September 23, 2013
In conjunction with the Google Developer Groups gtugs.org and StartupWeekend.org I co-organize many "Hackathon" events in Seattle and sometimes smaller cities for developers. Over a weekend this generally entails pitching your fellow attendees your idea on Friday evening, collecting a team, coding a prototype app on Sat-Sun, then pitching angel investors on Sunday evening. Who select a winner. Sometimes the ideas get funded. Generally they don't. I'm very concerned the SEC interpretation of the JOBS Act will spoil the Hackathon format and stop innovation and startup jobs.
(1) The spirit of the JOBS Act was to make it easier for startups to raise money.
(2) Your proposed rules will make is much, much harder for startups to raise money.
(3) Your proposed rules create a lot of traps for the unwary. Many startups will inadvertently violate these rules and then be disqualified from raising money for a year. This will actually hurt the economy.
(4) The SEC has not done a good job of defining what actually constitutes general solicitation and general advertising, yet proposes to automatically disqualify companies from using Rule 506 for a year if they dont file an Advance Form D 15 days before generally soliciting. This is totally unfair to companies.
(5) Demo days and investment forums and similar events are good for America. I think the point of the JOBS Act was to countenance these events. But your proposed rules would essentially make them illegal because many founders of startups will miss the Advance Form D filing inadvertently. This result is directly contrary to the spirit of the JOBS Act.
(6) You are asking startups (many of which have very limited financial resources) to spend thousands of dollars filling out forms before they have raised any money. This is unfair. Many startups that go out and try to raise money never succeed in doing so. This is another reason the post-sale Form D makes more sense than a pre-filing.
On behalf of hundreds of developers thank you for consideration.