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Feds to Break Up Tech’s Investor Party

47 points by lnguyen 14y ago

skylan_q 14y ago
Good thing we have the SEC to protect us from soliciting the need for investment in a startup! ....?
- lhnn 14y ago
  My thoughts exactly. Why can't someone just ask others for money? What is so wrong with "broadcasting" a solicitation for money?
  - dclusin 14y ago
    The threat of potential evil-doers operating a boiler room type operation primarily. The basic problem with regulation of the form "this type of solicitation is ok, but not this" is that the government tends to be behind the curve. Logically this makes sense; the government can only ban certain types of abuse after they have been deemed as such and after they have already happened. If your goal is to protect the 401k of a soccer mom who isn't good with the googles the easiest way to do that is just ban private placement solicitations entirely.
  - ahi 14y ago
    This is one of those situations where the regulations were effective so we don't remember why they were put in place. Basically every other grandma was having her purse emptied by a good looking scam artist.
    - jaekwon 14y ago
      We already have plenty of that. We can penalize the scam artists. That's not excuse for limiting grassroots dealflow.
      - rprasad 14y ago
        We can go after the scam artists today because of the same regulations that disallow this party. The only reason people think these regulations are unnecessary now is because they've never experienced the types of fraud that these regulations were meant to address.
tedsuo 14y ago
I don't clearly understand this, but does it create a scenario akin to a "pre-ipo ipo" where start-ups can get funding from the general public?
- bps4484 14y ago
  No, from what I understand there are no changes to the rules about investors needing to be accredited (http://www.sec.gov/answers/accred.htm http://www.sec.gov/answers/accred.htm) which prevents the general public from investing. This would just allow startups to publicly state "I want investment" instead of saying "I have this awesome startup [wink wink]" and waiting for an investor to say "would you like investment?".
  - pash 14y ago
    That's wrong. The crowdfunding exemption of the JOBS Act is precisely an exemption to the rules that restrict investment in start-ups (really in any company not registered with the SEC) to accredited investors. There will still be restrictions—for example, only companies raising $1MM or less qualify, and nobody can invest more than a certain fraction of their annual income. See Title III, Sec. 302 of the act [0] for details. 0. http://www.gpo.gov/fdsys/pkg/BILLS-112hr3606enr/pdf/BILLS-112hr3606enr.pdf http://www.gpo.gov/fdsys/pkg/BILLS-112hr3606enr/pdf/BILLS-11... [PDF]
    - bps4484 14y ago
      good to know, thanks for the correction.
    - rprasad 14y ago
      Also see http://www.sec.gov/divisions/marketreg/tmjobsact-crowdfundingintermediariesfaq.htm http://www.sec.gov/divisions/marketreg/tmjobsact-crowdfundin... for an FAQ explaining the crowdfunding provisions of the law. But also note that crowdfunding is not yet legal. There were certain enabling regulations that needed to be passed to make it possible for crowdfunding platforms to operate which have not yet been issued. See, e.g., http://venturebeat.com/2012/08/21/congressman-secs-foot-dragging-is-killing-crowdfunding-promise/ http://venturebeat.com/2012/08/21/congressman-secs-foot-drag... (posted today!).
nateberkopec 14y ago
"The rules will also undermine a key advantage of Silicon Valley venture capitalists and “super angel” investors: Dealflow. Since startups haven’t previously been able to broadcast that they are raising money, they must approach potential investors directly, and they tend to reach out only to the biggest names." Ha ha, good joke - I mean, journalism.
deleted 14y ago
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47 points by lnguyen 14y ago

skylan_q 14y ago

Good thing we have the SEC to protect us from soliciting the need for investment in a startup! ....?

lhnn 14y ago
My thoughts exactly. Why can't someone just ask others for money? What is so wrong with "broadcasting" a solicitation for money?
- dclusin 14y ago
  The threat of potential evil-doers operating a boiler room type operation primarily. The basic problem with regulation of the form "this type of solicitation is ok, but not this" is that the government tends to be behind the curve. Logically this makes sense; the government can only ban certain types of abuse after they have been deemed as such and after they have already happened. If your goal is to protect the 401k of a soccer mom who isn't good with the googles the easiest way to do that is just ban private placement solicitations entirely.
- ahi 14y ago
  This is one of those situations where the regulations were effective so we don't remember why they were put in place. Basically every other grandma was having her purse emptied by a good looking scam artist.
  - jaekwon 14y ago
    We already have plenty of that. We can penalize the scam artists. That's not excuse for limiting grassroots dealflow.
    - rprasad 14y ago
      We can go after the scam artists today because of the same regulations that disallow this party. The only reason people think these regulations are unnecessary now is because they've never experienced the types of fraud that these regulations were meant to address.

tedsuo 14y ago

I don't clearly understand this, but does it create a scenario akin to a "pre-ipo ipo" where start-ups can get funding from the general public?

bps4484 14y ago
No, from what I understand there are no changes to the rules about investors needing to be accredited (http://www.sec.gov/answers/accred.htm http://www.sec.gov/answers/accred.htm) which prevents the general public from investing. This would just allow startups to publicly state "I want investment" instead of saying "I have this awesome startup [wink wink]" and waiting for an investor to say "would you like investment?".
- pash 14y ago
  That's wrong. The crowdfunding exemption of the JOBS Act is precisely an exemption to the rules that restrict investment in start-ups (really in any company not registered with the SEC) to accredited investors. There will still be restrictions—for example, only companies raising $1MM or less qualify, and nobody can invest more than a certain fraction of their annual income. See Title III, Sec. 302 of the act [0] for details. 0. http://www.gpo.gov/fdsys/pkg/BILLS-112hr3606enr/pdf/BILLS-112hr3606enr.pdf http://www.gpo.gov/fdsys/pkg/BILLS-112hr3606enr/pdf/BILLS-11... [PDF]
  - bps4484 14y ago
    good to know, thanks for the correction.
  - rprasad 14y ago
    Also see http://www.sec.gov/divisions/marketreg/tmjobsact-crowdfundingintermediariesfaq.htm http://www.sec.gov/divisions/marketreg/tmjobsact-crowdfundin... for an FAQ explaining the crowdfunding provisions of the law. But also note that crowdfunding is not yet legal. There were certain enabling regulations that needed to be passed to make it possible for crowdfunding platforms to operate which have not yet been issued. See, e.g., http://venturebeat.com/2012/08/21/congressman-secs-foot-dragging-is-killing-crowdfunding-promise/ http://venturebeat.com/2012/08/21/congressman-secs-foot-drag... (posted today!).

nateberkopec 14y ago

"The rules will also undermine a key advantage of Silicon Valley venture capitalists and “super angel” investors: Dealflow. Since startups haven’t previously been able to broadcast that they are raising money, they must approach potential investors directly, and they tend to reach out only to the biggest names." Ha ha, good joke - I mean, journalism.

deleted 14y ago

[deleted]