| SAN FRANCISCO, June 26
SAN FRANCISCO, June 26 500 Startups, the $100
million Silicon Valley venture fund perhaps best known for its
incubator program for young companies, said on Thursday it would
tap a new source of cash for its latest fund: the public.
Such a move would have been illegal until late last year,
when a new law kicked in that allows private companies and funds
to use advertising to find investors. Its adoption by 500
Startups, founded by respected entrepreneur and investor Dave
McClure, signals growing acceptance of public fundraising in
"Imagine trying to sell a product, especially if you're a
public figure, without being able to talk about it," said
McClure, adding the firm wanted to take advantage of its
relatively high profile, including its almost 200,000 Twitter
Still, McClure expects most investors in the fund to come
from traditional sources, rather than via Tweets and notices on
his website. And all investors will still have to be accredited,
meaning they have net worth of at least $1 million and can prove
it through documents such as tax returns.
While many start-up companies have taken advantage of the
change in rules, few venture firms have. One exception: New
York-based ff Venture Capital, which raised a $52 million fund
late last year in part through mentions on Twitter and its
The old rules, mandated by the 1933 Securities Act, changed
last year thanks to a provision of the 2012 Jumpstart Our
Businesses Act, better known as the Jobs Act.
The ban on advertising was originally to prevent
opportunists from targeting the gullible and has long been
considered a bedrock protection against scams. Congress decided
to lift it, with some protections, to help startups and thus
boost the overall economy.
Many lawyers warn that lifting the ban could lead to abuse.
McClure's fund, which will target investors who can commit
$1 million to $5 million each, is 500 Startups' third fund. It
raised a $29 million fund in 2010 and a $44 million fund in
(Reporting by Sarah McBride; Editing by Richard Chang)