SEC Expands “Accredited Investor” Definition

Scott Edward Walker

This past Wednesday, the Securities and Exchange Commission (SEC) adopted amendments expanding the definition of “accredited investor” to include individuals who hold certain professional certifications/licenses or have certain “credentials,” as determined by the SEC.

Update to Accredited Investor Definition

The Startup Lawyer

The Dodd-Frank Wall Street Reform and Consumer Protection Act probably won’t fix or prevent anything, but it was successful at modifying a portion of the definition of an accredited investor. ADJUSTING THE ACCREDITED INVESTOR STANDARD. (a) I’ve seen a few subscription docs floating around that don’t account for this recent modification to the accredited investor definition. Tags: Startup Issues accredited investors

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Will the most successful crowdfunding portals be restricted to accredited investors?

Gust

4) Accredited Investor funding portals, which may or may not register under the JOBS Act, but will restrict themselves to the exempt, upper part of the market. This is an interesting question, and one to which no one really has an answer yet. To some extent it will depend on what the SEC decides to do with the regulations surrounding the whole subject, which they have until the end of the year to write.

Startup Fundraising: Friends, Family, And Accredited Investors

Early Growth Financial Services

When it comes to startups’ earliest funding sources, beyond founders’ personal liquidity (or debt capacity) friends and family are usually the first places founders turn to for help getting their startups going. But there are significant risks to tapping those close to you for funds. And I’m not just talking about the obvious possibility of emotions becoming wrapped up in funding decisions or the potential negative impacts to your personal relationships.

What is an accredited investor?

Startup Company Lawyer

For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as “accredited investors&# defined in rule 501 of Regulation D. Offerings to accredited investors are exempt from the registration requirements on the theory that accredited investors are sophisticated enough to protect their own interests. Thus, many homeowners are accredited investors due to the value of their houses.

Expand Accredited Investor Class, Not Shrink It.

Venture Chronicles

1) Changing the definition of a “qualified investor&# in angel and venture deals. You have to be a qualified investor. A qualified investor is currently defined as anyone with a net worth of over $1mm or net income of over $250k. The term “qualified investor&# is also known as “accredited investor&# and is governed by the landmark Securities Act of 1933, Rule 501 of Regulation D.

Are there any crowd funding options for tech start-ups not tied to just supporting projects?

Gust

At the moment, this is primarily limited to raising money from very rich people who qualify as Accredited Investors , and with whom you already have a pre-existing relationship. So in the meantime, while there are a very few sites (such as CircleUp for Accredited Investors, and Bolstr for non-Accrediteds) that have begun to gingerly start operations under existing laws, I’m afraid it’s likely to be several months before crowdfunding truly gets going.

Fundraising 101: Checklist for Entrepreneurs

Scott Edward Walker

Do your homework and determine which investors are the right fit for your startup (see post here ). Hustle and build relationships in order to get warm introductions to those investors (see post here ). Get references and speak with other entrepreneurs and founders who have done deals with your prospective investors (see post here ). Don’t solicit investors via Facebook, LinkedIn or Twitter (see posts here and here ).

House Passes Crowdfunding Bill: FAQ’s for Entrepreneurs

Scott Edward Walker

Third, startups will likely have difficulty raising funds from VC’s and other sophisticated investors if they have hundreds of unsophisticated stockholders. Needless to say, few sophisticated investors will want to sit on the Board of Directors of such a company due to the risks of lawsuits relating to director liability, and D&O insurance rates will presumably sky-rocket for these companies. Last week, the U.S.

Raising Capital? 3 Tips for Entrepreneurs

Scott Edward Walker

Fundraising Tips Tip #1: Only Offer and/or Sell Securities to “Accredited Investors”. The rule of thumb in connection with private placements is only to offer and sell securities to “accredited investors” under SEC Rule 506. If a company offers or sells securities to non-accredited investors, it opens a Pandora’s box of compliance and disclosure issues, under both federal and state securities law. Tips #3: Diligence the Investors.

How To Launch a Startup and Avoid Ending-up in Jail

Scott Edward Walker

Startup Issues accredited investors Chris Dixon finders illegal immigrants independent contractor IP assignment minimum wage misclassifying employee payroll taxes privacy laws sales taxes securities laws startup startups vestingIntroduction I love working with startups – and trying to protect founders and watch their backs.

Convertible Note Seed Financings: Founders Beware!

