Understanding Fundraising Regulations

New VC fund managers do not know that these things they are doing are completely ILLEGAL… ❌ There are very strict rules around fundraising. Yet many new GPs copy what they see others doing — even when it’s illegal. The risk? Trouble today, or 5–10 years down the line when regulators or LPs look closer. Sophisticated LPs know the legal lines — and crossing them exposes both liability and inexperience. Here are the 3 most common fundraising violations (and how to avoid them): 1️⃣ PERFORMANCE-BASED FUNDRAISING COMPENSATION 👩🏾⚖️ Many “Vendors” often say: - “I’ll be a venture partner — give me carry for LPs I bring.” - “We’ll raise for you — just pay a % of capital committed.” 🚫 Illegal without a broker-dealer license ($50K–$150K+ + ongoing compliance). Even employee bonuses tied to fundraising can trigger violations. ✅ Legal way: Pay fixed fees or salaries unrelated to fundraising. Compensate with cash, equity or carry — but not tied to capital raised. 👉 Reality check: As a new manager, it’s extremely unlikely that anyone else can fundraise for you without a track record. You’ll almost always need to do the hard work yourself. 2️⃣ GENERAL SOLICITATION 👨🏻⚖️ New managers assume LPs will roll in if they “go public.” Tactics include: • LinkedIn posts about fundraising • Cold DMs to people • Podcasts/webinars about your fund • “Contact us to invest” buttons on websites 🚫 All illegal — unless you’ve structured under narrow exemptions. Even cold outreach counts as solicitation. ✅ Legal way: You can only pitch people you have pre-existing relationships with who are accredited investors. Network authentically, vuild relationships, then pitch one-on-one. 👉 Reality check: Public fundraising isn’t just illegal — it looks cheap. LPs won’t trust someone blasting cold posts with no track record. VC is trust-based. Public asks scream inexperience. 3️⃣ RAISING FROM EU LPS WITHOUT COMPLIANCE 🧑🏿⚖️ Many assume: • “If a European LP wants in, I can accept the money.” • “Everyone else does it — must be fine.” 🚫 Wrong. The EU regulates under AIFMD (Alternative Investment Fund Managers Directive) and MiFID II (Markets in Financial Instruments Directive). Even one EU LP can trigger filings. Regulators act quickly. ✅ Legal way: Work with EU securities counsel. File required notifications in each jurisdiction before accepting European LPs. 👉 Reality check: European LPs expect compliance. Skip it, and you lose credibility. Worse — a violation can come back years later and jeopardize your fund. Breaking the rules — even by accident — is the fastest way to undermine your credibility. And “everyone else does it” is not a defense. The managers who win are the ones who know the rules, build real relationships, and raise the right way. ⚖️ Know the rules. Follow them. Your fund' future depends on it.

🤲 How Charities Can Be Vulnerable to Money Laundering Global charities, with their noble missions and far-reaching impacts, face an array of #financial and #reputational challenges. It's crucial to acknowledge that even unintentional involvement in financial crime can lead to severe consequences for these organizations, including legal issues, loss of donor support, and disruption of financial services. This, in turn, affects their ability to fulfill their humanitarian objectives. The Realm of Financial Crime: It encompasses #bribery, #corruption, #terroristfunding, #moneylaundering, and #sanctions/ #exportrestrictions. Charities, especially those operating in #highrisk or #sanctioned nations, must be vigilant and understand the relevant regulations and the roles of regulated financial institutions like banks in preventing #financialcrime. How Money Laundering Can Occur Within Charities Money laundering is a global menace, threatening the integrity of financial systems and institutions, including charities. Being #nonprofitentities, charities could be more susceptible due to weaker regulatory frameworks. Let's explore potential avenues for money laundering in #charities: 1.#AnonymousDonations: A pathway for launderers to conceal the origin of their funds. 2. Overvaluation of #DonatedAssets: Inflating the value of donated assets for larger tax deductions and disguising fund origins. 3. #FrontOrganizations: Using charities as a façade for illegal activities. 4. Misuse of Funds: Directing charity funds towards unlawful activities. 5. Misrepresentation of Purpose: Falsifying the donation's intent to #laundermoney. Charities need to implement effective policies and procedures to mitigate these #risks, including due diligence in donor screening and reporting suspicious activities. Educating staff and volunteers on recognizing and reporting money laundering is equally important. #BanksResponsibilities In the fight against financial crime, #banks play a pivotal role, especially when it comes to #duediligence. This includes understanding: 1. Where charities operate. 2. Their affiliations and ownership. 3. The source of their funds. #EnhancedDueDiligence becomes imperative for charities functioning in high-risk areas. Due Diligence is Essential Just like banks, charities must conduct due diligence on individuals and entities they engage with. This risk-based approach ensures they have sufficient information about their donors, beneficiaries, staff, volunteers, and partners. Vigilance is key, especially when dealing with #PoliticallyExposedPersons (#PEPs) or operating in high-risk areas.

