Update: The SEC has recently adopted rules allowing companies to offer and sell securities through crowdfunding, including to people who are not accredited investors. For capital increases that do not meet the requirements of the crowdfunding regulation, the following organization is still in effect. Should it be through a crowdfunding platform? If so, what would be the best thing to do? Would it be possible to group unrecredited investors into an LLC? I`ve seen a lot of different responses online, but I haven`t found much that definitely is. Also, FWIW, investors would be based on NYC. We also felt that the name of the instrument could be particularly misleading for retail investors. „A potential problem in the use of FAS in crowdfunding, we wrote, is that inexperienced small investors mistakenly think they are getting something simple and safe, a security they think they can use in all Silicon Valley startups and investors, and that they are making an investment without fully understanding the risks they are taking in buying these FAS.“ The longest period was limited to private investment for the average American to listed companies on a stock exchange such as the Nyse (New York Stock Exchange). What is the difference between accredited and unreased investors? To be an accredited investor, you must either have net assets of $1 million or earn at least $200,000 per year (Rule 501 of U.S. Securities and Exchange Commission Regulation D). If you do not meet any of these requirements, you will be considered an uncredited investor. The structure of the security notes according to the money makes it easier for founders to see the percentage of the business they have sold. It also makes it easier for investors to predict the future value of the stock. The exact conditions of a SAFE vary. However, the basic mechanics are that the investor makes available to the company a certain amount of financing at the time of signing.
In return, the investor will later receive shares in the company in connection with specific contractual liquidity events. The main trigger is usually the sale of preferred shares by the company, usually as part of a future fundraising cycle. Unlike direct equity acquisition, shares are not valued at the time of SAFE signing. Instead, investors and the company negotiate the mechanism with which future shares will be issued and defer actual valuation. These conditions generally include an entity valuation cap and/or a discount on the valuation of the shares at the time of triggering. In this way, the SAFE investor participates above the company between the signing of safe (and the financing provided) and the triggering event. A „SAFE“ is an agreement between an investor and an entity that grants the investor rights to the company`s future equity, which are similar to a share warrant, unless a certain price per share is set at the time of the initial investment.