Liabilities and Disclosures

Liabilities and Disclosures

October 11, 2021 by investor

There’s risk in startup investing as most investments don’t pay a return to the investor.

In running an angel network, one must take steps to mitigate liability.

It’s a best practice to have all members sign liability waivers stating they understand the risk of startup investing and take responsibility for it.

The waiver should indicate that each member makes their own investment decisions and the angel group is not recommending any startup for investment.

Members in the group should provide full disclosure. 

If the member has any relationship with a proposed startup such as advising, consulting, or otherwise, the member should disclose this to the other members.

Each member can decide for themselves how that impacts their investment decision.

In syndicating deals to other groups, an angel network should have those groups sign liability waivers indicating that each investor is responsible for their own due diligence.

Finally, most startups are raising capital from angel investors who are doing so under an SEC exemption.

The angel group should have written confirmation from the members indicating that they are accredited investors.

Take care to cover these areas of liability for your angel network.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.


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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.

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