#Angellist venture registration
The Lead Angel may be required to provide managerial assistance and guidance to the private or start-up company through an agreement between the Lead Angel and the company for a period of time following investment, but a Lead Angel is not permitted to receive compensation for the provision of advisory services to the investors unless that Lead Angel is either registered as an investment adviser itself or exempt from adviser registration requirements under applicable state law and the Investment Advisers Act of 1940 (the “Advisers Act”).Ĭarried Interest Not Compensation in Connection with the Purchase or Sale of Securities Under the CircumstancesĪ carried interest is compensation paid as a percentage of profits or an increase in investment value when an underlying investment in an investment partnership or vehicle is resold by such investment vehicle. In contrast, in an Angel Advised Deal a particular Angel will take an active role in identifying an opportunity and negotiating the related transaction (the “Lead Angel”). The Angel being followed does not take an active role in providing advice or services to the potential investors and may not even know that he or she is being followed. The FundersClub Adviser is granted certain management rights in the start-up company, provides the start-up company with certain planning and strategic advice, may provide the start-up company networking opportunities, and has the right to vote the securities held by the newly formed private fund, including the right to accept or reject any tender offer.ĪngelList’s Variation on the FundersClub Model: Angel Followed & Angel Advised DealsĪngelList employs a similar strategy, but notably offers two different investment models: the “Angel Followed Deal” and the “Angel Advised Deal.” In an Angel Followed Deal, potential investors are able to see when a high-net-worth individual experienced in venture financing (an “Angel”) makes certain investments and are permitted to follow the Angel’s lead when making investment decisions. Once an agreement is reached, a private venture capital fund is formed with the FundersClub Adviser as the official investment adviser to the fund and a third-party custodian is retained to take custody of the investor funds.
1 Upon gaining access to the site, the potential investor may submit nonbinding indications of interests for the various opportunities, and once a certain threshold of investor interest is met, FundersClub will close the indication of interest process for a particular investment opportunity and reconfirm each interested investor’s accredited status.Ī venture capital investment adviser owned by FundersClub (the “FundersClub Adviser”) will then enter into a term sheet with the start-up company. The no action letters do not provide standards for platforms that may want to provide direct investments into portfolio companies.įundersClub qualifies potential investors through an “online process.” Once an investor’s accredited status is confirmed, that investor may access a FundersClub website listing investment opportunities and information provided by various start-up companies seeking investment capital.
Significantly, both funding platforms are limited to accredited investors only and the offerings relate to investments in special purpose investment vehicles and not direct investments in the underlying portfolio companies. The letters also confirm the SEC’s position that carried interest compensation for advisory services in a private equity fund, such as a venture capital fund, is not, in and of itself, transaction-based compensation for broker-dealer registration purposes. The new letters indicate that running a platform that connects investors with private funds and qualifying investors as accredited investors for private placements will not, in and of itself, require broker-dealer registration so long as there are no other broker-dealer indicia like transaction-based compensation or handling of customer funds or securities. (“FundersClub”) and AngelList, LLC (“AngelList”), allowing them to avoid registering as broker-dealers under the Securities Exchange Act of 1934 (the “Exchange Act”) even though their affiliates will receive some compensation in the form of a carried interest.
In two recent no action letters, the Securities and Exchange Commission (the “SEC”) granted no action relief for two venture capital online funding platforms, the FundersClub, Inc.
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