August 17, 2013
I strongly agree withthe following statement from angel.co.
"The proposal appears to be targeted to the way startups raised money 20 years ago: with long prospectuses designed by bankers who were facilitating the deal. Today, startups raise money without bankers, through informal conversations with investors. It is unfeasible to notify the SEC in advance, file documents every time there is a new communication with investors and include boilerplate with every communication. Worse, since everything is public, startups will see other startups break the rules and assume there are no rules. So startups will either accidentally break the rules or decide to raise money privately.
The stated purpose of these rules is to help the SEC track investment activity so they can adjust general solicitation regulations over time. There are ways to this without putting good startups out of business or moving investment activity underground. First, allow third parties like AngelList to do the filing on the startup's behalf, with a simple URL that is delivered via API. Second, only require boilerplate when startups are communicating financing terms. Finally, remove the 1-year ban for noncompliance—it is incommensurate with any harm."
1. File docs with the SEc 15 days before every time they publicly discuss raising money
-15 days in the startup world is a life time
-startups move quickly
-startups do not need more regulation
-So does this mean that a startup that wants to talk to an investor has to file and wait 15 days after the introduction to have the conversation?
2. Startups must file documents with the SEC every time they update their offering materials
-this is not how Silicon Valley works
-Silicon Valley is one of the bright spots of the US economy
-Is the intent of the legislation to prevent innovation from taking place in Silicon Valley?
-Is the intent to prevent the funding model from evolving?
-Is the intent to return the funding model in Silicon Valley to funding by venture capitalists only?
3. Startups must include legal boilerplate every time they talk about their financing publicly
-How will this work when a starutp CEO is interviewed by a publication like Techcrunch
-How will this work at start up competitions?
--will a slide be shown with the boilerplate for each new startup presentation?
--how long will the slide be displayed on the screen
-How will this work on web sites like angel.co which users browse through?
--Will a message popup at each new page that the user navigates to with a boilerplate message?
--will a boilerplate message popup for each item discussing a new startup in the newsfeed thereby rendering it useless?
Who proposed this legislation?
-investment banks which are trying to save their IPO business?
-venture capitalists who are dinosaurs and are being displaced by angel.co?