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I cannot meet those "accredited investor" requirements, which if you think about it, are really meant to cut off dealflow for anyone who isn't already rich. Me
by lzw 16y ago
I cannot meet those "accredited investor" requirements, which if you think about it, are really meant to cut off dealflow for anyone who isn't already rich.
Meanwhile, I have easily lost an angel investment's sized amount of money in equities and derivatives I've controlled. (and made many times that in positive returns... but it is the losses the government pretends like they are protecting me from.)
I could have been putting $15k-$20k into several startups a year, for the past 15 years, up to one a month in recent years, if the government would let me.
Think about that-- it would have been ILLEGAL for me to invest in these companies (or for them to take my money)... while at the same time I've incurred complete losses of the same size in the public markets, and could blow all of it and more at any casino on the country in a weekend.
- joshu 16y agohttp://en.wikipedia.org/wiki/Accredited_investors http://en.wikipedia.org/wiki/Accredited_investors If you could put 15-20k a month into startups, how are you not meeting the accreditation reqs? I think the requirements are to cut off companies from taking investments from little old ladies. It's the startup that would get in trouble, not you. You considered talking to a lawyer?
- lzw 16y agoI could put that amount in at the end of the period, not the beginning, and accredation requires either a higher salary than i have, or a net worth over a million, which I don't have. If preventing little old ladies was all that was needed, then it could be accomplished with a wavier.
- joshu 16y agoThe other issue that for angel investing is that you really ought to be doing 10+ investments a year to actually even out the risks so that you can get a return. That's a fairly high watermark. I've done approx 45 investments. One has returned (a small amount) of money in five years, so far.
- newman314 16y agoNot trying to throw Chris under the bus here but if his stated net worth is <$1million when he started, was he not in violation of the definition of "accredited investor" per Wikipedia?
- gojomo 16y agoNot if his income was over $200K in the prior 2 years, and expected to be the same in the current year. The income level is an alternate, not additional, qualification. And, perhaps he fudged some numbers, by inflating the value of something illiquid, to claim to be accredited slightly before he was. As I understand it -- but could be wrong, IANAL -- this requirement isn't a matter of providing formal documentation to the government beforehand, but of asserting your status to the security issuer, perhaps with some documentation, and them accepting your assertion. Only if things go south, and disputes/lawsuits begin, would the fact that money was accepted from non-accredited investors begin to cause liability and enforcement troubles for the issuers. So the issuers are motivated to ask for some documentation, but could also easily 'look the other way' or accept flimsy assertions in some instances.
- newman314 16y agoCan anyone comment if documentation is typically required (by the lawyers or startup) from an angel investor or is this assumed (scary)?