In a recent development, Solargridx Ventures Private Limited ("Company" or "Solargridx") faced stringent repercussions from the Ministry of Corporate Affairs in India due to its infringement of critical provisions within the Companies Act, 2013 (“Act”). As a consequence of this violation, the Company is now subjected to a substantial penalty of Rs. 10 lakhs.   Issue:  Solargridx, operating under the brand name 'SustVest,' raised funds from the public via the Community Stock Option Plan (CSOP), which were listed on Tyke, an online platform. CSOP were considered as derivative or rights or interest in securities, and the holders were promised a reward based on future valuation. Subsequently, a show cause notice was issued to the Company for being in non-compliance with Section 42 of the Act.   Facts: (i) Solargridx aimed to foster brand loyalty through CSOP agreements, essentially constituting engagements with subscribers within a community. In return, subscribers received various benefits, including access to exclusive events, curated offers, beta testing privileges, and more. The intent behind this initiative was to boost sales and enhance the company's goodwill. An online pitching session was conducted on the Tyke platform to educate members about the company and the CSOP plan. (ii) Further, the Company received a show cause notice, alleging a violation of Section 42(7) of the Act. The assertion was that by utilizing the Tyke platform to raise securities and engage in public advertising, the Company had contravened the law. The authorities sought an explanation regarding why penalties under Section 42(10) should not be imposed for this breach.   Arguments: (i) Solargridx's defence rested on the assertion that they had not released any public advertisements or utilized media, marketing, or distribution channels to inform the public about their securities. (ii) The Company contended that it had classified the revenue from CSOP as 'other income' and paid GST tax on it, implying that CSOP did not fall under the definition of "securities" according to the Securities Contracts (Regulation) Act, 1956.   Decision:  (i) Authorities found CSOPs linked to equity shares and were a form of derivative securities, violating Section 42 of the Act, treating CSOP holders like shareholders during liquidation. (ii) The Company exceeded the prescribed limit for private placement of securities by issuing CSOPs to 565 subscribers during FY 2021-22. (iii) The Company ought to refund funds with interest if not allocated within 60 days from the application. (iv) Violation of Section 42(7) due to public CSOP communication on Tyke. Contributor - Priyal Mehta ANB Legal- India #ESOP #Law #MinistryofCorporateAffairs

Trump's tariffs erased $4 trillion from the US stock market. Here's what it means for your fundraising round. President Trump's latest tariffs (25% on Canadian and Mexican goods, 10% on Chinese imports) are reshaping the startup ecosystem. As a fundraising consultant who's helped over 1200 founders, I'm seeing immediate effects on investment strategies across the board. Here's what's happening: → The S&P 500 has already lost $4 trillion in value since February → Tech stocks are being hit hardest (Tesla alone lost $125B in a single day) → Investor sentiment has flipped from optimism to extreme caution For founders actively raising capital, this creates both challenges AND opportunities. >Investors are tightening requirements Expect tougher due diligence, more focus on unit economics, and pressure to show how you'll weather supply chain disruptions. >Valuations are compressing The days of sky-high multiples are temporarily paused. Be prepared to adjust your expectations and focus on fundamentals. >Cash runway is now EVERYTHING I'm advising all my clients to extend runway immediately – the fundraising timeline has just doubled for many companies. >Supply chain startups are suddenly HOT If your solution helps companies navigate trade disruptions, emphasize this in your pitch now. What Should Founders Do? If you're currently fundraising (or planning to this year): ✅ Revise your pitch deck to address tariff impacts head-on ✅ Create multiple financial scenarios showing resilience ✅ Target investors who historically invest during downturns ✅ Consider smaller bridge rounds to extend runway The winners in this new landscape will be founders who adapt quickly and position uncertainty as opportunity. This isn't the first economic shock and I can tell you confidently, capital is still available for companies that understand the new rules. What are your thoughts about fundraising in this changing landscape? #StartupFunding #TariffImpact #VentureCapital #FundingStrategy

