Founders - Don't Do This!

Written by Kenneth Obel
Published on Jul. 06, 2011

From time to time, I come across startup companies that include a section on their About Us or FAQ pages about investment opportunities. As someone who started a company, I completely understand the inclination to do this -- if someone out there loves the company you are building and wants to consider investing, why not offer them a little information a tell them how to reach out to you? 

 

Unfortunately, the answer to why not is that you run the risk of your words being characterized as a general solicitation of investment by the Securities and Exchange Commission (a.k.a. the SEC). This can undercut your ability to raise money via the private offering exemption from registration under the Securities Act. For reasons explained in my GoodGuide to the basics of private offerings, this is a bad thing to have happen.  

 

Perhaps you can get away with simply stating that your company is funded by private investors, leave it there, and hope that a really motivated individual will contact you about investing. But anything that could be construed as proactively reaching out to people with whom you have no preexisting relationship is liable to be considered a general solicitation. It's not worth the risk.

 

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In addition to the  GoodGuide to the basics of private offerings, I have also posted other information on 
my website that is of interest to founders and entrepreneurs:


The GoodCounsel GoodGuide to the basics of startup structuring

The GoodCounsel GoodGuide to the basics of management equity

 

 

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