No, the VCs were scared that they wouldn't earn a high return on investment with most of the money going to license fees, application fees, and surety bond premiums; and that in the alternative, they might be at risk of going to jail themselves. See 18 U.S.C 1960(a):
"(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both."
Most of the VCs I talked to about FaceCash refused to invest because they were afraid of the regulatory implications.
Given you have competitors that have raised money, this leaves two possibilities:
1. You were talking to the wrong VCs
2. You got rejected by the VCs for reasons other than the mere existence of the regulatory challenge(for example, they may have rejected you because they believed the regulatory challenges were surmountable but that you did not possess the skills etc. to deal with them in the manner that they'd like)
In either case, your attributing your failure to fundraise to the regulatory implications seems dishonest and/or misguided.
A sample of e-mails from VCs explicitly stating that regulations were a primary factor in their refusal is available as an appendix to the white paper I wrote about the laws, here:
In addition to those references, several more investors told me verbally that the laws were the primary issue. Beyond that, I'm not sure what skills you would be referring to that you are absolutely certain I (but not other entrepreneurs) lack, in order to deal with regulations.
Furthermore, the two possibilities you listed are not the only two, and I'm not clear as to why you are so insistent on refusing to acknowledge the possibility that regulations might be a hindrance in my case. Specifically, it's also possible that:
3. I was talking to the right VCs, but I was more honest in my assessment of the regulatory situation than the few other competitors I know of that recently did raise money;
4. I was talking to the right VCs, but both my competitors and their investors were genuinely unaware as to the situation regarding a brand new law.
If you'd like to continue the discussion you are welcome to e-mail me.
