AngelList won't be crowdfunding portal, as proposed by SEC
- Cromwell Schubarth
- Senior Technology Reporter- Silicon Valley Business Journal
- Email | Twitter | Google+
AngelList isn't interested in
becoming a crowdfunding portal, as
defined by U.S. regulators this week.
Kevin Laws, chief operating
officer of the country's largest network of startup founders and funders, told
me that he has serious reservations about what the Securities and Exchange
Commission has proposed.
The SEC issued proposed
guidelines on Wednesday that would let small businesses and startups raise
up to $1 million per year from investors who have been barred from buying stock
in such risky ventures until now. The guidelines call for privately owned
crowdfunding portals and certified broker dealers to process the funding
deals.
But Laws told me that there are several proposed SEC requirements for portals
that run counter to how AngelList operates.The most important is that portal operators are banned from taking equity of any form. It can only accept cash for facilitating deals.
"While I understand the intent of transparency of incentives for the portal, we think that has the side effect of rewarding deal volume over deal quality," Laws said.
The SEC also wants to limit a portal's ability to keep deals off of its network. Portal operators can reject deals on objective criteria, such as only doing deals in a specific geography or industry. They can also reject them if they suspect fraud. But they are barred from refusing deals that don't meet their subjective standards.
"You can't give advice or make recommendations, either," Laws said. "All of that runs counter to how we run AngelList. You just become a clearinghouse for crowdfunding."
If a deal turns out to be fraudulent, the crowdfunding portal would be liable under the SEC proposals, too.
Cromwell Schubarth is the Senior Technology Reporter at the Business Journal. His phone number is 408.299.1823.
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