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 for
Entrepreneurship in a Generation

Ron Miller
CEO StartEngine Crowdfunding, Inc.
Kickercon Crowdfunding Conference
August 28, 2014
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A Brief History of Title III
2009-2012: Lobbying congress for new law to allow investment
crowdfunding
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
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Size of Potential Investments in
Crowdfunding 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 largest
demographic
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Title III Crowdfunding Is A Radically Different
Business Than Title II Crowdfunding
Title II: Accredited Investors
Over $200,000 yearly income or over $1.0MM net worth excluding
house
Estimated potential investors: 8-10 million
Title III: Non-Accredited
Different market, different purpose
Market: Millennials
Purpose: develop dozens, hundreds, or thousands of brand
ambassadors
Estimated potential investors: 200MM+
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Inside the SEC: Key Players and Positions
Commissioner 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 its not set in
stone
The Chair has exclusive authority regarding scheduling of the commissioners
vote to finalize the rules
Timing is a closely guarded secret and its 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
Doesnt 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

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Inside the SEC
Working Committee
Members of Division of Corporations and Finance
Attorneys with Trading and Markets
Division of Economics and Risk Analysis - (This committee is actively
preparing 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 as
proposed is workable
We are highly interested to learn that based on industry experience, costs to
issuers 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 highly
encouraged submission of formal comments

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Inside FINRA: Key Players and Positions
Contacts: 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 our
regulatory notice and proposal out the same day
Aware that commission has publicly stated its a high priority- its a public
position and they are aware that people are at work
Timeframe is hard to predict but we are very attentive to substance and
timing and our goal is to synchronize finalization with the SEC as expeditiously
as possible
Normally there is a 45 day application process to become a registered portal
but 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
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Where is Congress on Title III Crowdfunding?
24 Members of the House sent a letter to the SEC Chair urging finalization of
Title III Rules on August 8, 2014
Committee on Innovation and Technology (bi-partisan) and the New
Democrats (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 crowdfunding
rules
Rep. McHenrys crowdfunding bill 2.0 which he intended to fix some of the
problems with Title III appears to be delayed until after the election this fall. It
is predicted that there will be relatively swift legislative action to approve
and 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 push
them to write a letter to the SEC Chair urging finalization of
Title III rules.
2. Work back through Polis and others who signed the August
letter to find out who on the Senate side would be willing to
write 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 to
raise capital
Regulatory efficiency and decreased risk to investors will be
achieved with a consistent federal structure
Given the pace of state level adoption of crowdfunding laws, now
is the best time for the SEC to publish final rules
10
Major Arguments Against Title III Proposed
Rules & 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 crowdfunding
markets, no accounts of fraud have been reported
Screening processes set forth in the proposed rules due diligence requirements
and background check companies can help weed out fraud
Disclosure and reporting requirements are unreasonable
Reality: Companies are already developing products to help issuers comply with
post-funding compliance requirements; e.g. www.capschedule.com and
www.tempcfo.com help with managing and engaging a large pool of investors
and support Title III companies with highly efficient accounting services


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Projected Timeline for Title III
Implementation
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 its
rulemaking 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,rule-
comments@sec.gov and explain why Title III will jumpstart
your business.
2. Write to your congressmen and senators asking for the
finalized rules to be published. Email Ron@startengine.com
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 of
youe Title III or crowdfunding posts on social media.
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