Subject: File No. JOBS Act Title III
From: David Simpson, CFA
Affiliation: Dex Offshore Entertainment LLC

July 23, 2012

I have an entirely different vision as to what a crowdfunding portal could be but indications are that the interpretation of the JOBS act by the SEC would disallow its implementation. As a hypothetical, imagine a site targeting new drugs.

1.) For a project to raise money on the site, it's first screened by the PhD level portal management team to determine if they think the proposed drug and founders have a viable economic project and package assembled. There may be a fee of $200 to load a project.

2.) The project is featured on the portal. Because of the reputation built by the portal's past successes, the money is raised from fee-paying ($100/ann.) portal members, shares acquired but held in electronic form on the portal's accounting system. The funds are put into 1 Vehicle that invests in the company. The portal charges 5% of capital raised.

3.) The portal mgmt team sits on the Board and leverages its network and expertise (and the crowd's) to monitor use of proceeds and sources of revenes helps the business succeed. All reporting and updates are handled through the portal's communication platform to the shareholders. For these efforts, the portal has shares in the Vehicle that dilute the portal S/H 10%. If a S/H wants or needs to trade shares, they may be able to find a counterparty via the bulletin board and the portal has the ability to handle the transaction for a small fee. The portal has mechanisms for S/H to vote on matters with the portal representing S/H interests.

4.) Any dividends or sale proceeds are paid to the S/H through their accounts. If a broader public offering leads to a listing on an exchange, the vehicle can enable certificates to be issued to the S/H. The portal electronically issues 1099s and any other required tax documents.

Anyway, you can see that this is more like a VC fund kind of model. The portal limits the projects which can be offered, promotes the project across social media, and has a vested interest in the outcome. The portal holds customer money, has individual accounts, gives advice. Truly, the success of the platform is a function of how well the projects do - so total alignment with investors. But as the laws are shaping up, this firm would have to be registered as a B/D and easily have upwards of $500K in annual overhead (compliance, legal, audits, training) immediately added.

As the laws are shaping up - you will basically drive an oligopolistic model where only a handful of large sites that attain scale fast can survive on the relatively thin margins allowed. Your first attempts at enabling democratization of capital will be to consolidate power and access in the industry to the usual suspects. You potentially undermine the industry before it even begins - or force sites offshore where laws may be more adaptable to innovations.

Accordingly, in the spirit of the JOBS Act, I would implore you not to just think about the small entrepreneurs raising capital but the small entrepreneurs building portals and ensure a playing field that does not exclude us. Focus more on transparency than dictating what the business model should be. Enable innovation and evolution, let's find out what succeeds in the marketplace.