Hat Tip to Joe Wallin for noting the SEC has requested public comments as to whether and how they should revise the definition of “accredited investor.”
As I’ve previously noted, for most tech startups it’s very important that they only sell stock to accredited investors. It comes down to this: the securities laws impose a number of onerous obligations on startups whenever they sell securities to someone who is not an accredited investor. [Read more…]
If you are a founder of a startup, you may have heard this before. You may not know what an accredited investor is, or you may not understand why it is incredibly important to only sell stock and notes to accredited investors. Here’s a quick primer on selling your startup’s securities.
You’ve probably heard of the “Securities Laws.” Securities laws are the federal and state laws and regulations that govern the sale of securities, i.e., stocks, notes (including convertible notes), and other financial instruments. The securities laws are very complex, so I’m going to try and simplify what you need to know as regards accredited investors, however there are many other aspects of the securities laws you need to take into consideration. [Read more…]
When founders of a company buy their initial shares of stock in a newly formed corporation, sometimes they wish to do so by exchanging intellectual property (IP) such as a business plan or a website, or other types of property (the below applies to many types of property, not just intellectual property). Purchasing stock with property raises a number of issues and risks that need to be addressed. This post is intended to help founders evaluate the issues when they buy stock with IP. [Read more…]
Lots of people are excited by the potential for equity crowdfunding ever since the federal government passed the JOBS Act. Many new businesses are popping up to exploit the new model, and there is a lot of buzz about equity crowdfunding these days. Of course, it is still not legal yet, and won’t be until the SEC finishes writing the rules. But I still hear the same question over and over: Should my company raise capital through equity crowdfunding? Unfortunately, in the case of most startups I don’t think it makes sense. Here’s why: [Read more…]