Fundraising: Can I Spend The Angel Investor or VC Money As I Get It?
As I get questions from readers from my Ask The Chief ImpleMentor campaign, I will take some of the questions that I think might have a broad audience and post them here on the blog.
This one is filed under “Dragons – Fundraising: Can I Spend The Investor Money As I Get It?”
Question:
Thanks for your comments about accredited angel investors. It was very helpful. We just finished your business plan and are starting to pitch our deal to angel investors and venture capital. Since we are already spending money on buying stuff for the company, can we start spending the investor money as we get it?
Steve
Answer:
The first thing you need to buy is a big sword – so you can fight off all the dragons that are getting ready to hatch! Firstly, you didn’t say – but I hope you have a Reg D PPM for a LOT of reasons. Please see FundRaisingDocuments.com
One of the things that should be covered in your Reg D PPM is how you handle
investor funds as you receive them. For every successful offering I have ever been involved with or even watched from the sidelines, the money is ALWAYS escrowed as it is collected. That means that the money is deposited in a separate, untouchable escrow account UNTIL all of the minimum level of funding is reached. None of it goes into the company’s operating account until then.
Why? Read more >>
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