Observations and Thoughts on the SEC’s Harmonization Concept Release

The securities regulatory regime in the United States is one based on the principle of disclosure, disclosure, and more disclosure; only those who can fend for themselves may invest without the benefits of statutorily prescribed disclosure. Therefore in the United States, there are only three ways to offer and sell securities from a federal perspective:

(1) through the registration of such securities through a disclosure heavy S-1 or equivalent form (what is generally referred to as an “IPO” or a public market offering),

(2) through an exemption to that registration by following various rules or safe-harbors (“private market transactions” such as Reg A/A+, Reg. D, Reg. S, and Reg. CF) or

(3) in violation of federal law.

The legitimate private markets utilizing these exemptions from registration have grown significantly in recent years and are now more than double the size of the public markets: in 2018, issuers raised roughly $2.9 trillion of capital through exempt offerings, compared to only $1.4 trillion through public offerings.

This has been a clear trend for many years and the Securities and Exchange Commission (SEC) has taken notice.

In June, the SEC released a 200+ page concept release (the Harmonization Concept Release) providing a comprehensive overview of private markets. Never before has the SEC made such an open and far-reaching request for thought leadership with respect to exempt/unregistered security offerings. Yet only 31 comment letters have been provided with the September 24th, 2019 deadline approaching. (In the interest of full disclosure, one of these letters was submitted by the Associating of Online Investing Platforms (the AOIP), an organization Republic is a founding member of).

Disclosure, Disclosure and More Disclosure

The SEC used the Harmonization Concept Release as a method to review all existing methods for selling, and many of the methods for re-selling, securities privately (i.e., not sold through an IPO or equivalent). Specifically, the SEC is seeking comments on ways to make it easier for issuers of securities (especially smaller issuers) to raise capital in the private markets.

As the operator of the Republic crowdfunding portal since Reg CF’s inception, Republic is acutely aware of certain rules promulgated by the SEC which have reduced regulation crowdfunding’s efficacy at achieving the goals of allowing startups and small businesses to accept investments from the “crowd and expanding opportunities for the crowd to participate in these opportunities.”.

A bit of background, changes to the securities laws over the years have made it significantly easier for companies to remain private longer and raise capital through the private markets, however, the various rules and exemptions companies can utilize the raise capital through these private markets are misaligned and can cause a great deal of confusion.

Reg D 506c, Reg A+ and Reg CF

Traditionally, crowdfunding was a method of capital formation either done without offering a security (see Kickstarter), which made participants have no stake in the offering company or done solely intrastate (for example, NextSeed’s Texas intra-state portal). The National Securities Markets Improvement Act of 1996 made it more attractive for companies to issue private securities under Rule 506 by preempting state securities registration requirements and the the Jumpstart Our Business Startups Act of 2012 (JOBS Act) created additional new exempt offerings that preempted state securities laws that allows issuers to use general solicitation to raise privately as long as they only accept accredited investors (Rule 506(c)) and created a new exempt offering for “crowdfunding” offerings (Reg. CF) as well as expanded Reg A+.

All three of these general solicitation registration exemptions are forms of crowdfunding. The following are three observations of issues this current regime has left in place that particularly stymie regulation crowdfunding (Reg. CF) as it related to Reg A+ and Rule 506(c).

Offering Limits 

Reg. CF suffers from an arbitrary offering cap.

Specifically the $1,070,000 cap on the amount an issuer may raise under this exemption in any 12-month period severely limits regulation crowdfunding’s value by

(i) denying issuers the ability to raise sufficient capital under one offering exemption,

(ii) blocking interested participants from investing due an oversubscribed offering’s limitations and

(iii) dissuading companies from utilizing the exemption due to point (i).

In the past three years the average seed round for a startup has ballooned to over $2,500,000, while the Republic funding portal (and other portals) have hosted numerous offerings that have hit the statutory funding cap with excess demand from other retail investors, many of these issuers had to spend additional time and expense soliciting investments through 506(c) or Regulation S (after or in conjunction with their regulation crowdfunding offering) to fill their necessary funding goals, as regulation crowdfunding was an incomplete offering method.

