Subject: File No. S7-06-13
From: David A Neal
Affiliation: Managing Director, The Startup Factory

October 16, 2013

The new rules permitting general solicitation seemingly open up a new set of opportunities for the startup companies that my firm works with. The idea of informing larger numbers of potential investors via more expansive means is attractive.

Despite that, I believe that the 506(c) rule has inherent problems that will render it irrelevant to startup technology companies. The verification of accredited investor status will render 506c unusable. I can't see angel investors providing financial information to the companies that they are considering investing in. I recently talked about it with successful angel investors. Not one of them is comfortable with providing such information.

The rule also has an impact on how we operate as a tech accelerator. We have heretofore had a "Pitch Day" to close our semi-annual sessions. With the new rule we cannot be comfortable holding such an event.

I believe that most fundraising by startups will stay under the 506b rules if the 506c rules are not modified.