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Back to basics: General Solicitation: Who cares? 2. Investors

Paul Clark
Paul Clark
Last updated: January 17, 2024
Venture south fallback

2. Informed investors. If you approach VentureSouth to ask for investment and we suspect you are generally soliciting investors, we will pass – no matter how attractive the opportunity sounds. This happens every few weeks: a company approaches VentureSouth and says “you can download our pitchdeck from our website page” or include a press release about the first closing of their fundraising in their email introduction. We pass immediately.

In case it is not totally clear by now, this is why:

(A) If the company is raising capital under the 506(c) exemption, we will pass because VentureSouth is not going to be sharing our members’ financial information – which would be needed to prove accreditation of all investors.

(B) If the company is supposedly raising privately under the 506(b) exemption, but is so obviously violating the general solicitation prohibition that we notice it immediately, the issuer should be heading to an appearance on the SEC’s litigation page – probably turning our investment into a fine paid to the SEC. Hard pass.

And yet…Once you are looking out for people declaring they are raising money, you see questionable material ALL THE TIME. Just google “in process of raising”, “first closing”, or anything similar and you’ll see what we mean. There are so many companies (and funds) raising money, and posting on Twitter about it, that you probably get away with it. But is it really worth the risk?