Capital Formation Strategies

Both the U.S. and State governments regulate raising capital. The ideal is to prospect "accredited investors," which means investors who meet minimum standards for personal wealth and income. There are few restrictions on soliciting investment capital from accredited investors, because the law presumes that these wealthy individuals are capable of protecting themselves when investing.

But most startups look to "friends and family" for their initial capital. These are legitimate sources of startup capital, but federal and state laws require certain qualifications and disclosures before you can accept funds from these non-accredited investors. The legal requirements can be complex, so please seek guidance from a legal professional before accepting investment funds from any source.

Under the Obama administration Congress enacted the JOBS Act of 2008, which allowed the creation of online investment platforms where start-up companies could publish their business plans on investor websites where accredited investors would sign up to view the startup's business plan and commit to invest under the conditions of the stock offering. Investors who register with these websites typically are looking for the next "unicorn," the investment that may become the next Facebook, Twitter, Wiz, Uber, or SpaceX. These investors are willing to risk a total loss of some of their investments in hopes that one or more will pay off big (i.e., become a Unicorn). These online platforms include Angel List, Deal-by-Deal Investments, Angel List Access Fund, Professional Investors, Microventures, Fundable, SeedInvest, and several others. These platforms will promote your business, but take a percentage of any investments made through them.

These online platforms can be an effective way to raise capital, but only if you present your business in a way that appeals to the particular interests of the participating investors. At Nevada Business Law Group, we can help you tailor your offering in a way that gives you the greatest chance of fund-raising success. Call us for help in ensuring that your company will appeal to these "angel" investors.

It may be that your best option initially is to use the "friends-and-family" offering strategy. We can help you to navigate that process as well.