September 21, 2013
Speaking as both an entrepreneur and angel investor, I can not see any scenario where the unintended consequences of the new Rule 506 requirements won't be extremely negative. It's bad for entrepreneurs because of the added cost, complexity, and risk of raising funds, particularly in the very early stages, where resources are scarce and the focus needs to be (and should be) on the product or service, not regulatory compliance. It's bad for potential investors because of the added cost of due diligence and the increased risk of investing in a company that is bound by these requirements, for fear that they have "missed something". And sadly, the long-term effect will almost certainly be a marked reduction in this kind of investing, ultimately slowing innovation and perhaps even making other countries more appealing for start-ups.