[easy-tweet tweet=”many issuers choose not to rely on the #crowdfunding exemption because the limit is too low … some issuers choose to raise funds needed in excess of the offering limit through a separate offering #RegCF” template=”light”]

As the SEC found in the Regulation Crowdfunding’s three-year lookback report:

“ . . .many issuers choose not to rely on the crowdfunding exemption because the limit is too low.  . . some issuers choose to raise funds needed in excess of the offering limit through a separate offering, which they consider to be a less optimal experience for investors and a more costly and potentially riskier approach for issuers. . . ”

Further, the SEC found that the majority of issuers who utilized Regulation Crowdfunding undertook a Regulation D exempt offering before, during and after their offerings, adding cost and additional regulatory burdens for the issuer.

The SEC found in the lookback report:

“ . . .many issuers choose not to rely on the crowdfunding exemption because the limit is too low.  . . some issuers choose to raise funds needed in excess of the offering limit through a separate offering, which they consider to be a less optimal experience for investors and a more costly and potentially riskier approach for issuers. . . ”

These follow on and concurrent offerings were not “open” to the public, nor did they benefit from the same levels of disclosure as a Regulation Crowdfunding offering. Additionally, therefore the SEC should consider, and commenters should advocate for, raising the offering cap.

[easy-tweet tweet=”the SEC should consider, and commenters should advocate for, raising the offering cap #RegCF” template=”light”]

Investment Limits 

Under Rule 506 (both (b) and (c)), participants can invest an unlimited amount, just like they can in the public markets. If participants are accredited, there are no requirements for any disclosure to be made to them.

However, under Reg CF, these same investors are severely limited in how much these accredited investors can invest into issuers who are making robust disclosure filings under Reg CF.

The SEC should consider removing these limits as there is no practical purpose to them. Accredited investors who wish to invest in an issuer that are limited by Reg CF’s investment limits will do so under Rule 506(c), only adding cost and complexity to the capital formation process.

The SEC should also look to the language of 4(a)(6) of the Securities Act to determine whether the rulemaking process incorrectly broadened the investment limits rules as authorized by Congress.

Testing the Waters

The SEC asked:

“In light of the fact that some exemptions impose limited or no restrictions at the time of the offer, should we revise our exemptions across the board to focus consistently on investor protections at the time of sale rather than at the time of offer?  If our exemptions focused on investor protections at the time of sale rather than at the time of offer, should offers be deregulated altogether? .  . .”

While traditionally, the offer and sale are considered to happen in tandem, they can be properly divided into distinct activities.

For example, under Reg A+ issuers may test the waters for interest in an offering—without restriction as to the types of investors solicited—before filing an offering statement (Form 1-A). Presumably, the SEC believed that issuers could be trusted to not complete any sale before the offering was qualified, the same situation can be used in extended to Regulation Crowdfunding to help early-stage companies determine whether to extend the expenses of preparing for a compliant, public, securities offering.

The SEC found, in its three-year lookback review of Reg CF, that the average offering costs $22,479 to conduct before paying commissions to portals and escrow agents, while average human capital expended in preparing and conducting the offering exceeded 241 hours.

[easy-tweet tweet=”The SEC found that the average offering costs $22,479 to conduct before paying commissions while the average human capital expended in preparing & conducting the offering exceeded 241 hours #RegCF” template=”light”]

Given the high cost of capital, both in dollars and hours, an issuer who cannot satisfy their capital needs through such offering, may find doing so unattractive when they could spend the same money traveling to meet friends, family, and institutional investors to secure greater capital at a reduced opportunity cost.

As Regulation Crowdfunding offerings cannot be conducted anywhere except for a properly registered and regulating funding portal (or broker-dealer acting as a funding portal) investors will face no risk as the sale of the securities cannot take place until a valid Form C is filed with the SEC, a funding portal publishes the offering, and the offering remains open for 21 days while meeting its target offering amount.

These onerous requirements will prevent any improper sale of securities until all of the requirements are met, with the oversight of a licensed intermediary, something not required to be used during a Reg A+.

These are but a few of the items commenters can address when writing to the commission. There are many more suggestions that could improve Reg. S, Rule 701 and other offering types and we hope other industry participants focusing on these areas address them appropriately.

[easy-tweet tweet=”Maxwell Rich Deputy GC of @joinRepublic explains the shortcomings of #RegCF #crowdfunding” template=”light”]

Comments on the SEC Concept Release Regarding Regulatory Harmonization are available here. You may also submit your own comments here.


