September 23, 2013
Im a 20-something entrepreneur living in Seattle. Ive only occasionally had a regular salary and while Ive stashed most of it away in anticipation of the resource strain of a startup, I see that funding eventually is going to be the key to the growth and success of my next venture.
That is why I had hoped that the JOBS Act would make the process of raising money for me easier. However, that doesnt seem to be the case and I will explain.
1. The proposed changes are vague and unclear.
Im supposed to file an Advance Form D 15 days before generally soliciting or in other words asking for funds. However, general solicitation is undefined in the proposed changes so how am I supposed to know when Im generally soliciting? In fact, did I just now generally solicit by saying that one day I would go out and seek capital? The rules are unclear but the punishment is extreme.
If you count my disclosure as general solicitation and automatically disqualify my company from using Rule 506 for a year, Im going to have to give up on my dream and go back to work because my resources will run out. A dream that, if successful, could provide jobs, taxes and health care benefits in this country
2. The proposed changes will have an impact on Demo days and startup incubators.
I dont have my entire team together yet but a great place to look for talent is startup incubators and demo days, where good ideas and teams are backed with cash rewards for participation. Hundreds of bright entrepreneurs participate in these events all over the country. Some participate in multiple events of this kind. How are they supposed to preemptively spend the money to file a Form D prior to these events when the likelihood of being funded is so small? Participants would end up having to refuse the cash and seek funding from another source, which would defeat the purpose of the event altogether.
3. The proposed changes are going to increase the upfront costs of starting a business.
Seasonal entrepreneurs are more likely to build successful businesses but because of the dismal success rates of startups, most of us are going to fail a number of times before that happens. This means that a lot of us are working from a very small resource pool. Were using all the money we have to make this dream a reality. It would be a shame if we lost more dreamers because of the cost constraints of pre-filing a Form D, just in the hopes of getting funding.
So you can see why Im disappointed.
I believe that everyone has a unique perspective and its an entrepreneurs job to use that perspective to change the world for the better. I just wonder what the unforeseen costs will be to all of us if we make entrepreneurship any harder than it already is.