Venture fund 500 Startups
uses Jobs Act to raise $100 million from public
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[June 27, 2014]
By Sarah McBride
SAN FRANCISCO (Reuters) -
500 Startups, the $100 million Silicon Valley venture
fund perhaps best known for its incubator program for
young companies, said on Thursday it would tap a new
source of cash for its latest fund: the public.
Such a move would have been illegal until late last year, when a new
law kicked in that allows private companies and funds to use
advertising to find investors. Its adoption by 500 Startups, founded
by respected entrepreneur and investor Dave McClure, signals growing
acceptance of public fundraising in Silicon Valley.
"Imagine trying to sell a product, especially if you're a public
figure, without being able to talk about it," said McClure, adding
the firm wanted to take advantage of its relatively high profile,
including its almost 200,000 Twitter followers.
Still, McClure expects most investors in the fund to come from
traditional sources, rather than via Tweets and notices on his
website. And all investors will still have to be accredited, meaning
they have net worth of at least $1 million and can prove it through
documents such as tax returns.
While many start-up companies have taken advantage of the change in
rules, few venture firms have. One exception: New York-based ff
Venture Capital, which raised a $52 million fund late last year in
part through mentions on Twitter and its website.
The old rules, mandated by the 1933 Securities Act, changed last
year thanks to a provision of the 2012 Jumpstart Our Businesses Act,
better known as the Jobs Act.
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The ban on advertising was originally to prevent opportunists from
targeting the gullible and has long been considered a bedrock
protection against scams. Congress decided to lift it, with some
protections, to help startups and thus boost the overall economy.
Many lawyers warn that lifting the ban could lead to abuse.
McClure's fund, which will target investors who can commit $1
million to $5 million each, is 500 Startups' third fund. It raised a
$29 million fund in 2010 and a $44 million fund in 2012.
(Reporting by Sarah McBride; Editing by Richard Chang)[© 2014 Thomson Reuters. All rights
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