September 23, 2013
Dear SEC,
Please do not approve the proposed changes to Regulation D and Form D. These rule changes will adversely affect all members of the startup community in our efforts to introduce informed investors to capital-seeking entrepreneurs.
The intent of the JOBS Act is clear: help entrepreneurs raise money. Easing the ability of entrepreneurs to raise capital will help grow their businesses a change much needed by entrepreneurs in this country. Congress did not specify these additional proposed requirements for the explicit purpose of helping to make this process easier for entrepreneurs, not harder.
The new requirements will confuse and concern entrepreneurs, and paired with ambiguous defining of general solicitation, will lead to few entrepreneurs willing to utilize the new law. These requirements include the filing of a Form D 15 days before general solicitation with noncompliance resulting in a one year prohibition on the raising of capital. As CFO of a startup, I am carefully managing the capital for our business and am acutely aware of how potentially lethal that prohibition would be to startups just like mine. These proposed rules represent a high-risk situation in which the entrepreneur will have less incentive to use the opportunity to generally solicit for fear of failing to comply. Further increasing the risk is the lack of a clear definition of the term general solicitation. This increases the risk of failure to comply and with such a harsh and incurable penalty, will lead startups to avoid this new, fantastic opportunity to raise capital.
The avenues for accessing capital must be updated to aid informed investors and entrepreneurs in their efforts to connect using means now available to both. Unfortunately, the proposed rule changes are regressive and lead to a more risky and cumbersome process which only serve to discourage honest entrepreneurs from this great opportunity. That was not the intent of the JOBS Act.
Please consider the ramifications these proposed new rules will have on honest, hard working entrepreneurs, and in doing so, do not approve these proposed rules. They violate the primary intention of the JOBS Act, which is helping entrepreneurs to raise capital.
Sincerely,
David Johansson