Crowdfunding And JOBS Act News Roundup – October 1, 2013

This article talks about how someone “raised $250K in 53 minutes . . . But the server for my site crashed and was exceptionally slow for about 20 minutes … I have no doubt that, for a growth round … I could raise a couple million dollars.”

An article was published on “The 10 hottest U.S. startups on AngelList.”  It can only lead to a herd mentality and overvaluations if it continues.

FundersClub has what appears to be a well thought out blog on “6 Critical Questions that Investors Should Ask Funding Platforms.”

FundersClub also let it be known that it was not a fan of general solicitation:  “Our stance on general solicitation is no different, which is why we’re opting to defer participation in general solicitation until it is a clear win for investors and startups. The reality is that as of today, top VCs, top incubators and accelerators, and the leading law firms advising investors and startups currently regard public fundraising as a question mark. Many are actively advising against it, and for example, are cautioning investors against companies who’ve participated in public fundraising to protect the investors.”

On the other side of the coin, wefunder is encouraging startups to take advantage of the new rules.

AngelList announced the use of syndicates which garnered wide publicity.  One article noted “The feature will be the “nail in the coffin” for the bottom half of venture capitalists who don’t really provide a lot of extra value. These VCs will be pushed out of good deals by these gangs of angels carrying with them much more funding to back the best companies.”  Another article notes that volume funding by syndicate leads may rob start-ups of good board members.

The SEC reopened the comment period on the proposed amendments to Regulation D, Form D and Rule 156.

Form Ds indicating a general solicitation by checking the 506(c) box have begun to appear at the SEC.  See examples here and here, although many may be confused by the dates of first sale and the indication that the offering is complete.

For other information on Regulation D and general solicitation, see JOBS Act and Other Securities Law Essentials for Growing Companies.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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