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Startups Can Generally Solicit Starting September 23

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Re: Startups Can Generally Solicit Starting September 23

#11

Post by tlrobinson »

newsign wrote: post #6

So how far are we from real crowd-funding? i mean no requirement of accredited investors? i'm sure someone is already working on that bill ...

From TFA: "When Title III of the JOBS Act takes effect – likely in 2014 – this number will multiply as any individual will be able to invest in private offerings."

Re: Startups Can Generally Solicit Starting September 23

#13

Post by brainflake »

In my mind, it's the whole requirement of being an "accredited investor" that is the real hurdle. I ran into this a few years ago when a friend of mine opened a brewery. He was taking investments, but since it was a private company you had to be an accredited investor (which I wasn't). In the end I ended up being able to give him some money for potential returns but we had to jump through some legal loopholes.

Re: Startups Can Generally Solicit Starting September 23

#15

Post by mindcrime »

nickodell wrote: post #7
sbw wrote: post #2

Provided solicitations are limited to accredited investors...

What's an accredited investor? edit: Nevermind, it's a person with at least $1,000,000 in assets or $200,000 dollars in income.

And the problem with the "new rules" is that they require the "accredited investor" to provide all sorts of documentation to the startup, to certify that they are, indeed, an "accredited investor". We're talking tax returns, or a certified document from their accountant, etc.

This is going to add extra friction to the process and may negate a lot of the purported benefits of this whole mechanism, given that investors were previously allowed to simply "self certify" their status as an "accredited investor".

See, for example, http://wraltechwire.com/will-sec-rule-506-c-changes-help-cur...

for some discussion on that point.

Re: Startups Can Generally Solicit Starting September 23

#17

Post by fecak »

hanley wrote: post #16

This might be a dumb question, but why does the law require that an investor is "accredited"? Why does their income and net worth matter? If someone only made a measly $100k last year and wants to invest in my company, why wouldn't they be allowed to?

I believe it's to prevent lower net worth individuals from losing their life savings. The inability to make a big bet on a single company. Paternalism basically.

Re: Startups Can Generally Solicit Starting September 23

#19

Post by segmondy »

mindcrime wrote: post #15
nickodell wrote: post #7

Earlier quoted context omitted.

What's an accredited investor? edit: Nevermind, it's a person with at least $1,000,000 in assets or $200,000 dollars in income.

And the problem with the "new rules" is that they require the "accredited investor" to provide all sorts of documentation to the startup, to certify that they are, indeed, an "accredited investor". We're talking tax returns, or a certified document from their accountant, etc. This is going to add extra friction to the process and may negate a lot of the purported benefits of this whole mechanism, given that investors…

can't they do that by proxy? i go to my bank, i show them evidence that i have made $200k or more in the last 2 years, or that i have a million+ net worth. i get the document notarized, i give the company the notarized document by the bank as evidence. my paperwork stays private.
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