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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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AngelList Accreditation Report

Comments (12)

One of the most annoying things about being an angel investor is filling out the same Accredited Investor Questionnaire over and over again. I’ve made about 200 angel investments and over 50 VC fund investments at this point since 1994 and I’ve filled out some version of this form at least 250 times.

A few weeks ago Fred Wilson made an open request for A Web Service For Qualified and Accredited Investors. He was referring to the form that used to be required under what is called “501″ that now goes by the friendly name 506(b). I doubt he has yet to fill out a form for 506(c), which is the new requirement for “general solicitation” under the JOBS Act. At least I hope he hasn’t, because there are a whole host of new and exciting issues with companies that use 506(c).

It’s incredibly annoying to fill out the same paperwork over and over again for each investment. So Fred’s request was timely and likely something on a lot of people’s minds – or at least mine.

And the gang at AngelList. They totally nailed it by releasing the AngelList Accreditation Report. It’s exactly what Fred wants and is another great example of how far ahead of the curve AngelList is. If you have no idea what AngelList is trying to accomplish overall, read the great article from this week’s BusinessWeek titled AngelList, the Social Network for Startups.

We’ve been working really closely with AngelList lately on our FG Angels initiative. We’ve completed one investment, have a second that should close this week, and a third that we are about to launch. We are settling into a tempo of about two a month and hope to be at four a month by Q2. We’ve had to do a lot of work – with AngelList – to get the documentation, legals, and workflow correct and appropriate for a fund like ours. But we feel like we are almost there.

The AngelList gang continues to be a joy to work with. And things like the AngelList Accreditation Report show that they’ve got a deep understanding of what is needed to truly democratize angel and seed investing.

  • Elizabeth Kraus

    This is great! However, I think the big question is what CPAs and Lawyers will require to verify accreditation. Many angel investors qualify as accredited because they have ownership in one or several private companies. I was thinking about using my ownership in some companies in my net worth, but my CPA requested that I get a professional valuation for those companies. The cost and headache of that has prevented me from using those assets in my net worth equation and therefore, I’ve had to keep a significant amount of cash that I could be investing in startups, in public securities. Bummer for me and the startup community. This is also a challenge for LLCs of several investors. If I have to get letters from the up to 13 people that we have in LLCs, that is going to be a total pain. And lastly, I’m curious how often AngelList is going to require this. I thought the SEC had a 90 day time limit now or something?

    Regardless, it’s step in the right direction and I’m just sorry the SEC is making all of this far more complicated than it was a year ago. If everyone can incur credit card debt and gamble in Vegas, shouldn’t everyone be able to put $1000 into a startup without a letter from a CPA? Pisses me off.

    • http://www.feld.com bfeld

      Yeah, and our wonderful “JOBS Act” didn’t really fix anything, and made some stuff much harder. Crazy.

      • E.Appleton Blackmore

        KInda like ‘E-Trade’ wouldn’t fix anything?

    • http://www.matthewshobe.com/ mshobe

      Great questions, Elizabeth. Personally, I’d love it if anyone could back startups at that $1K level; I’d much rather see investments in promising entrepreneurs rather than the roulette wheel.

      I’m with angel.co. We’re working with several firms to make sure the Accreditation Report satisfies everyone’s needs today and will continuously improve it.

      For a multi-investor LLC, we will ask for confirmation of all equity owners’ accreditation from your lawyer or CPA, but hopefully doing so once reduces rework for everyone for as long as that accreditation remains valid.

      On time limits: for asset-based accreditation, it’s 90 days; for income-based it’s until the tax time next year (added detail on this topic, and more, here – https://angel.co/help/accreditation#accreditation-10).

      • Elizabeth Kraus

        Thanks for the reply! This is helpful, but unfortunately, getting this kind of verification every 90 days is still a royal pain. Not your fault and you are making it better, so much appreciated! The SEC is just making things tough.

  • Really

    ohhh Noooo!!! That is sooooo annoying!!! Your very rich hand must be so tired…..ughh….life is so hard at the top…..for instance, I hate it when I have to refi all my vacation homes….so much work!!!

    • http://www.feld.com bfeld

      Aha – an anonymous coward shows up and trolls me. How awesome.

  • http://www.howardlindzon.com howardlindzon

    awesomeness.

  • http://www.wanderandtrade.com/ Brandon Burns

    I’ve heard competing opinions on when an entrepreneur should join / list a company on Angel List. Some say wait until you’ve lined up people to follow you immediately so you can get noticed by the algorithm, others say just get on ASAP no matter what.

    What say ye?

    • http://www.feld.com bfeld

      ASAP in my book. No downside.

  • Shurtleff

    Would be great if the accreditation system can learn that if you have been verified a few times you don’t have to re-verify so often

    • http://www.startupboy.com naval

      It does – lasts for 3-12 months depending on which verification method you use. The expiration is there because of the law. Try it out, please.

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