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Dan Rosen Letter To SEC

The document is a letter commenting on proposed SEC regulations regarding Regulation D and Form D filings. It argues that the proposed rules would make early stage startup financing much more difficult and potentially cripple the angel investment asset class. If imposed, the restrictions and limitations risk drying up the capital needed by startups, which have driven job creation and economic growth in the US. The letter urges the SEC to resist overregulating angel investing and instead make the financing process simpler to support early stage companies.

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John Cook
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1K views2 pages

Dan Rosen Letter To SEC

The document is a letter commenting on proposed SEC regulations regarding Regulation D and Form D filings. It argues that the proposed rules would make early stage startup financing much more difficult and potentially cripple the angel investment asset class. If imposed, the restrictions and limitations risk drying up the capital needed by startups, which have driven job creation and economic growth in the US. The letter urges the SEC to resist overregulating angel investing and instead make the financing process simpler to support early stage companies.

Uploaded by

John Cook
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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November4,2013 ElizabethMurphy,Secretary U.S.SecuritiesandExchangeCommission 100FStreetNE Washington,DC20549 Re:FileNo.S70613,AmendmentstoRegulationD,FormDandRule156 DearMs.Murphy: ThankyoufortheopportunitytoprovidecommentstotheCommissiononyourproposedamendments toRegulationDandFormD.Manyothershaveprovidedyoudetailedcommentsonwhytheproposed rulesareneithersuitabletocurrentmarketconditionsnoralignedwiththegoalsoftheJOBSActthat theyweresupposedtosupport.Iamnotasecuritiesattorney,andrecognizethatmanyofthelegal argumentsintheseothercommentswillhavemoreswaywiththecommission,soratherthanpileonto thosealreadyexhaustiveandaccuratecomments,Iwouldliketotakeamorepersonalapproach. Ihavebeenanaccreditedinvestorwhohasbeenanactiveangelinvestorforover20years.

s.Assuch,Ive madewellover50investmentsinstartupsandhavechairedthelargestangelgroupinthePacific Northwestthathasmadeover200suchinvestments. Angelinvestinghasmovedfromacuriositytoanassetclass.AngelInvestorsareindividuals,scattered acrossthecountryineverymajorcityandtownintheUS,whoinvesttheirownmoney(unlikebanksor VCs).And,tomaketheircompaniessucceed,theymustalsoinvesttheirtime,knowledge,experience, andnetworks.Wedothiswillingly,givingbacktothecommunitiesthathelpusbecomesuccessful, knowingthatontheaverageover50%ofthesestartupswillfailandnotreturntheinvestmentcapital wehavecontributed.Occasionally,oneorourcompaniessucceedswildly,creatingmanyjobsand sometimesawholenewindustry. HereinthePacificNorthwest,asinmanyotherareasofthecountry,theamountofventurecapital financinghasdiminished.AngelInvestorshaveoftensteppedintothebreach,investingbothmoreand forlongerthaninthepast.Theseprivateinvestmentsarenotliquid;weknowthatgoingin.Weknow thatwetypicallyhavetoholdourinvestmentsforover7yearsfromtimeoffirstinvestmentandoften over10years.Theseareriskyinvestments. Sinceweoperateonourown,wedonothavetheinfrastructureofalargefirm.Typically,ourindividual investmentsaresmallintherangeof$25,000to$100,000andthecompaniesareattheirvery earlieststages(whenwecanaddthemostvaluetohelpthemsucceed),raisingonlyafewhundred thousanddollarstogetgoing.Moreoftenthannot,weinvestinasmalltechnologyteamwithagood idea,whohavenotyethiredanyrealbusinesspeople,havenoinfrastructureandareworkingoutofa temporaryoffice.Itisourhopethatthecapitalandtimewecontribute(wearenotpaid;justequity) willhelpthesecompaniesbecomethenextMicrosoft,Google,orFacebook,creatingthousandsofhigh payingjobs. Inordertogetthesecompaniesgoing,simplicityisrequiredinfinancinganddealstructure.Having travelledandworkedinmanycountries,theUSsystemhasbeentheenvyoftheworld.SimpleRegD financingshavebeenthecornerstoneoftheentireassetclassandecosystem.Welearnofasmallteam,

helpthemgetupandrunning,doasimpleandquickfinancing,andthenhelpthemgrow.TheSEC deservesalotofcreditfortheirforesightinthisassetclassandtheFederalpreemptionthathasallowed ittogrowandcreatejobsandcompanies. However,yourlatestrulemakinghasputallofthatinjeopardy.Youhaveproposedasetofrulesthat wouldatbestmakethesefinancingsdifficultandatworstcompletelycrippledtheassetclass.Byasking theproverbial2guysinthegaragetotakeonthesameresponsibilitiesthatyouwouldrequireofan establishedcompanywithonstafflegaldepartmentsandmillionsinrevenueisthedefinitionof insanity.Requiringpotentialinvestorstoturnoverpersonalfinancialinformationtoacompanythathas norealabilitytokeepitsecureisridiculous.Butmostofall,itstrikesmethatyouaretryingtofixa problemthatdoesntexistangelinvestorsknoweachotherandtheriskstheyaretaking.Thereis littleornofraudinthisassetclass. Ifyoudoimposeahostofrestrictionsandlimitationsontheassetclassthatisworkingwellandisnot sufferingfromanyproblemotherthan,perhaps,needingevenmorecapital,youriskcausingthecapital todryupforthesefragilecompaniesthathavedriventheUSeconomy. ThisisexactlyoppositetheintentoftheJOBSAct.And,inmyhumbleopinion,contrarytoournational interest.Weneedmorecapitalgoingintoangeldeals,notless. Pleaseresistthetemptationtocrippleangelinvesting. Respectfully, DanielRosen,CEO DanRosen&Associates Kirkland,WA

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