May. 26, 2020
Hello - Thank you for taking comments on this important matter. My comments relate to Paragraph #78 / Eligible Securities Please consider that you are proposing to limit CF to the most complex of all securities - common stock. This will stifle innovation in this space to the detriment of small investors. Small investors need simplicity. Consider that you are limiting small investors to the following: - The valuation of perpetual cash flows - An expected holding period of 7 - 10 years - Return that is dependent on a small number of possible liquidity events - Risk that decisions will be made that are not in the best interest of their tiny minority Common stock is not a security that is designed for small investors, yet you are proposing to limit CF to only this form. The better approach would be to use CF as a way to let the market innovate to create securities that are better suited for small investors. For example, you are considering scoping out revenue sharing agreements, but this form of investment may be the simplest and best suited for small investors. Consider a purchase of a fixed amount of future revenue. In this case, all the investor needs for valuation is to estimate the probability and timing of this revenue. Additionally, the investor is not subject to the vagaries of start-up investor politics and can get its money back much sooner than upon a sale or IPO of the company. Please consider that investor protection is paramount here. Consider that limiting eligible securities to traditional equity will only help the traditional players in this market. The best way to protect small investors is to let the market innovate to create new securities that are more appropriate for them than common stock. If securities such as revenue shares aren't allowed to be issued in CF, then innovation will be difficult and small investors will be hurt. Thank you. Respectfully, Shane Hadden, CFA Founder/CEO Seats Capital LLC