What are the different types of raises that a company can do on SeedInvest?

SeedInvest can facilitate raises under Regulation 506(b) or 506(c), Regulation A+ (also known as Regulation A or Title IV), or Regulation CF (also known as Title III).

What are the major differences between the different types of raises?

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Can I sell to any non-accredited investors under 506(b) or (c)?

No. For 506(b) offerings you can actually have a limited number of non-accredited investors invest but it is generally a very bad idea. It triggers additional disclosure requirements and ongoing reporting, but technically can be done. Under a 506(c) raise, you absolutely cannot have any non-accredited investors. In general, our lawyers advise against having any non-accredited investors even in a 506(b) raise mainly because they are likely not to (or be unwilling to) comply with the additional requirements it would trigger. Many companies do it anyway without knowing which results in them violating their exemption and opening the door for potentially severe legal action. Additional resources on this topic are available at:

https://www.sec.gov/answers/rule506.htm

http://www.strictlybusinesslawblog.com/2015/08/31/why-you-cant-really-include-non-accredited-investors-in-rule-506-offerings/

If I raise under 506(c), will SeedInvest take care of making sure that investors are accredited? 

Yes. For any investor that comes through SeedInvest, our broker-dealer partner will verify each investor’s status as an Accredited Investor.

For offline investors, SeedInvest is happy to help without charging fees on investors who are properly “carved out”. Please note we will need some information from your investors to be able to proceed. Generally, verifying accredited investors involves getting a confirmation letter from each investors’ lawyer/accountant/financial advisor.

Important: Please note that verification of accredited investor status is the Company’s obligation and we are providing this service to protect you and everyone in the offering. We will require that all investors in this offering are verified accordingly and will ask for proof of those letters or other documents. Failure to provide documentation for offline investors can significantly delay closing procedures and the release of funds from escrow.

This post was written by AnMaree Williams on June 28, 2016

Choosing an Offering Type

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