Importance of Corporate Governance

As we get closer to SEC's final ruling on equity crowdfunding, I think it is important to have some sort of corporate governance in place whenever a startup seeks funding from investors. It is more important than limiting an individual's contribution on capital. VC backed firms have it in their term sheets on how the startup will be governed such as who will sit on the board, how the funds will be used, and how the progress of the project will be tracked.

Since a large sum of money is at stake here, the backer and the founders meet frequently and the budget gets tweaked quite often as the funding need changes over time. The more real time and transparent the monitoring becomes, the more certainty there is that the business is not misusing the funds.

My concern with the direction of where the SEC is going with equity crowdfunding regulation is that they are missing the mark on where the regulation should be. I have not seen any language referencing corporate governance on their proposed ruling.

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