Regulatory Burdens Of JOBS Act Drive Dealstruck Direction

dealstruckDealstruck is a debt-based crowdfunding platform based in La Jolla, California. It was launched by co-founders Ethan Senturia and Russel McLoughlin.

In a recent interview with Xconomy, Senturia describes the process of launching the company. The throught process he alluded to should raise a red flag for equity crowdfunding’s stakeholders, and it outlines the biggest concern facing the forms of crowdfunding that stand to be legalized by the implementation of the JOBS Act. From the article…

“We looked at Title III pretty closely,” says Senturia. “There’s a lot of friction and costs associated with it. You have to get your financials audited by a [certified public accountant], and you have to make certain disclosures to the SEC. We said, ‘Let’s try to create a framework that operates under existing rules and regulations, and that doesn’t come with the regulatory burdens of the JOBS Act.’”

Senturia is alluding to concerns about the regulatory framework about to be put forth by the SEC in regards to Title III of the JOBS Act, the section of the act that legalized crowdfunding for equity to non-accredited investors. The elephant in the room may be the costs associated with raising capital under the JOBS Act. I’ve heard numbers as high as 20 or 25 percent. Hard to imagine small businesses getting excited about parting with equity while only keeping 75 cents on the dollar.

Of course, all of this is speculation at the moment. The country will have to wait to see proposed rules from the SEC, which are already long overdue.

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