Kickercon PresentationDeck Final

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Title III remains a

high priority, we

expect to publish

the rules this year.

The Fate of Title III Lies In Your Hands



Investment Crowdfunding:The Most Significant Innovation forEntrepreneurship in a Generation

Ron MillerCEO StartEngine Crowdfunding, Inc.

Kickercon – Crowdfunding ConferenceAugust 28, 2014

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A Brief History of Title III

2009-2012: Lobbying congress for new law to allow investmentcrowdfunding

April 5, 2012: The JOBS Act was passed with the greatest bipartisan

support of any bill in the past 3 years and was signed into law by

President Obama

September 23, 2012: Title II went into effect, allowing public solicitation of

securities to accredited investors

October 23, 2013: Proposed rules for Title III were released by the SEC

February 3, 2014: Comment period closed for Title III proposed rules

2



Size of Potential Investments inCrowdfunding Market

In 2013 Kickstarter:

Over $500MM Raised

19,000 projects funded

3.2 million contributors

Consumer investment crowdfunding to grow to $93 billion by 2025

Potential growth to $300 billion including institutional investors

There are 75 million Millenials in the US, making them the largestdemographic

3



Title III Crowdfunding Is A Radically DifferentBusiness Than Title II Crowdfunding

Title II: Accredited Investors

Over $200,000 yearly income or over $1.0MM net worth excludinghouse

Estimated potential investors: 8-10 million

Title III: Non-Accredited

Different market, different purpose

Market: Millennials

Purpose: develop dozens, hundreds, or thousands of brandambassadors

Estimated potential investors: 200MM+

4



Inside the SEC: Key Players and PositionsCommissioner Lead Staff Person

Mary Jo White Jessica Dickerson

Kara Stein Allison Lee

Ben Brown John Cook

Michael Piwowar Mark Uyeda

N/A – Division of Corporations & Finance Sebastion Abero

Timing of Title III Final Rules

•

Currently, Title III is on the “Unified Agenda” for October 2014 – it’s not set instone• The Chair has exclusive authority regarding scheduling of the commissioners

vote to finalize the rules• Timing is a “closely guarded secret” and it’s not appropriate for the staff to

get ahead of the boss• Agenda is very crowded (Dodd-Frank priorities) – not clear “where in the

building” support is for putting Title III on the agenda • Doesn’t seem to be on the top of the priority list – we got a lot of friction that

current rules are “not workable” • Staff work on incorporating comments is basically complete – “We are ready

to go”

5



Inside the SECWorking Committee

• Members of Division of Corporations and Finance

• Attorneys with Trading and Markets

• Division of Economics and Risk Analysis - (This committee is activelypreparing the final document now - it is well underway)

Workability of Title III

• We have not heard from many portals or issuers saying that Title III asproposed is workable

• We are highly interested to learn that based on industry experience, costs toissuers are much lower than estimated in proposed rules

• Challenges we see/heard of:

•

Review/Audit requirements are too costly• Liability too high on portals for material misstatements and omissions

• Glad to hear of our support and view that Title III is workable and highlyencouraged submission of formal comments

6



Inside FINRA: Key Players and PositionsContacts: Adam Arkel and Patricia Albrecht

Position: Our rules track very closely to the SEC rules

Key variable, SEC has to finalize their rules first but our intent is to send ourregulatory notice and proposal out the same day

Aware that commission has publicly stated it’s a high priority- it’s a publicposition and they are aware that people are at work

Timeframe is hard to predict but we are very attentive to substance andtiming and our goal is to synchronize finalization with the SEC as expeditiouslyas possible

Normally there is a 45 day application process to become a registered portalbut they may have an accelerated dated

Steps:

SEC finalizes rules

FINRA files its proposal with the SEC SEC publishes in Federal Registry

21 day public comment

90 days for SEC to finalize

7



Where is Congress on Title III Crowdfunding?

24 Members of the House sent a letter to the SEC Chair urging finalization ofTitle III Rules on August 8, 2014

Committee on Innovation and Technology (bi-partisan) and the NewDemocrats (Led by Rep. Polis)

Main points of the letter:

Delay is stifling innovation

Delay is costing the US jobs

Delay is causing confusion due to conflicting intrastate crowdfundingrules

Rep. McHenry’s crowdfunding bill 2.0 which he intended to “fix” some of theproblems with Title III appears to be delayed until after the election this fall. Itis predicted that there will be relatively swift legislative action to approveand expand crowdunding laws if the Republicans take the Senate this fall.

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Next Steps for Congressional Action

1. Get supporters to write and call their legislators and pushthem to write a letter to the SEC Chair urging finalization ofTitle III rules.

2. Work back through Polis and others who signed the Augustletter to find out who on the Senate side would be willing towrite a similar letter to Chair White.

9



Need For Uniform Federal Rules and US

Leadership on Crowdfunding Inconsistent state level crowdfunding laws create market chaos

and inefficiency

State law differentiation is inconsistent with the nature of the

Internet, the needs of investors and the needs of issuers looking toraise capital

Regulatory efficiency and decreased risk to investors will beachieved with a consistent federal structure

Given the pace of state level adoption of crowdfunding laws, nowis the best time for the SEC to publish final rules

10



Major Arguments Against Title III ProposedRules & Realistic Responses

Financial reviews and audits are too burdensome

Reality: Audit industry will continue to evolve to meet the requirements of Title III

Ex. CrowdfundCPA

$1MM yearly cap is too low

Reality: Most companies seeking funding will be raising below $500k

Follow-on angel or VC investors will be more inclined to invest in companies with

proven market traction

Fraud is inherent with non-accredited investors

Reality: UK, Australia and the Netherlands have equity-based crowdfundingmarkets, no accounts of fraud have been reported

Screening processes set forth in the proposed rules – due diligence requirementsand background check companies can help weed out fraud

Disclosure and reporting requirements are unreasonable

Reality: Companies are already developing products to help issuers comply withpost-funding compliance requirements; e.g. www.capschedule.com andwww.tempcfo.com help with managing and engaging a large pool of investorsand support Title III companies with highly efficient accounting services

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http://www.capschedule.com/

http://www.tempcfo.com/

http://www.tempcfo.com/

http://www.capschedule.com/



Projected Timeline for Title IIIImplementation

October 2014: SEC Votes to approve the final Title III Rules

1 week after finalized rules: Publish in Federal Register

60 days in (estimated December 2014): Rules to become effective

after publication

60 to 120 days from SEC vote to finalize: FINRA to complete itsrulemaking process

Estimated go live date: January or February 2015

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A Call To Action

1. Submit your letter to the SEC via the web link,http://www.sec.gov/cgi-bin/ruling-comments (Go to 2013,Crowdfunding, file number S7-09-13) or email address,[email protected] and explain why Title III will jumpstartyour business.

2. Write to your congressmen and senators asking for thefinalized rules to be published. Email [email protected] for a sample letter and talking points.

3. Join our effort, stay involved and like our Facebook page,

facebook.com/voteoncrowdfunding, follow us on Twitter@VoteOnCF and add #VoteOnCrowdfunding on all ofyoue Title III or crowdfunding posts on social media.

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http://www.sec.gov/cgi-bin/ruling-comments

mailto:[email protected]












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