Subject: File No. S7-09-13
From: Matt R Morse, Sr

December 3, 2013

I am writing in response to the current finalization of SEC regulations and guidelines as they relate to equity crowdfunding. I understand and appreciate the viewpoint of the SEC to create tiers of regulatory conduct. I think that this is a good approach to address the different levels of complexity and investor risk.
I am specifically writing about the first tier of fundraising up to $500,000. I encourage the SEC to streamline the process for fundraising of less than $500,000 and make the process relatively easy and straightforward. In todays world, it is common for any franchise, business, startup, or new venture to raise capital in this range and is really not anything new, except that now it will become more common online. Online equity fundraising, and its attendant potential risk and reward, just reflects what is already common in the business world all across America and is an extension of real life. Human psychology and business motivations wont change just because you can read about an investment opportunity on a computer. Disclosure, vetting and due diligence will continue to be important but risk will always remain and be inexorably linked to (potential) reward. Risk and reward are two sides of the same coin and no amount of regulatory oversight will eliminate one side of the coin and retain the other. We can read every day about companies big and small, private and public, destroying capital investments and going bankrupt, and it is unlikely that there will be any negative quality in online equity crowdfunding that is entirely unique. Making the regulatory climate ever more onerous, complex and burdensome for raising smaller amounts of capital online (less than $500,000) will be counterproductive and only serve to make crowdfunding more and more like a Wall Street endeavor, thereby defeating the legislative intent of Congress. It would be more logical to place reasonable safeguards on smaller amounts such as a disclosure acknowledgement like:
Your investment is 100% at risk. You can lose all of your investment. Start ups like the one you are investing in have a high probability of failure.
In addition, it would be entirely reasonable to limit individual investments to, for example, $2000 per startup. In the event that an investor had an insatiable appetite for risk, he or she could invest in many startups and thereby employ the tried and true tool called diversification.
In summary, dont regulate online equity crowdfunding out of existence before it even exists. Main Street America needs a startup investment alternative to Wall Street. Crowdfunding is that alternative.