Scott Edward Walker

Obviously, this is not very appealing to sophisticated investors because their return on a high-risk investment would only be the interest on the loan, which (as discussed in part 2 ) is typically 5%-7% annually. 2) Conversion Right (Investor-Friendly). This is why many sophisticated investors will push for both a conversion right and a premium, with the right to choose the higher amount. Sophisticated investors, however, will push back hard against such a provision.

Walker Twitter Highlights: December 19th – January 1st

Scott Edward Walker

rJgnV1 The SEC’s final rule re NET WORTH STANDARD FOR ACCREDITED INVESTORS and the exclusion of primary residence’s value: 1.usa.gov/tcGLpX Learn to Code: A Non-technical Co-founder’s Guide (via @kathrynhough ) bit.ly/tLRCpR Twitter Highlights accredited investor entrepreneurs groupon Marc Andreessen quora raising capital Sean Parker SEC

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Startups, Please, Don’t Break These Laws.

Up and Running

You go to a local startups meeting after dinner, and the panelists tell the crowd they’re looking for investor. Or you can talk to accredited investors , as defined by the the Securities and Exchange Commission (SEC). When you show an investor financial results that you made up, that’s called fraud. Tags: startup advice startup financing startup mistakes accredited investors criminal financials fraud prison SEC

Five Austin Startups Pitch at Sputnik ATX’s Demo Day

SiliconHills

The invite-only event for accredited investors was held at Sputnik ATX’s offices in downtown Austin. Sputnik ATX, an Austin-based accelerator, held its second Demo Day last week featuring presentations from the five startups in its latest cohort. The companies gave 15-minute presentations followed by questions and answers. They are all awesome,” said Oksana Malysheva, co-founder […].

5 Crowdfunding Approaches To Tempt Every Entrepreneur

Startup Professionals Musings

Yet as I mentor entrepreneurs around the country, it still seems to be one of the least understood approaches to startup funding, with more myths than accredited angels and professional venture capital investors combined. In fact, perhaps the most important model, equity crowdfunding for non-accredited investors was only legalized via the SEC in 2016, so its impact is still in the early stages. In Europe, other investors can buy equity, with platforms such as Seedrs.

8 Ways Your Old School Can Energize Your New Venture

Startup Professionals Musings

As a startup advisor and investor, living in an area with several local universities, I’m continually surprised by how little many entrepreneurs know about the resources available from these institutions. If you need help building your first business plan or financial model, it’s getting easier and easier to find what you need, as well as connections to peers and investors, without an expensive business consultant.

Finding The Right Angel Investor For Your New Venture

Startup Professionals Musings

If your startup is looking for an angel investor, it makes sense to present your plan to flocks of angels, and assume that at least one will swoop down and scoop you up. Angel investors are people too. Investors expect you to understand their motivation, respect their time, and show your integrity in all actions. But now to answer one of the most common questions I get “How do I find angel investors?” angel investor flock new venture right angel

SEC Adopts New Equity-based Crowdfunding Rules

SiliconHills

The difference is up until the change, only so-called accredited investors, high net worth individuals, could […] The post SEC Adopts New Equity-based Crowdfunding Rules appeared first on SiliconHills. The U.S. Securities and Exchange Commission approved new crowdfunding rules last Friday allowing companies to raise money from anyone. The new rules allow companies to offer up to $1 million a year in securities through online equity-based crowdfunding portals.

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New Investment Initiative from Launch NY

ithacaVC

Here it is: Launch NY is working to find more ways to engage the local investor community and connect them with our client startup companies. With nearly 130 co-investors to date in Launch NY portfolio companies who have received funding from the Launch NY Seed Fund, the most active seed fund in NYS, our companies have secured 12x the $1.9MM we have invested. Investors can then invest in individual companies on a deal by deal basis, with as little as $10,000.

Where would I go to invest in startups or emerging companies?

Gust

” and the second is “Are you an Accredited Investor by that country’s standards?” ” If we’re talking about the US and you are NOT at the Accredited level ($1 million in investable assets, or $200,000 annual income), then for the moment you are actually not allowed to invest in privately held startups (emerging public companies, Read more >. The first question you need to ask is “What country are you in?”

ProfessorVC: What does it take to be an Angel Investor?