Maxwell R. Rich is the Deputy General Counsel of Republic, a full-stack investment platform operating a regulation crowdfunding portal (where he holds the Chief Compliance Officer role), a broker-dealer, an exempt investment adviser and advisory & technology services businesses. Republic was founded in 2016 to democratize investing, focusing on underserved founders, emerging technologies such as blockchain and legal innovation.


¹ Final Rules, Crowdfunding, Release Nos. 33-9974; 34-76324; File No. S7-09-13 at 6. See congressional statements regarding crowdfunding bills that were precursors to the JOBS Act: 157 CONG. REC. S8458-02 (daily ed. Dec. 8, 2011) (statement of Sen. Jeff Merkley) (“Low-dollar investments from ordinary Americans may help fill the void, providing a new avenue of funding to the small businesses that are the engine of job creation. The CROWDFUND Act would provide startup companies and other small businesses with a new way to raise capital from ordinary investors in a more transparent and regulated marketplace.”); 157 CONG. REC. H7295-01 (daily ed. Nov. 3, 2011) (statement of Rep. Patrick McHenry).
² The Entrepreneurs Report – Private Company Financing Trends From the WSGR Database : Financing Tends for Q1 2019, https://www.wsgr.com/publications/PDFSearch/entreport/Q12019/private-company-financing-trends.htm, last accessed August 27, 2019. The authors note that this report may suffer from a sample size that is too small to properly capture all relevant financing date for the relevant period.
³ Report to the Commission, Regulation Crowdfunding, June 18, 2019, at 37-38.
4 Report to the Commission, Regulation Crowdfunding, June 18, 2019, at 36.
5 Report to the Commission, Regulation Crowdfunding, June 18, 2019, at 37-38.
6 Report to the Commission, Regulation Crowdfunding, June 18, 2019, at 25.

Concept Release: The Securities and Exchange Commission Asks for Feedback on Ways to Harmonize Securities Exemptions

The Securities and Exchange Commission is seeking comments on the current securities exemption structure. In a release yesterday, the SEC asked the public to provide feedback on “ways to simplify, harmonize, and improve the exempt offering framework to expand investment opportunities while maintaining appropriate investor protections and to promote capital formation.”

In the US, there is an alphabet soup of securities exemptions, or methods for companies to raise capital, while remaining compliant under the law. The rules have been created over decades with tweaks and additions that have added to what can only be described as a mish-mash of convoluted rules.

For ordinary people, the structure is Byzantine at best. The only true beneficiaries are lawyers steeped in the acronym-speak of securities law. Issuers pay dearly for this knowledge.

For online capital formation, this publication frequently references Reg D506c, Reg A+ and Reg CF, even while recognizing the fact that most people find this confusing as they simply want to raise capital while being compliant.

Part of the equation and SEC consultation is the definition of an “accredited investor.” Long in use, the current rule is wealth based demanding individuals that qualify to earn over $200,000 a year or have a net worth of more than $1 million. While simple to apply, this metric has failed in recognizing investor sophistication. While common sense dictates that wisdom is not measured by cash in the bank, the current regime has disenfranchised tens of millions of investors. As private markets have become a preferred route for capital formation, the net effect has been to block the masses from some of the most promising investment opportunities in history. Meanwhile, the rich get wealthier.

The SEC has long discussed their project to review securities exemption harmonization. The common-sense initiative was launched by SEC Chair Jay Clayton who commented on the request for public feedback:

“We are taking a critical look at our exemptions from registration to ensure that our multifaceted private offering framework works for investors and entrepreneurs alike, no matter where they are located in the United States. Input from startups, entrepreneurs, and investors who have first-hand experience with our framework will be key to our efforts to analyze and improve the complex system we have today.”

While it is not clear if there will be an actionable outcome, the project is long overdue.

