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Well, if I accept money from my uncle with the understanding that I'll pay him back ten fold if I make it big, that's legal right? And let's say I get five fri

jrockway 18y ago
Well, if I accept money from my uncle with the understanding that I'll pay him back ten fold if I make it big, that's legal right? And let's say I get five friends and make the same deal with them; again, nothing illegal there right? Unfortunately, induction only works in mathematics, not in the legal system. I'm sure there's an arbitrary line somewhere, and that that line has to do with "intent". (Getting 10 friends to invest, probably fine. Getting 10 people responding to a newspaper ad, probably not fine. Ah, the legal system...)
- cperciva 18y ago
  Getting 10 people responding to a newspaper ad, probably not fine. There's two reasons why this isn't fine, actually: You can't get strangers to invest unless they're accredited investors; but also the newspaper ad itself is illegal ("public offering of an unregistered security" or something along those lines).
  - jrockway 18y ago
    My post is about induction. Let me explain in detail: It's OK for one person to invest in my startup. It's still OK if I get one more person to invest in my startup. Induct on the number of people. It's OK to get an infinite number of people to invest in my startup. Q.E.D. The reason induction doesn't work is because the law defines that a certain number of people is "public offering of an unregistered security". In math, there is no such restriction.
cperciva 18y ago
Where exactly is the line drawn here... It varies by jurisdiction, but usually the rule is that "friends and family" are ok, but you can only take money from strangers if they're rich (i.e. "accredited investors"). In BC the "friends and families" rule is defined more or less as "people who have direct knowledge of you and are investing in you instead of the company". But again, the rules vary by jurisdiction -- so consult a lawyer who is familiar with the rules in your jurisdiction before you do this.
DenisM 18y ago
There are two lines: 1. Public solicitations is a no-no. What constitues "public" is quite well-defined. 2. Investors must be able to fend for themsleves - either be educted in the area, rich enough to hire someone who is or otherwise be able to assess risk.

jrockway 18y ago

Well, if I accept money from my uncle with the understanding that I'll pay him back ten fold if I make it big, that's legal right? And let's say I get five friends and make the same deal with them; again, nothing illegal there right? Unfortunately, induction only works in mathematics, not in the legal system. I'm sure there's an arbitrary line somewhere, and that that line has to do with "intent". (Getting 10 friends to invest, probably fine. Getting 10 people responding to a newspaper ad, probably not fine. Ah, the legal system...)

cperciva 18y ago
Getting 10 people responding to a newspaper ad, probably not fine. There's two reasons why this isn't fine, actually: You can't get strangers to invest unless they're accredited investors; but also the newspaper ad itself is illegal ("public offering of an unregistered security" or something along those lines).
- jrockway 18y ago
  My post is about induction. Let me explain in detail: It's OK for one person to invest in my startup. It's still OK if I get one more person to invest in my startup. Induct on the number of people. It's OK to get an infinite number of people to invest in my startup. Q.E.D. The reason induction doesn't work is because the law defines that a certain number of people is "public offering of an unregistered security". In math, there is no such restriction.

cperciva 18y ago

Where exactly is the line drawn here... It varies by jurisdiction, but usually the rule is that "friends and family" are ok, but you can only take money from strangers if they're rich (i.e. "accredited investors"). In BC the "friends and families" rule is defined more or less as "people who have direct knowledge of you and are investing in you instead of the company". But again, the rules vary by jurisdiction -- so consult a lawyer who is familiar with the rules in your jurisdiction before you do this.

DenisM 18y ago

There are two lines: 1. Public solicitations is a no-no. What constitues "public" is quite well-defined. 2. Investors must be able to fend for themsleves - either be educted in the area, rich enough to hire someone who is or otherwise be able to assess risk.