Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more ➡
Standard view
Full view
of .
Add note
Save to My Library
Sync to mobile
Look up keyword
Like this
0 of .
Results for:
No results containing your search query
P. 1
Woodie Neiss OGR Testimony on Capital Formation FINAL

Woodie Neiss OGR Testimony on Capital Formation FINAL

Ratings: (0)|Views: 561|Likes:
Published by Woodie Neiss

More info:

Published by: Woodie Neiss on May 18, 2011
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, DOC, TXT or read online from Scribd
See More
See less





“Reversing the Decline in Capital Formation”Testimony of Sherwood Neiss
Sherwood Speaks, LLCMiami Beach, Florida
May 10, 2011Before theCommittee on Oversight and Government ReformUnited States House of Representatives
The Honorable Darrell Issa, ChairmanThe Honorable Elijah Cummings, Ranking Member
Chairman Issa, Ranking Member Cummings and members of theCommittee, thank you for holding this hearing today and allowing meto share an entrepreneur’s perspective on improving capital formationthrough regulatory modernization. My intention is to explain whyoutdated securities laws -- put in place before the Internet age -- needto be modernized and overhauled, and how these reforms can boostour struggling economy. By revamping the Security and ExchangeCommission’s (SEC’s) position on solicitation and accreditation, we canopen the doors to small business growth and prosperity. Allowing foran exemption for Crowd Fund Investing, which includes protections forinvestors, will spur innovation among your constituents, create jobs,increase consumer spending, and reinvigorate our economy.My Name is Sherwood Neiss and I am an Entrepreneur. This is mysecond time testifying before the U.S. Congress. The last time I washere, in 2006, I testified on the unintended consequences of Sarbanes-Oxley on small businesses. I pointed out that the regulatory burdensunder Section 404 were the reasons why the audit at our ‘3-timeINC500, Entrepreneur of the Year award winning’ company tripled intime and cost, ate up 14% of our net income and made us decide thatwe were better off selling the company than raising capital in thepublic markets to grow, hire and expand. I am delighted that my andothers’ testimony helped convince Congress to pass the small businessexemption from 404(b) audit requirements, and I am hopeful that mytestimony today will convince you to consider other adjustments toexisting rules that hinder capital formation and access.I am going explain to you what Crowd Fund Investing is and how it willhelp our nation’s entrepreneurs, how the principals of crowd fundinghave been working for hundreds of years and over the past 5 yearshelped fund over $300M in ideas. Why based on our nation’s currenteconomic challenges we need to make it possible for the averageAmerican to crowd fund startups and small businesses. Why theburden of disclosure for registration of startups and small businessesunduly prohibits seed and early stage capital formation, and how wecan address investor protection thru education.I and my co-founders at startupexemption.com, Jason Best andZachary Cassady-Dorion, have crafted the following Crowd FundInvesting proposal in collaboration with Karen Kerrigan of the SmallBusiness & Entrepreneurship Council.2
Crowd Fund Investing (CFI) is not permitted by securities laws todaybut it stands to be a powerful method of financing, where groups of people will come together to invest in startups and provide valuableknowledge and experience to help an entrepreneur succeed. It willprovide a way for unaccredited investors to pool their individual smallcontributions (likely between $50 – $500 each), and invest incompanies and entrepreneurs they believe in. The funding rounds willoccur on Internet platforms, which provide an added level of transparency and communication between the investors and theentrepreneurs. And “Micro-Angel Investors” will support people andbusinesses they believe in and in turn, help to grow the economy.In order to make this a reality, we support creating common sensemodifications to existing regulations to enable small businesses toraise capital. These reforms are modest, follow the spirit of theSecurities Act of 1933 and the Exchange Act of 1934 and include:1.Strong anti-fraud provisions2.Limited risk and exposure for unaccredited investors3.Transparency4.Standards-based reporting and a5.Limit to the amount of seed capital a company can raise.
We propose the creation of a “funding window of up to $1M” forentrepreneurs and small businesses. (“Small Business” will bedefined as one with average annual gross revenue of less than$5M during the last three years or since incorporation if thebusiness has existed for less than three years. This definition willbe consistent with definitions utilized by the Small BusinessAdministration).
Where any individual (including unaccredited investors) canchoose to invest; however investments from unaccreditedinvestors would be limited to $10,000. (The $10,000 limit is inline with other established financial disclosure limits like those onbanking transfer reporting requirements. That said, based onwhat is happening on Crowd Funding websites today (to befurther explained below), we anticipate that the majority of 3

You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->