5 ms·

for almost all startups there are exactly zero non-accredited investors on any cap table Why is it unfathomable to imagine someone with a $500K NW writing a $5

for almost all startups there are exactly zero non-accredited investors on any cap table Why is it unfathomable to imagine someone with a $500K NW writing a $5k-20k cheque? To be accredited you either need $1M NW or sustained $200K income (2+ years). Leaves plenty of room for small-time angels who want to invest 1-4% of their net wroth

paxys 5y ago
It isn't unfathomable, just extremely rare. There simply aren't a lot of people with <$200K/yr total comp who are investing in random pre-seed startups, and even if they exist very few companies will actually take their money.
- jacquesm 5y ago
  You're both well into anecdata territory. Your 'extremely rare' is my 'pretty common' and I'm sure that there are situations where it isn't.
  - jollybean 5y ago
    It's not anecdotal, even if you have a different experience. People putting out $50K cheques in 'very risky' things for strangers businesses very much likely to fit the criteria for accredited. Maybe your 'Uncle' might do this, but it's generally not a concern that you're going to have that many of them that it's going to force you to go public. Also, you can vet for it by asking the question.
  - astrange 5y ago
    This thread is kind of factually wrong post-JOBS Act anyway. You can accept lots of unaccredited investors under Regulation CF, and you can become accredited by taking an exam without meeting the income requirements.
    - Animats 5y ago
      Regulation CF [1] is a kind of mini-IPO. You have to work through a funding platform/broker, file with the SEC, confirm the net worth of investors, and such. The most active funding platform for this is Wefunder.[2] This is sort of like Kickstarter, but with equity. [1] https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051... [2] https://wefunder.com/ https://wefunder.com/
      - astrange 5y ago
        The investors self-affirm their net worth through their broker. There were some other rules changes this year that make it easier, though I can't find documentation of what they are atm. I've noticed more use of SPVs which simplifies things for the company. The main problem with this is it's a bad idea for most investors because the investment opportunities are largely bad and take 6+ years to get any return.

paxys 5y ago

It isn't unfathomable, just extremely rare. There simply aren't a lot of people with <$200K/yr total comp who are investing in random pre-seed startups, and even if they exist very few companies will actually take their money.

jacquesm 5y ago
You're both well into anecdata territory. Your 'extremely rare' is my 'pretty common' and I'm sure that there are situations where it isn't.
- jollybean 5y ago
  It's not anecdotal, even if you have a different experience. People putting out $50K cheques in 'very risky' things for strangers businesses very much likely to fit the criteria for accredited. Maybe your 'Uncle' might do this, but it's generally not a concern that you're going to have that many of them that it's going to force you to go public. Also, you can vet for it by asking the question.
- astrange 5y ago
  This thread is kind of factually wrong post-JOBS Act anyway. You can accept lots of unaccredited investors under Regulation CF, and you can become accredited by taking an exam without meeting the income requirements.
  - Animats 5y ago
    Regulation CF [1] is a kind of mini-IPO. You have to work through a funding platform/broker, file with the SEC, confirm the net worth of investors, and such. The most active funding platform for this is Wefunder.[2] This is sort of like Kickstarter, but with equity. [1] https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051... [2] https://wefunder.com/ https://wefunder.com/
    - astrange 5y ago
      The investors self-affirm their net worth through their broker. There were some other rules changes this year that make it easier, though I can't find documentation of what they are atm. I've noticed more use of SPVs which simplifies things for the company. The main problem with this is it's a bad idea for most investors because the investment opportunities are largely bad and take 6+ years to get any return.