30 posts categorized "September 2013"

Crowdfunding and the public/private distinction

Traveling today, so today's post will be brief.

Be sure to see Chris Dixon's post from yesterday, "Some thoughts on startup crowdfunding." Thanks to Joe Wallin for the heads up.

I like how Chris looks at the changes happening in private securities laws and markets, and just lumps it all altogether under the rubric "crowdfunding."

People like me tend to want to parse out all the nuance (e.g., Title II of the JOBS Act vs. Title III), but it's actually a good exercise in perspective to find what's common or thematic about all the changes. "Crowdfunding" is actually a good term that encompasses the opportunities and dangers in most of the reforms.

Here's the scariest thought, point 4 from Chris's post:

"When you look at the biggest crowdfunding markets – publicly traded stocks on NYSE, NASDAQ, etc – you find that a) In general, non-professional investors lose money when they try to pick individual stocks. This suggests that something similar to mutual funds would be the best mechanism for amateur participation. b) There is a constant cat-and-mouse game between regulators and sketchy market participants. If this happens with private financings, and more and more rules and regulations get added, many of the advantages of being a private company could go away."

Crowdfunding and the public/private distinction

Off to New York

We had a great summer in Seattle, the summer just ended.

But good grief has it ended. Rain, rain, rain.

One of the pleasures of living in Seattle in the winter months is figuring out how to trade a week of rain at home for a week of sunshine in parts elsewhere.

CaptureWell, the trade of rain for sun was not part of the design for plans for the upcoming week, but, such a windfall is in the forecast.

Posts here this week will (I hope) be about art, shows, walks.

Weekend Read: WSJ Accelerators Post on Pitch Events and General Solicitation

This weekend please read an article I wrote for The Accelerators blog of the Wall Street Journal, The Trojan Horse of Accredited-Investor Verification.

6960882500_cc7fccd4d4_oThe piece gets into how some angel groups, pitch event promoters, and demo day organizers are dealing with new Rule 506(c). Basically, the days of a de facto industry practice of ignoring the Rule 506 prohibition on general solicitation and general advertising are over.

Now that it is okay to generally solicit, it's also time to come to terms with what came part-and-parcel with such over permission: the need to take reasonable steps to verify the accredited status of all purchasers.

It's going to take some time for the ecosystem to sort things out.

Check out this Pando Daily post that Doug Cornelius quoted from in his weekly roundup post. Do you think the newly conservative steps demo days promoters are taking, as recounted by the Pando Daily reporter, Erin Griffith, cut the mustard?

Please do read the piece for the WSJ Accelerators!

Photo: D Services / Flickr.

Comment period extended for proposed Reg D rules

The SEC has posted a notice that it will re-open the comment period just ended for a set of proposed rules that would, if adopted as proposed, significantly overhaul Reg D. Among other bad things, the proposed rules seek to hamstring the new Rule 506(c), which just went into effect on Monday.

The extension, in the words of the SEC notice, is "to permit interested persons additional time to analyze and comment on the proposed amendments."

8040907235_37c354b000_zI don't think the new deadline for comments can be known just yet. I think the notice of re-opening has to be published in the Federal Register. When that happens, then I think a 30 day clock starts ticking.

This move is consistent with a recommendation of a small business advisory committee which met earlier this month.

If you aren't already familiar with what is at stake with the proposed rules, be sure to visit http://angel.co/sec.

Photo: Duncan Hill / Flickr.

Unexpected twist: SEC offers site for voluntarily submitting 506(c) materials

Kudos to Doug Cornelius for breaking this news on his blog yesterday, in his post, Voluntarily Submit Your Private Placement Advertisements to the SEC.

CaptureI agree with Doug that this is "a head-scratching move." There is nothing in final Rule 506(c), effective this past Monday, that requires issuers to submit to the SEC any, as the SEC site puts it, "written general solicitation materials used in Rule 506(c) offerings."

Of course, the proposed rules contemplate just such a thing. But the Chair of the SEC has at least once in writing indicated that issuers are not required to follow the proposed rules. Issuers wishing to rely on the 506(c) exemption only need, at least as of today, to follow the conditions of the final rule.

Three longer reads for where we are after General Solicitation Day

We are now living in the second day after General Solicitation Day. All trying to take stock of what has happened, and how the landscape is different.

And there is no shortage of media coverage! (Here, from a news angle, is a good overview from the Wall Street Journal: General Solicitation Brings Startups Capital, Risks. I was interviewed for this article and love the quote they got from me: "The government is doubling down on the idea that accredited investors can fend for themselves.")

PhotoBut today I wanted to call out three different, longer-form pieces of writing, each published within the last week. Each, in a different way, lends a deeper perspective on where we in the startup financing ecosystem are now.

Each will be a reference piece in the weeks and months to come.

1. Paul Spinrad's take on where we are, how we got here, and how all the different pieces fit together.

Here is an article that Paul Spinrad published on a PBS website: Online Platforms Give the First Public Look at Private Equity. As I said on Twitter yesterday, Paul's is the best written, broadest article yet on general solicitation and the changes to private financing rules.

Among the delights of Paul's well written survey are: an explanation of how public offerings came to be squeezed into a private exemption framework; the balance or contrast of considerations when approaching policy for accredited and non-accredited crowdfunding; and how private equity platforms are rolling out new features to facilitate the new rule set.

On Monday in GeekWire, I tried, not very effectively, to point out some of the new features on some of the leading online platforms. Paul's take on the same topic is far more accomplished. And that topic is only one facet of his survey.

2. Trent Dykes', Megan Muir's and Kiran Lingam's whitepaper on do's and do not's at demo days and pitch events.

This one, Demo Days, Pitch Events and the New Reg D, is controversial. I've had an earful from several people already on how this whitepaper may get one or another thing wrong.

But I greatly admire the ambition and timeliness of it. The question that the rest of us hem and haw about – am I automatically generally soliciting if I show up at a demo day or pitch event? - they tackle.

Whether or not you agree with the protocols and checklists they lay out, Dykes, Muir and Lingam are calling out the right factors to consider and giving laypeople the means to educate themselves about general solicitation.

3. The Gunderson law firm's comment letter to the SEC on the proposed Reg D rules.

This is a letter published on the SEC's received comments page, signed by a Gunderson partner, Sean Caplice.

There are a ton of comment letters on the proposed rules, none too few from big law firms.

What's remarkable about the Gunderson letter is that it provides answers to all 101 "requests for comment" posed by the SEC in its proposing release.

Most commentators either cherry pick which of the SEC's questions they want to answer, or skip the agency's questions altogether and comment from the perspective of the commentators' own agenda or frames of reference. For tackling all 101 requests for comment, and for that reason alone, I think the Gunderson comment letter is a touchstone. (Kudos to Joe Wallin for pointing the letter out to me.)

Joe Wallin's Spreecast, "General Solicitation for Startups"

Yesterday, Joe Wallin got Doug Cornelius and me together on Spreecast to chat about startups and general solicitation.

The best thing about it? Joe kept the whole thing really short.

With his permission, I'm embedding it here as today's post.


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