[easy-tweet tweet=”We are taking a critical look at our exemptions from registration to ensure that our multifaceted private offering framework works for investors and entrepreneurs alike” template=”light”]

The concept release seeks input on whether changes should be made to improve the entire exemption ecosystem. The SEC is asking for feedback on the following topics:

  • The limitations on who can invest in certain exempt offerings, or the amount they can invest, provide an appropriate level of investor protection or pose an undue obstacle to capital formation or investor access to investment opportunities
  • The Commission should take steps to facilitate a company’s ability to transition from one offering to another or to a registered offering
  • The Commission should expand companies’ ability to raise capital through pooled investment funds
  • Retail investors should be allowed greater exposure to growth-stage companies through pooled investment funds such as interval funds and other closed-end funds
  • The Commission should revise its exemptions governing the secondary trading of securities initially issued in exempt offerings

Crowdfund Insider asked Doug Ellenoff, Managing Director of Ellenoff Grossman & Schole and longtime advocate of financial innovation for his thoughts on harmonization. Ellenoff credited the SEC staff for pursuing a more rational approach to private offerings exemptions:

“In the aftermath of the JOBS Act of 2012, the rules have only become more arcane and I believe more confusing for the public to navigate these regulatory financing options.  While I appreciate the need and history of each of the provisions, other than securities lawyers, what entrepreneur is able to properly process the range of currently available options (pros and cons; expenses etc.)–4(a)(2); 4(a)(6); Rule 504; Reg D– 506(b); 506(c); 3(a)(11), Rule 147 and Rule 147A; Reg A and Reg A+,” stated Ellenoff.

He said there is just no simple, common sense way to explain these provisions:

“I have spoken at hundreds of events to glazed over audiences trying to convey it in a digestible manner … and even seasoned securities lawyers are having trouble making sure their clients truly understand how to proceed legally and make the right judgment call,” Ellenoff stated. “So it’s timely in my judgment to clarify and meaningfully crowdsource responses to the SEC’s list of dozens of questions.  I encourage everyone’s participation.   This is a significant challenge but a magnificent chance to make a meaningful impact on capital formation for entrepreneurs to effect securities law policy.”

Maxwell Rich, a securities attorney and Chief Compliance Officer of leading crowdfunding platform Republic had this to say:

“Republic supports the Commission’s efforts in studying ways that the various registration exemptions used to raise capital in the United States can be simplified, harmonized and improved. While regulation crowdfunding is a nascent and emerging capital formation framework, its interactions with other exemptions such as Reg D and Reg A+ lack synergy and symmetry, which causes investor and issuer confusion.”

Rich said they hope this study will provide “common sense and actionable recommendations” for expanding investment and capital raising opportunities while maintaining appropriate investor protections.

Youngro Lee of NextSeed 3Youngro Lee, founder and CEO of NextSeed and Chair of the Association of Online Investment Platforms, added his voice of support for the SEC’s harmonization initiative.

“This is a very positive development for the future of small business capital formation laws.  The original JOBS Act was instrumental in launching a new industry seeking to provide opportunities for small businesses and everyday investors, but there were real challenges presented by the legal limitations.  Thoughtful harmonization of the various confusing securities offering exemptions could truly accelerate the adoption of new capital formation laws for the benefit of everyone.”

By requesting the public’s feedback on regulatory harmonization we can expect a diversity of opinion on the matter. But in the end, it is what the SEC does with the information. And whether they are willing to act, or alternatively, they feel a need to pass the buck over to Congress.

Regardless, it is painfully obvious action is needed.

The public comment period for the concept release will remain open for 90 days following publication of the release in the Federal Register.


FACT SHEET

CONCEPT RELEASE ON HARMONIZATION OF SECURITIES OFFERING EXEMPTIONS

The Commission issued a concept release that reviews the framework for exempt offerings, including several exemptions from registration under the Securities Act of 1933 that facilitate capital raising.  The concept release seeks comment on possible ways to simplify, harmonize, and improve this exempt offering framework to expand investment opportunities while maintaining appropriate investor protections and promote capital formation.

Background

Over the years, and particularly since the Jumpstart Our Business Startups Act of 2012, several exemptions from registration have been introduced, expanded, or otherwise revised.  As a result, the overall exempt offering framework has changed significantly.  Our capital markets would benefit from a comprehensive review of the design and scope of the Commission’s exempt offering framework.

