing staying private, some people hope equity crowdfunding will broaden investor access to the high-returns of these young firms beyond venture capitalists, institutional investors, and high-net-worth individuals.

But with investing officially allowed today, it seems unlikely either of these dreams will come to fruition any time soon. That’s not to says that the U.S. economy isn’t in need of a jumpstart when it comes to new business creation. The start-up rate has been on the decline since the 1980s without any sign the trend is about to reverse. Not only are startups less likely, but the decline has been very pronounced for high-growth startups. In short, there are fewer startups and the ones that do exist grow slower.

A policy change that accelerates business startups and their growth would certainly be welcomed. The reasons for the decline in the startup rate (and overall business dynamism) aren’t well understood. But it seems unlikely that access to capital is a powerful reason, as credit became more available at the same time that the startup rate began declining.

But even if capital were at the heart of the problem when it comes to high-growth startup, the new equity crowdfunding measures seem unlikely to help. When the rule was finalized by the Securities and Exchange Commission late last year, Nick Tommarello of the investment crowdfunding platform WeFunder wrote about some of his concerns with the rule. His chief concern: The rule doesn’t allow newly eligible investors (those who weren’t already rich enough to invest before) to pool their funds together to invest in new firms looking for investors.

As Tommarello explains, because high-growth startups with a large number of investors may scare away later-stage investors, they prefer to lump the crowdfunders together into  one bigger fund. This means the new regulation will make it extremely difficult if not impossible for everyday Americans to invest in potential high-growth startups. Recipients of new funding will most likely be firms that didn’t have access to funding previously and have a low growth potential. These small businesses may be good businesses, but they likely aren’t the kind that’ll significantly boost employment and productivity growth in the United States.

This part of the regulation also means that average investors won’t have direct access to the kind of returns that accredited investors and venture capital funds do. Now, that might be a good thing as these kinds of investments are high-risk. Given the state of saving in the United States, policymakers may not want to encourage everyday Americans to invest in such risky assets. Perhaps traditional mutual funds may be able to provide some access to these returns in the future, though their current experience valuing these kinds of firms might make us less optimistic on that front.

Increasing business dynamism in the U.S. economy is vital to long-term economic growth and prosperity. In a period of weak productivity growth, new high-growth entrepreneurial firms have the potential to help boost the productive capacity of our economy in the long-run. Unfortunately, it seems the JOBS Act, one of the first efforts in this area, is unlikely to be a big step forward. But in the spirit of startups, we should pick ourselves up quickly from this misstep, dust ourselves off, and pivot to the next idea.