Unlock the Secret Tax Benefits of Charitable Giving 🎁 "I donated to charity solely for the tax deduction!" — Said no true philanthropist ever. We give because we care. But let's be real: why not optimize your generosity and potentially reduce your tax burden? Here's a breakdown of what savvy donors understand about maximizing their impact: Understanding Eligible Donations: Qualified Organizations: Only donations to IRS-recognized 501(c)(3) organizations qualify for deductions. That heartfelt GoFundMe campaign? While admirable, it won't count for tax purposes. Non-Cash Contributions: Be aware that limits for non-cash donations (like clothing or goods) can vary based on the item's value. The Importance of Documentation: Keep detailed records! The IRS requires meticulous documentation of your contributions. Receipts, acknowledgments, and appraisals (for larger non-cash items) are crucial. Strategic Giving Considerations: Itemizing vs. Standard Deduction: Remember, you can only deduct charitable contributions if you itemize on Schedule A (Form 1040). For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your total itemized deductions don't exceed these amounts, itemizing might not be beneficial. Maximize Impact: You're already supporting causes you believe in. Strategic planning can help you amplify that impact while potentially reducing your tax liability. Are you planning to make a significant charitable contribution this year? Let's discuss strategies to optimize your giving and ensure you're taking advantage of available tax benefits.

Raise funding, and your to-do list doesn’t grow. It explodes. Suddenly, you’re hiring. Reporting to investors. Pitching partners. Balancing compliance. And too many founders try to hold it all together with their own two hands. "No one can do it as well as me." Maybe that’s true at first. But it’s also how you end up buried in work you should have handed off months ago. Especially legal. If you’ve just raised funding, these are the legal responsibilities you should stop doing yourself - now: 1/ Post-funding statutory work • Share allotments, certificates, and filings on time • FC-GPR & advance reporting for foreign funds • Articles updates when investor rights change 2/ Ongoing regulatory & licensing ops • License applications and renewals (RBI, SEBI, IRDAI where applicable) • Compliance audits - KYC/AML, data protection, operational guidelines • Mandatory regulatory reporting and policy updates 3/ Contract & partnership management • Vendor, bank and partner agreements • Customer-facing terms - ToS, privacy, SLAs • Employment contracts with IP and confidentiality protections 4/ Investor-relations legal framework • Board governance and investor-rights compliance • Regular legal reporting and cap table management • Anti-dilution, exit mechanics and investor protections 5/ IP, data and security basics • IP filings and audits • DPDP 2023 implementation and cross-border safeguards • Breach protocols and vendor risk controls And this is how you delegate legal the right way: • Match tasks to specialist expertise (regulatory vs contracts vs IP) • Set clear deliverables, timelines and owners - not vague requests • Keep strategic oversight - don’t micromanage the work Delegate the right legal tasks and two things happen: • You free up time for the work only a founder can do • You protect the business from cracks that funding can’t fix Post-funding is the moment you stop doing everything and start scaling everything. --- ✍ Reply with “Delegate” if you’re handing legal off this week - tell me which area you’ll offload first: Statutory / Licensing / Contracts / IR.

#regulation , information asymmetries and the funding of new #ventures .  Ever wondered how regulations could ease the challenges of asymmetric information for young and innovative firms? A recent study conducted by the Bank for International Settlements – BIS delves into the largely unregulated #cryptocurrency ecosystem, providing valuable insights. 📈 Regulatory Stringency and Private Capital: The study constructed a comprehensive measure of regulatory stringency at the state-month level in the United States. Surprisingly, it found that more stringent regulation is associated with increased private capital. However, this effect is observed primarily in states with a more developed financial sector. 💼 Boosting Access to Capital: Analyzing granular deal-level data, the researchers traced the heightened access to capital in a more stringent regulatory environment to a reduction in information asymmetries. This implies that stringent regulations play a crucial role in bridging the information gap between investors and entrepreneurs. 🚀 Benefiting Young and Innovative Firms: Notably, the study found that younger firms with fewer tangible assets benefit more from a reduction in information asymmetry. This suggests that stringent regulations can provide a significant boost to innovative startups, fostering a more supportive environment for their growth. 🤝 International Impact: Interestingly, foreign investors, those not specialized in the crypto sector, and investors with fewer professionals on board were found to invest more capital in states with stringent regulations. This showcases the broader impact of regulatory measures on attracting diverse investment sources. 🏛️ Financial Hubs Take the Lead: The study highlights that stringent regulations are particularly impactful in states with well-established financial sectors. Financial hubs benefit from reduced information asymmetry, creating a more favorable landscape for both investors and entrepreneurs. The BIS study underscores the potential of stringent regulations in the largely unregulated crypto ecosystem. By reducing information asymmetries, regulations can create an environment conducive to private capital influx, especially benefitting young and innovative #startups . #Regulation #Cryptocurrency #Innovation #StartupEcosystem #InvestmentInsights

