August 29, 2013
Thank you for allowing the community to provide such comments to the SEC on the proposed amendment to Regulation D and Form D. Allow me a moment to introduce myself and the platform that I speak on behalf.
My name is Bryan Healey, and I am the founder of Joinvestor, an internet platform for connecting entrepreneurs, engineers and investors in order to help small businesses succeed. Part of our effort is in connecting accredited investors with businesses seeking financing at their earliest stages. One of the principle purposes of the JOBS Act, as passed by Congress, was to open the doors to this kind of collaboration and expand the options and methods for success in the small business community. We believe that the JOBS Act, as written, is capable of helping this large and vital section of the American economy, and we are grateful that the SEC is taking this matter seriously.
We do have concerns over the recent proposal for changes to Form D, however, and we would like to make those concerns known to you. The largest such issue surrounds the requirement to file the necessary Form D a full fifteen days before any solicitation takes place, and the new dangers of failing to file and amend properly. These new requirements are out of sync with the way businesses will interact with investors on the internet at this stage, and does not take into account the general level of financial expertise in a start-up of the size associated with these campaigns. Furthermore, it creates too much potential for accidental disobedience (the penalty for which, as outlined, is disproportionately severe) and will outright discourage participation.
The fundamental purpose of the JOBS Act, as is obvious in the observance of the full name of the law (Jumpstart Our Business Startups), is to simplify the growth experience of small businesses. This includes loosening regulations for companies in their earliest stages and making the financial environment more forgiving and accommodating to enterprises just getting off the ground. At these stages, businesses tend to be run by only a handful of (or even a single) individuals with a basic product (or potential product) and it is unreasonable to expect such sophistication.
While those who support the JOBS Act do understand and appreciate the concern that the SEC and others have surrounding bad actors and the potential for abuse, we believe that the concern is not nearly as great as has been posited. The very nature of the internet and the modern age has made the target community more informed, and has greatly simplified the research process and it cannot be forgotten that the fundamental principle of crowdsourcing, an exercise not possible with such ease prior to the development of the internet, fosters a substantial, likely insurmountable, challenge for any potential abuser by overwhelming the process with a swarm of concerned participants in search of credible information. It is the grace of the free markets applied on a smaller stage.
There are a number of solutions to the troubles outlined above, including allowing a third-party provider (like Joinvestor) to file the required documents on behalf of soliciting businesses, and softening the penalties for non-compliance and delayed compliance. Whatever direction the SEC undertakes, we sincerely hope that the well-being of the start-up community is reconsidered and the aforementioned concerns be integrated in the final outcome.
Thank you for your time