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My current project is a sort of microfinance site that does exactly what you're describing. I recently pitched it at a pitch competition (lost.) Long story shor
by sdurkin 18y ago
My current project is a sort of microfinance site that does exactly what you're describing. I recently pitched it at a pitch competition (lost.) Long story short, there are some legal obstacles, but nothing insurmountable. If you want to hear more, feel free to email me.
- pclark 18y agovery interested! wanna drop me an email (cant find yours) -- peter@omgponi [dot] es
- webwright 18y agoSeriously, if you think there are "some legal obstacles, but nothing insurmountable", you'll want to investigate further. If you sell equity in your company, you REALLY don't want to sell it to non-accredited investors... It's hugely more expensive from a legal POV. Read: http://www.thestartuplawyer.com/securities/life-is-too-short-to-deal-with-non-accredited-investors http://www.thestartuplawyer.com/securities/life-is-too-short... While you can sell equity to up to 35 non-accredited investors, you shouldn't-- here are the reason he throws out: "(1) Non-Accredited Investors Trigger a Larger Disclosure of Information - If you raise capital from non-accredited investors in a Rule 505 or Rule 506 registration-exempted financing, you must provide a huge amount of information about your startup company. Think IPO-registration huge, thereby leading to larger legal and accounting costs. Such additional costs may not be prudent if your startup company is tight on capital. (2) Non-Accredited Investors Tend to be More Hostile Than Accredited Investors - Implied by the definition of a non-accredited investor, the investment a non-accredited investor makes to your startup company will mean much more to him or her than an investment an accredited investor makes. A non-accredited investor will be much more emotional. Thus, non-accredited investors are much more likely to sue your company if things don’t go according to plan. (3) Non-Accredited Investors can Hinder an Acquisition - It may be difficult for your startup company to be acquired after it has completed a registration-exempted financing with non-accredited investors. Non-accredited investors trigger additional rules in the context of an acquisition (e.g., a purchaser’s representative). Sometimes the acquiring entity will require a startup company to perform a buyout the non-accredited investors pre-acquisition."
- sdurkin 18y agoNo, we're not by any means thinking of selling equity to non-accredited investors directly. Perhaps "some legal obstacles" was not the best phrase to use. There are significant legal obstacles, and we're consulting with a corporate lawyer from the U. Chicago who has agreed to do some preliminary work pro bono. Everything is in the early stages, and with corporate law the line between what's considered innovation and what's considered fraud is murky. Without annoying my partners by saying too much, we're confident we have a type of solution.
- webwright 18y agoI'd wager that if there was innovation to be done, we would've heard about it by now. If you do it, make sure you get a lawyer who specializes in securities law (a generic corporate lawyer is not your best bet). Seems like a lot of effort (and a TON of expense) for something that most securities lawyers would tell you is a bad idea...