Weekly Roundup: Zuck's Last Laugh

Happy Groundhog Day, DVC! In our 2023 year-in-review newsletter we made fun of Meta CEO Mark Zuckerberg for spending his “Year of Efficiency” getting into Twitter feuds and competing in Jiu-Jitsu tournaments at a local high school.

It now appears we owe him an apology, as Meta stock is up 155% since Feb 2023 and just issued its first-ever dividend after a 3X increase in profits.

In business, I’m never betting against Zuck again. In his high school Jiu-Jitsu matches, however, I’ll still bet on a fight-by-fight basis.

Welcome to DVC!

Welcome to the 20 new members who’ve signed up for DVC since last week! We’re happy to have you 👋 

Startup Discussion & Weekly Poll:

This week one of our QAI program members asked us about the many “Regulation” categories in startup fundraising:

It’s a great question. Like most finance topics, it gets very complex very fast. But, it affects all of us as investors, so here’s the high-level overview!

The Background:

The SEC regulates the buying/selling of public & private securities (I.e. “stocks”, “shares”, “equity”). Over the years, they’ve built up a list of “Regulations” for private companies. Basically, think of these as “categories” of fundraises that dictate:

• Which companies can raise money (and how much)

• How frequently they can raise money

• Who is allowed to invest (and how much)

• And much more…

Let’s go over the main ones.

Regulation D (“Reg D”) - “Investing for some”:

Most startups raising from VCs, angel investors, or small groups use private “Reg D” rounds. Since investors are “accredited-only”, there are fewer SEC requirements to protect investors.

Highlights:

• Companies can sell securities to accredited investors only

• Companies can raise an unlimited amount of money

• Fewer regulatory disclosures to file than RegCF or RegA+

Regulation Crowdfunding (“RegCF”) - “Investing for all”:

As of 2015-16, companies can raise from their communities in a “RegCF round” on an SEC-approved equity crowdfunding platform (e.g. Wefunder, StartEngine, Republic).

Highlights:

• Companies can sell securities to accredited and non-accredited investors

• Companies can raise up to $5M in a 12-month period

• Non-accredited investors can invest a maximum of $2,500/year (or more based on income/net worth)

Regulation A+ (“RegA+”) - “The Mini IPO”:

Like RegCF, companies can raise from the public in “RegA+” rounds. Called “Mini IPOs”, these let private companies raise lots of capital from any investor without having to actually go public.

Highlights:

• Companies can sell securities to accredited and non-accredited investors

• Companies can raise up to $75M in a 12-month period

• Fewer investment limits for non-accredited, but has more disclosure requirements than RegCF or Reg D

The Takeaway:

If your head’s spinning, don’t worry. When I first heard the term “RegA+”, I genuinely thought it was a streaming platform for Reggae music.

The key thing to remember: RegCF and RegA+ rounds are open to non-accredited (everyday investors), while Reg D rounds are accredited-only (wealthy investors).

Time for a quiz! Choose an answer below and see how you stack up next week!

Last Week's Results:

Last week we talked about the job cuts at Brex and asked whether you thought the recent tech layoffs are a good or bad sign for the economy… Turns out 75% of you said you had “No idea” and are just waiting for my fortune-telling neighbor to return from Florida to give her predictions 🔮 

I’ll keep you posted on what she says. In the meantime, I’ll ask my second-favorite forecaster, Punxsutawney Phil, for his thoughts now that he’s done with the weather.

Vote for New Deals:

Help select DVC's future deals! Please view the options, upvote your favorites, and suggest your own!

New companies suggested this week:

• Sholder (in “Friends Invest First” mode!)

DVC Deal Review Updates: