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Presumably Rule 506(b) which prevents fundraising from nonaccredited investors. There is an exception for up to 35 non-accredited investors but taking money fro
by voxic11 6y ago
Presumably Rule 506(b) which prevents fundraising from nonaccredited investors. There is an exception for up to 35 non-accredited investors but taking money from even one non-accredited investor greatly increases the disclosure requirements on your startup. So the startup would essential need to do disclosure as though it were a public company.
https://www.sec.gov/smallbusiness/exemptofferings/rule506b https://www.sec.gov/smallbusiness/exemptofferings/rule506b
- JumpCrisscross 6y ago> the startup would essential need to do disclosure as though it were a public company Not quite that onerous. But the start-up and investor would each need to spend at least $5,000 on legal diligence. This would likely be true with or without the rule—if you don’t understand the preferred investors’ terms, you aren’t qualified to invest.
- bpt3 6y agoRule 506(b) doesn't prevent it entirely, and keep in mind that the vast majority of companies aren't venture backed startups, and I believe would be covered under Rule 504. You absolutely don't need to do disclosure like a public company if you have non-accredited investors.