Professor VC

What does it take to be an Angel Investor? To the SEC, it means that you are an accredited investor and To the man (or woman) on the street, a minimum qualification would seem to be an interest and ability to invest in early stage ventures. However, that is not always the case as there is no qualification to set out your shingle as an angel investor or form an angel group. Labels: angel groups , Angel Investors. Card Counting for Investors. ProfessorVC.

Techstars Sustainability Accelerator Demo Day on 10/30/19

Feld Thoughts

As a bonus, there is also an investor-only event that morning for accredited investors. Last week David and I spent some time at the Techstars Sustainability Accelerator in partnership with The Nature Conservancy. Their demo day is happening on October 30th in Denver and you can register here if you’re interested in attending. . If you want to see what actual world-changing startups look like, you’ll love this particular demo day.

How the JOBS Act Is Legalizing Equity-Based Crowdfunding

Growthink Blog

The JOBS Act Opens Up Equity-Based Crowdfunding The key goal of the JOBS Act was to make it possible to raise funds from investors through certain crowdfunding sites in exchange for equity in your company. That issue is that, as of today, you can only raise equity Crowdfunding from accredited investors. As you can imagine, the vast amount of people who might want to invest even a small amount in your company are NOT accredited investors.

Today For The First Time in 80 Years, You Can Ask Total Strangers to Invest in Your Business

Up and Running

Previously, businesses seeking to raise capital were required to either pitch their plans exclusively to so-called accredited investors—individuals with at least $1 million in net worth (excluding their primary residence) or $200,000 in annual income—or offer a regulated security (such as stocks or corporate bonds). However, another revision to the law lessening the restrictions defining “accredited investor” is expected to pass Congress soon.

Crowd-Funding Success Usually Brings New Challenges

Gust

Many entrepreneurs seems to be convinced that the “crowd” of regular people using the Internet will somehow solve their startup funding needs, when they sense a lack of interest from accredited investors. Pebble watch crowd-funding via Wikipedia. Professionals maintain that there is plenty of money and equity for qualified startups, and funding marginal startups via any source will only make Read more >. Invested Interests crowd funding entrepreneur funding startup

Can a private company take investment money from anyone?

Gust

Unfortunately, a private company in the US may not take investment money from “anyone” The only people who are legally eligible to purchase an equity interest in a private company without a great deal of special paperwork are, as you noted, Accredited Investors. It’s binary: you either are, or are not, an Accredited Investor.

8 Questions You Should Ask Before You Join A Startup

Startup Professionals Musings

Every startup founder loves to prompt for questions from investors and potential key team members about their vision, and the huge opportunity that can be had with their disruptive technology. From my perspective as an investor, I recommend that every founder needs to know the answers to these questions, be open and honest in answering them thoughtfully, and without making excuses: What is the current runway and burn rate?

Can Fortune 500 executives also be angel investors?

Gust

There are quite a few senior executives of large companies who are angel investors. The only legal issue is that they need, like anyone else, to be an accredited investor. Invested Interests angel investors fortune 500 executives private company public company

Where would I go to invest in startups or emerging companies?

Gust

” and the second is “Are you an Accredited Investor by that country’s standards?” ” If we’re talking about the US and you are NOT at the Accredited level ($1 million in investable assets, or $200,000 annual income), then for the moment you are actually not allowed to invest in privately held startups (emerging public companies, of course, you can buy on the stock market like everyone else.).

Tech Wildcatters Pitch Day May 2016

The Startup Lawyer

Here’s the streamlined agenda: 12:45pm — Accredited Investor Preview 1:30pm — Doors Open to General Public 2:15pm — Program/Pitches 3:30pm — Happy Hour It’s free to attend, but be sure to register … Continue reading → The post Tech Wildcatters Pitch Day May 2016 appeared first on Startup Lawyer. Tech Wildcatters, the original Dallas accelerator, is hosting their first pitch day of 2016 on May 26th at the House of Blues in Dallas.

Do’s and Don’ts For Entrepreneur Business Networking

Startup Professionals Musings

I often recommend business networking as the most effective way for a startup founder to find investors, advisors, and even key executive candidates. These events are swarming with potential investors, and this is the forum where they are actively soliciting new opportunities, so don’t be shy about handing out your business card at breaks, lunch, mixers, or scheduled activities. Don’t do cold calls or email blasts of your resume and business plan to potential investors.