Highlights

The concept release requests comment on:
The Exempt Offering Framework Whether the Commission’s exempt offering framework, as a whole, is consistent, accessible, and effective for both companies and investors or whether the Commission should consider changes to simplify, improve, or harmonize the exempt offering framework.
The Capital Raising Exemptions within the Framework Whether there should be any changes to improve, harmonize, or streamline any of the capital raising exemptions, specifically: the private placement exemption and Rule 506 of Regulation D, Regulation A, Rule 504 of Regulation D, the intrastate offering exemptions, and Regulation Crowdfunding.
Potential Gaps in the Framework Whether there may be gaps in the Commission’s framework that may make it difficult, especially for smaller companies, to rely on an exemption from registration to raise capital at key stages of their business cycle.
Investor Limitations Whether the limitations on who can invest in certain exempt offerings, or the amount they can invest, provide an appropriate level of investor protection (i.e., whether the current levels of investor protection are insufficient, appropriate, or excessive) or pose an undue obstacle to capital formation or investor access to investment opportunities, including a discussion of the persons and companies that fall within the “accredited investor” definition.
Integration Whether the Commission can and should do more to allow companies to transition from one exempt offering to another and, ultimately, to a registered public offering, if desired, without undue friction or delay.
Pooled Investment Funds Whether the Commission should take steps to facilitate capital formation in exempt offerings through pooled investment funds, including interval funds and other closed-end funds, and whether retail investors should be allowed greater exposure to growth-stage companies through pooled investment funds in light of the potential advantages and risks of investing through such funds.
Secondary Trading Whether the Commission should revise its rules governing exemptions for resales of securities to facilitate capital formation and to promote investor protection by improving secondary market liquidity.

What’s Next?

The Commission welcomes all feedback and encourages interested parties to submit comments on any or all topics of interest and to respond to one, multiple, or all questions asked in this release.

The concept release will be published on the Commission’s website and in the Federal Register.  The comment period will remain open for 90 days from publication in the Federal Register.


[pdf-embedder url=”https://staging-crowdfundinsider.kinsta.cloud/wp-content/uploads/2019/06/SEC-Concept-Release-Harmonization-June-2019-33-10649.pdf” title=”SEC Concept Release Harmonization June 2019 33-10649″]


Republic’s GC Comments on SEC Enforcement Action Against Two ICOs: “Industry Participants Should Study this Settlement Closely”

Earlier today, CI reported on the first enforcement actions taken by the Securities and Exchange Commission (SEC) pertaining to post-DAO initial coin offerings (ICOs). The case is precedent setting and sets a clear path for enforcement officials to proceed with other ICO issuers who raised money following the DAO warning.

Maxwell R. Rich, Deputy General Counsel of Republic – a regulated crowdfunding platform that also lists token offerings, reached out to CI and shared a comment regarding the SEC’s announcement:

“Industry participants should study this settlement closely as it provides good guidance on how to avoid violating U.S. Federal Securities Laws, showing the pitfalls of not following them and more interestingly, may provide novel guidance for token issuers looking to register their tokens with the SEC post-offering,” stated Rich. “Registered Securities are generally freely tradeable. An example of this would be an IPO issuer, such as Google. And now, anyone can purchase shares of Alphabet. The problem is that to date, no token has been registered with the SEC through the IPO process. Which is why this settlement is so interesting — it’s indicating there is an alternative method for issuers to register their security tokens, whether they are exploring any digital assets securities offerings or are looking for ways to bring their previously unregulated ICO into compliance.”

Rich said the enforcement action reminds token issuers that the SEC is “taking a hard stance on token sales unless they fall under a registration exemption such as Reg D, Reg CF or Reg S.”

“Utility tokens that are offered through forward agreements such as SAFTs and DPAs will likely need to be registered or exempt from registration,” added Rich.

Securities attorneys, platforms and issuers will all be dissecting the SEC complaint documents with great interest.

What’s in a SAFE? New Site Open Sourced by Republic Helps Investors Figure it Out

SAFEs or Simple Agreements for Future Equity are popular investment options for early stage startups that are not quite ready to peg a value on the companyThey are also commonly used on investment crowdfunding platforms. SAFEs typically represent an opportunity to purchase stock at a discount at a future date, usually triggered by an event. This trigger is frequently associated with a future funding round where a valuation is applied – perhaps a VC round. Some SAFEs, such as Republic’s Crowd Safe allow founders to ‘roll over’ this conversion until a change of control – such as a merger, sale of the company or a public offering of the company’s stock.

Last year, the Securities and Exchange Commission (SEC) came out with a public warning telling investors to “be cautious of SAFEs in crowdfunding. They pointed out that SAFEs are not common stock, with no upfront equity. SEC Commissioner Michael Piwowar stated;

“In contrast to the sophisticated venture capital investors for whom SAFEs were originally intended, Regulation Crowdfunding [Reg CF] is designed to serve as a new method of raising capital from a broad, mostly retail base of investors … Intermediaries face a real challenge in educating potential investors about this high-risk, complex, and non-standard security when the security itself is entitled “SAFE.”

