Angel Insights Blog

The world of equity fundraising has really changed since September 23, when the SEC rules lifting the ban on general solicitation became effective. We’ve seen entrepreneurs use new ways to promote their investment opportunities, but we’ve also seen media coverage with many questions and misinformation about everything from how to verify that investors are accredited investors to what really makes a deal “generally solicited”.  Questions and comments still abound about the proposed rules on Regulation D, Form D and Rule 156.

Startups, investors, and the startup support community are asking lots of questions in the media and directly to ACA and other organizations. So I want to let you know about a couple of resources that can help you navigate these waters:

• Webinar on October 3 at 4p Eastern – The New SEC Rules and What the Startup Community Needs to Know. This program, a partnership of the Angel Capital Association and Global Accelerator Network, is for startups and the innovation and support community to learn about the new and proposed SEC Rules on General Solicitation. These rules will really change how entrepreneurs raise equity capital – particularly if they participate in demo days and economic development venture forums (many of which will be considered general solicitation based on regulatory language and discussions to date). Hear the information from angel investors, legal counsel and get a chance to ask questions. Registration and information is available here.

We’ll record and archive this program, but it is always great to be part of the live event and ask your own questions.

• SEC Extends Comment Period on Proposed Rules - The Commission announced an at least 30 day extension of the time people can comment on the proposed rules last week (not sure how long because of the current government shutdown).  These are the rules that require that issuers file an advanced Form D 15 days before they generally solicit, as well as submit all of their advertising materials by the day of use, and expanded information filings after raising capital.  As if this isn't enough, the rule comes with penalties that could lead startups to losing the ability to raise capital for a year. ACA would like to think we had something to do with this extension, which was recommended by the SEC Advisory Committee on Small and Emerging Companies after a September 17 presentation by ACA Chair David Verrill and me.

ACA urges all interested parties to take advantage of this additional time to tell the SEC what you think of these proposed rules.  You can link here to provide your comments and review those of others.  Your comments might have a major impact on the SEC's decisions.

• ACA Member Comments on the Rules - It has been great to see so many ACA members providing their comments to the SEC. We also see that some regions are developing joint letters from many investors. ACA is also working on a letter with other national associations to be submitted in a few weeks.

• Angel Group Policies on SEC Rules - ACA put out guidance in September on what membership in an "Established Angel Group" means for issuers verifying accredited investor status in generally solicited deals.  We continue to encourage angel groups to incorporate this application of the SEC's "Principles Based Methodology" as they work with entrepreneurs.  You may want to check out the policy statement from the North Texas Angel Network, which has developed a clear and concise policy statement for entrepreneurs on its preferences for "quiet" 506(b) deals, but also what issuers who use "loud" generally solicited 506(c) rules need to do to work with NTAN investors.

• Interesting Letters to the SEC - The comment pile on the new and proposed rules is really high, with so many good points.  We particularly liked these recent letters from:

• Sen. Jerry Moran (R-KS) and Sen. Mark Warner (D-VA)
• Milken Institute Center for Financial Markets

As you think about your part of the entrepreneurial funding process and have questions, we most of all recommend that you consult experienced legal counsel.  ACA's resource page on the SEC rules is there to help too.  It is clear that the world of general solicitation will be unclear for some time!