AngelList Accreditation Report

VC Adventure

One of the most annoying things about being an angel investor is filling out the same Accredited Investor Questionnaire over and over again. A few weeks ago Fred Wilson made an open request for A Web Service For Qualified and Accredited Investors. They totally nailed it by releasing the AngelList Accreditation Report. The post AngelList Accreditation Report appeared first on Feld Thoughts. Angel Investing accreditation angellist seed investing

Will Crowdfunding Replace Angel And VC Investors?

Startup Professionals Musings

Yet as I mentor entrepreneurs around the country, it still seems to be one of the least understood approaches to startup funding, with more myths than accredited angels and professional venture capital investors combined. In fact, perhaps the most important model, equity crowdfunding for non-accredited investors, is still not legal in the U.S., only accredited investors can use crowdfunding sites such as EquityNet to buy ownership in their favorite startup.

If You Can’t Find An Angel Investor, Look Again, Here

Startup Professionals Musings

If your startup is looking for an angel investor, it makes sense to present your plan to flocks of angels, and assume that at least one will swoop down and scoop you up. Angel investors are people too. Investors expect you to understand their motivation, respect their time, and show your integrity in all actions. But now to answer one of the most common questions I get “How do I find angel investors?”

Is it legal to solicit investors for a startup since the JOBS Act has passed?

Gust

However, under another part of the JOBS Act dealing with General Solicitation , startups, which have always been allowed to sell shares of stock privately only to Accredited Investors (rich people with investable assets over $1m or income over $200K) will, for the first time, be allowed to market that sale to anyone, once those provisions go into effect this summer. Invested Interests investors jobs JOBS act law legality solicitationYes and No.

Angel Funding Harder to Raise.But Not Really

Growthink Blog

One type of consumer that the Act tries to protect is angel investors. Specifically, the Act modified the qualifications for being an accredited investor. Previously, an accredited investor was defined as an individual with at least $1 million in assets, $200,000 in personal annual income or $300,000 in joint-spousal annual income. As a result, many angel investors who were previously categorized as accredited are no longer accredited.

Modern Day Patron of The Arts on Upstart

Feld Thoughts

In this new model of crowd-funding, accredited investors back entrepreneurs and have the option of signing on as mentors. FYI – I’m not an investor in Upstart , but I am a big fan. As investors, are we the modern-day patrons of the arts? I recently decided to back three graduates on Upstart. In exchange, the “upstart” gives up a percentage of their future income over the next 10 years.

Where To Find The Most Angels To Fund Your Startup

Startup Professionals Musings

If your startup is looking for an Angel investor, it makes sense to present your plan to flocks of Angels, and assume that at least one will swoop down and scoop you up. Angel investors are people too. Investors expect you to understand their motivation, respect their time, and show your integrity in all actions. But now to answer one of the most common questions I get “How do I find Angel investors?”

10 Keys To Giving The Right Entrepreneur Your Money

Startup Professionals Musings

It’s an opportunity for that “big bang” return of 10X to 100 times your initial investment, like early investors in Google, Microsoft, and Apple. Today you still need to be registered with the SEC as an “ accreditedinvestor to legally buy any startup equity in the U.S. With all these considerations, I recommend the following steps and considerations for investors newly interested in startups: Build a balanced investment portfolio.

Jumpstart Our Business Startups Act – How Will this Legislation Impact Your Startup?

Early Growth Financial Services

In order to reach out to private investors, you needed to have existing connections. Investors must be accredited investors. Even though you can now widely promote the fact that you are fundraising, you’ll only be able to accept funds from accredited investors. Accredited investors are … Continue reading → Legal Jumpstart Our Business Startups, a piece of the JOBS Act, just went into effect on September 23, 2013.

Crowdfunding Your Startup at 700 Percent Oversubscribed

ReadWriteStart

The jobs act promised small individual investors the ability to invest in the next Google. Less risk for the new startup investors. ” Investing in startups is a risky affair, yet investors are will to take these risks because of the potential of significant upsides. We literally had to turn down investors. We want to offer seed investors the opportunity to be part of our success before institutional VC’s take all the allocation.

10 Keys To Making Money By Investing In Entrepreneurs

Startup Professionals Musings

It’s an opportunity for that “big bang” return of 10X to 100 times your initial investment, like early investors in Google, Microsoft, and Apple. Today most startup investors still register with the SEC as “ accreditedinvestors before they buy any startup equity in the U.S. With all these considerations, I recommend the following steps and strategies for any investors newly interested in startups: Build a balanced investment portfolio.

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