Hi all,
There is this old loud mouth guy in my neighborhood claiming to be an “Angel investor”. But nobody has ever been able to get him to show any proof of past investment success. He’s obviously got some money, but boasts of millions and millions. Anyways, my question is. How can I verify one of the qualifications to be an “Angel investor”? Which would be the criteria a need to be “accredited by the Securities and Exchange Commission”.
TIA
What’s an Angel Investor?
Did a quick read of the Wiki article, and it seems to me that the Angel Investor is the one who should be seeking verification of potential investment proposals.
IOW, why do you need to know?
I want to verify his claims of being behind all the startups he boasts about. By seeing proof that he has been “accredited by the Securities and Exchange Commission”.
That’s the beauty of being an Angel Investor, there are no qualifications. The definition of Angel Investor is literally, “Some rich dude who throws money at a young company.” You can go to the next level and become accredited by the SEC, but that’s necessary.
Not according to this write up…
http://news.cincinnati.com/article/20130804/NEWS10/308040031/
“Today, angel investors must also be accredited by the Securities and Exchange Commission. The basic guidelines require assets of at least $1 million, not including your home, or annual income of at least $200,000 ($300,000 if combined with spouse’s income) each of the last two years. However, the JOBS Act could remove or lower these thresholds.”
So maybe he’s really rich, or maybe he’s a wanker, or maybe he’s a really rich wanker…the question remains, why do you care?
Why do I care? Because I think he’s an under the wire boolshiter and needs to be outed.
It’s not a requirement, just a guideline (bolding mine).
“An angel is a high net-worth individual who invests his or her own money in start-up companies in exchange for an equity share of the businesses. ACA recommends that entrepreneurs work with investors who are accredited investors (who meet requirements of the Securities and Exchange Commission) and who can add value to the company via high quality mentoring and advice.”
Well is he throwing around the SEC thing or is that something you looked up?
The SEC thing is - if memory serves - really designed to protect unsophisticated investors. It doesn’t prevent anyone on their own from investing in a company that they want - it just (I’m guessing here - as otherwise there isn’t much of a point) helps perhaps in other cases their are rules regarding who can be targeted for these schemes. I think it is sort of like the rules for investing in hedge funds.
Long story short - I think “accredited” just means that he has some money and filled out a form. It means nothing about success or knowledge.
If he is throwing around this accredited thing - he is just full of himself. He probably also has books that are in the “Library of Congress” (which is required of register copyright works - and costs like $5.00 or something).
If he actually is an investor in any public company - and owns more than a certain percent (I think 10%) - you can find it in the SEC databases. But it is possible to invest large sums of money and not have any records to really show for it (that you’d be able to find).
Investing money in a startup just proves you have money.
Also some people throw around terms pretty losely.
I have invested in some of the biggest, most successful companies in the US and around the world. Of course so has anyone else who has invested $1.00 or more in an S&P 500 index fund.
Ask him what he thinks about the efficient market hypothesis? A dollar says he will give you a blank look.
That is explicitly the meaning. It has nothing to do with the investor’s real knowledge or expertise. The point is to limit companies and entrepreneurs from preying on unsophisticated investors with fraudulent schemes.
If an entrepreneur/company want to sell its equity to anyone, the company need to go through the hoops of being publicly traded. As a proportion of all companies, only a tiny tiny minority do this.
The overwhelming majority of new companies either self finance or borrow from banks or sell their equity through a private placement. If the company/entrepreneur wants to do a private placement, he can only work with wealthier people because that’s the proxy we use for sophistication.
In reality, if you’re doing a round of angel funding your legal fees will be tens of thousands of dollars. It’s not really accessible to people without money even aside from the SEC definition.
In other words, as others have said, being an angel investor literally just proves you have money.
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Ask him what he thinks about the efficient market hypothesis? A dollar says he will give you a blank look.
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I don’t think most actual angels I know would have much if anything to say, either. They’re usually former entrepreneurs or executives. Often very successful lawyers. Occasionally a surgeon investing in a biomedical startup. They’re serious investors, sure, but they’re not really into discussing basic financial theories from Finance 101. They’re not finance professionals.
Looks like there is nothing specific I can look at for verification, but again, this board proves to be a wealth information, none the less. Thank you all for your feedback on this topic.