In brief, Commissioner Piwowar is of the opinion SAFEs are neither simple nor very safe, at least for smaller investors.

The counterargument to the SEC’s cautionary statement is that SAFEs are very founder friendly. Investing in an early stage firm is a risky bet. Many, if not most, startups fail, wiping out any equity position. As an investor in an early stage company you want the founder to be fully focused on executing on his or her vision of the company and the service or product provided. They should not be spending their time with every trivial shareholder request. Furthermore, Reg CF provides reporting duties for issuing companies, ensuring investors will have information about their investment. Finally, many have argued that voting rights for a $50 investor in a multi-million-dollar company provide no true ability to affect the company’s direction making them a ministerial headache.

One industry participant countered the SECs position on SAFE asking, rhetorically, what the Commission was comparing SAFEs to?  

While admitting that SAFEs are not as “simple” as common stock, this person said that putting a valuation on equity of a non publicly traded start up is not only quite complicated but utterly impossible.

“In fact the only thing you know about the valuation of a start up, is that it is wrong.”

In some respects, a SAFE is akin to an option that you may exercise, or not, depending on the success of the firm. If a firm fails, whether you hold a SAFE or common equity, you are out of luck and will need to write the investment off. The same may be true for most debt depending on how it is collateralized.

But regarding SAFEs, the devil is in the details. Too many people do not actually read the small print of the offering document or, perhaps, they simply do not understand the jargon. Not all SAFEs are created the same. Some may have a fantastical trigger point that will never occur. It can be challenging to discern between a SAFE that may payoff or one that is rigged to shortchange smaller investors.

Republic, a mission driven crowdfunding platform that is an offshoot of AngelList, has led an effort to create a solution for investors. Understanding that education is necessary in a new industry and transparency is the best policy when it comes to early stage investing, the dev team at Republic helped build an open-sourced SAFE evaluation website. Anyone may key in the terms of the SAFE from any platform or any offering (Reg CF or otherwise) using a SAFE to better understand if and when they may drive a return on their investment.

A SAFE can be structured to be have a trigger at an event where the investor receives a percentage discount, at a hard valuation or both.  The SAFE site allows investors to plug in the information to see what an expected return may be if a trigger event occurs.

But even with this helpful site, Republic cautions investors to be certain to read, and understand, what they are purchasing when they back a private company.

“SAFEs are popular because they push back the need to establish a valuation. If a firm values their company either too high or too low, when  there is little to no operating information, this can create unneeded problems and undermine a company’s potential for success,” says Maxwell R. Rich, General Counsel at Republic. “If the company is valued too high, it may forgo any future investments or may even necessitate a down round – harming early investors and the founders, who will likely experience dilution. If the valuation is too low, the founder may find themselves extraordinarily diluted, perhaps to the degree that it mitigates the incentive to drive returns. It is really a fine line that both parties must walk and understand.”

While all US based crowdfunding platforms are offering SAFEs, these offerings are not all of the same. Based off of the original Y-Combinator documents, several platforms, including Republic, have created bespoke SAFEs striving for a more balanced approach to facilitate both investor and issuer goals.

Republic’s standard Crowd Safe, which is structured to reduce an issuing company’s operating burdens while protecting investors economic rights, is customizable, allowing companies to add provisions such as a “right of repurchase”, escrow provisions to ensure investors see a partial return in the event of a dissolution, and other clauses to better match each issuing company’s particulars with an investors demands.

In the end, it is an investor’s responsibility to be cautious whether purchasing debt, equity, a convertible or a SAFE. Early stage investing can be highly rewarding but outsized returns are always paired with heightened risk and a real risk of loss of principal.

[Editors Note: Individuals interested in helping the “open-sourcing” may email contact@crowdsafe.info]

[clickToTweet tweet=”it is an investor’s responsibility to be cautious whether purchasing debt, equity, a convertible or a SAFE. Early stage investing can be highly rewarding but outsized returns are always paired with heightened risk and a real risk of loss of principal” quote=”it is an investor’s responsibility to be cautious whether purchasing debt, equity, a convertible or a SAFE. Early stage investing can be highly rewarding but outsized returns are always paired with heightened risk and a real risk of loss of principal”]