No. Almost all deals on AngelList are private to accredited investors only. This means that they fall under the 506(b) regime and are not public fundraising under Reg A or general solicitation under 506(c). However, companies can elect to raise under general solicitation if they wish.
Public fundraising allows startups tell the general public they're raising money—on Twitter, Facebook, blogs, TV, advertisements, etc. The legal term for public fundraising is ‘general solicitation’.
Whether startups raise money publicly or not, they can only accept money from accredited investors.
Startups that raise publicly also have the legal burden of verifying that their investors are accredited.
If a startup that raised publicly closes their round on AngelList (via syndicates), AngelList will handle all 506c investor verification.
Adding your startup or funding round to AngelList doesn't affect whether you are raising publicly or privately. Fundraising activity on AngelList is only visible to logged in, accredited investors.
If you announce your raise publicly (for example, by social media or to your company's newsletter), you will need to collect evidence from all investors to verify their accredited investor status.
If you close the round on AngelList (via syndicates), AngelList will provide accreditation verification for all investors in your round, free of charge. If you close your round offline, your investors can still get verified for free by AngelList, and can provide our verification letter to you or your company counsel at closing to satisfy the SEC's requirements.
Good question. Public fundraising can be useful for companies with a customer base of accredited investors (e.g. service for physicians) or for companies with a large social media reach.
However, startups should be aware that enabling public fundraising will make it easier for press to disclose details about their fundraising efforts. Also, verifying that all investors are accredited takes time and effort, and may discourage some investors from participating in the deal.
By default, startup fundraising information is just available to investors. This prevents the general public from seeing fundraising information.
To avoid triggering the requirements of general solicitation, don't promote your raise publicly, and ask your employees, investors and advisors to refrain from public discussion also.
No. You can only accept money from accredited investors whether you raise money publicly or not.
The SEC is expected to finalize “crowdfunding” regulations that allow startups to raise money from non-accredited investors in 2014.
Non-U.S. startups can take advantage of public fundraising, as long as they comply with their local regulations and U.S. regulations.
When you raise money publicly, you must have a higher standard for accreditation verification: you must take ‘reasonable steps’ to verify that your investors are accredited. For example, your investor could provide an income tax form. It is not enough for your investors to merely swear that they are accredited. Fortunately, AngelList will do the work of collecting the evidence that your investors meet this higher standard.
If you choose not to fundraise publicly, you can meet a lower standard of having a ‘reasonable belief’ that your investors are accredited. Historically, investors have sworn they are accredited in this case—although the SEC has stated that may not be enough.
If you are covering a startup that is fundraising on AngelList, you should avoid writing about financing details for companies that are not publicly raising money – also known as general solicitation. If you do write about them – even by mistake – it can cause them legal problems due to SEC regulations. Here's how to steer clear of trouble.
It is okay to write about company fundraising details on AngelList if:
- The company name and details are visible on Invest Online while you are logged out of AngelList
- The company's AngelList profile page shows a green "Public" tag, like this company, under the Fundraising section
- The company can be found in this filtered Companies list
All of the above are visible without being signed in to an AngelList account – in fact, this is how you should browse, since all you will be able to see is publicly available info.
If they're not meeting any of the conditions above, don't discuss or publicize their fundraising details. Only a small percentage of companies on AngelList have chosen to fundraise publicly. Unfortunately, doing so causes them to bear a lot of extra expense (and potentially lose investors) due to the need to collect a lot more information from potential investors. Publishing information about private companies would "break the seal" – automatically making them operate under the SEC’s 506c rule, which covers general solicitation.
Also: if you attempt to pose as an investor in order to get access to info about companies that are raising privately, we will permanently ban you from AngelList.