How Influencers Can Legally Raise Capital for Funds and Companies


This post is by David Teten from David Teten


Nik Talreja (@niktalreja) / XHow can influencers raise capital for companies or funds, without running afoul of restrictions on “general solicitation”?

The 2012 bipartisan JOBS Act was supposed to empower funds and individuals to raise capital more openly: to publicly advertise their track record and what they’re selling, just like almost every other industry. However, as far as I know, the great majority of private capital raises for funds and companies are still not using general solicitation. My Partner Winter Mead, Founder & CEO of Coolwater Capital, the accelerator for emerging VC fund managers, said: “Fewer than 5 of the 180 emerging managers we’ve worked with are raising via 506c, in order to get in front of more retail LPs, who are generally already following the GP, e.g., through the GP’s newsletter or community. At this point, all of them are currently planning to do 506c again for their next fund.”

Why has general solicitation not become more widely used among investors in alternative assets? There are four disadvantages to general solicitation.

  • General solicitation creates an obligation to verify that investors are accredited. William Stringer, Founder, Chisos, said, “The benefits of 506(c) were clear when we were raising smaller checks into a small fund from individual accredited investors. However, because of the additional information burden we almost lost a few larger, more sophisticated investors that did not want to be bothered for a relatively small investment.” You can typically outsource this for as little as $60 to companies such as VerifyInvestor.com or (Read more…)