This 2-minute donor update hack will build trust and keep them loyal for years: Donors aren’t just writing checks and forgetting about it, they’re expecting a return. Not necessarily a financial ROI (although some may), but a return in impact. They want to know their dollars aren’t disappearing into the void. They want metrics, transparency, and proof that their contribution is creating change. Nonprofits can learn a LOT from startups when it comes to donor retention. Startups live and die by how well they report back to investors. They’ve mastered the art of building trust and loyalty through data-backed updates. Why aren’t nonprofits doing the same? Borrow These 3 Investor Reporting Practices to Build Donor Trust: 1. Impact Dashboards Just like startups track revenue growth, nonprofits should track key metrics that matter to their donors (e.g., meals served, trees planted, lives impacted). Example: Charity: Water built an online dashboard showing exactly where every donation goes, right down to the GPS coordinates of the wells they’ve funded. 2. Regular Updates, Not Just Asks Startups send quarterly updates to their investors. Why not send the same to donors? Share wins, challenges, and lessons learned. Example: Instead of a generic “thank you” email, send a monthly email breaking down how donations have directly contributed to your mission. 3. Case Studies Startups use case studies to show investors how their money fuels growth. Nonprofits can do the same to showcase success stories. Example: Share a before-and-after story. How someone’s $100 donation changed a life. Include real numbers and outcomes. This leads to: Donors who feel confident in your organization. Donors who trust that their money is making a difference. Donors who stick around for the long haul. Nonprofits that treat their donors like investors grow rapidly. With purpose and impact, Mario

STRENGTHENING YOUR ORGANISATION’S INTERNAL GRANT SYSTEM. WHAT REALLY MATTERS? Due to recent funding cuts and the limited availability of financial resources globally, most NGOs now focus heavily on writing better proposals, curiously sourcing for funding, and while that truly matters, it’s only one piece of the puzzle. The truth is, if your internal grant system is weak, even the best-written proposals won’t survive the long game. Here's what strengthening your internal grant systems actually means and why it’s the key to long-term funding sustainability and building donor confidence. For each of these elements, there exists a set of questions that should be addressed. If you can affirmatively respond to all these parameters, it will boost your confidence internally, and you can be assured that you are thoroughly prepared to win your grant application.   1. Pre-Award Readiness 📌 Do you have a clearly defined mission, program strategy, Theory of Change, and track record of results? 📌 Can you align the right donors with the right projects at the right time? 📌 Have you thoroughly reviewed the donor expectations and project broader impacts? Remember: Being fundable starts before you ever draft a proposal. 2. Internal Systems and Templates 💼 Do you have standard tools, concept note formats, logic models, budget templates, reporting templates and application calendars? 💼 Is there a process for internal reviews and approvals? Note: Strong systems reduce chaos and increase proposal quality. 3. Grants Management Infrastructure 📊 Can you track grant cycles, donor compliance rules, and deliverables in one place? 📊 Are your MEL, finance, and program teams integrated in grant delivery? 📊 How best do you understand the project deliverables, target audience and stakeholders? Don’t forget, great systems make your organisation trustworthy and low-risk. 4. Capacity and Culture 🧠 Do your team members understand donor language, deadlines, and expectations? 🧠 Do you conduct mock reviews, grant audits, or capacity-building trainings? 🧠 Do you need more experts to deliver the project successfully? For your information: Grants aren’t won by documents; they’re won by capable teams.  5. Strategic Positioning & Sustainability 📅 Do you have a multi-year fundraising strategy, a mapped funding database, and a donor engagement plan? 📅 Are you interested in building relationships, or are you just submitting applications? 📅 When the funding ends, how would you continue to make impacts? Fun fact: Being strategic keeps your NGO ahead of the curve, not scrambling behind deadlines.   If you are only chasing proposals and not investing in your organisational systems, you’re building a house with no foundation. Start inward, build structure, and the grants will follow. Let’s build smarter, not just louder. #GrantWriting #FundraisingStrategy #NGOGrowth #GrantsManagement #DonorReadiness #DevelopmentFinance #Grant #CapacityBuilding 

I write frequently on the need for an ecosystem approach to payments and digital commerce to drive digital adoption in Africa. What does that mean and what is an example of how it works? One example is our partnership with Qatar Charity, a charitable organization providing food and other essential items to orphans in Tanzania. One problem they faced was around transparency of payments to beneficiaries. Is money spent on food? How much is spent per orphan? Are products being delivered to the right people? It is not enough to transfer the payments to beneficiaries, what is requried is a full view of the transaction process where cash handling is entirely eliminated from every step of procurement. In this case we combined AzamPesa (mobile money wallet) with Sarafu (ecommerce/last mile delivery) to develop a 360 degree solution for Qatar charity: Step 1. Qatar Charity identifies beneficiaries. Each beneficiary is registered on Azampesa and on Sarafu Steo 2. Qatar charity indicates what products each beneficiary is permitted to order from Sarafu using their funds. Step 3. Azampesa establishes a restricted wallet for each beneficiary that can only be used to order products on Sarafu that are approved by Qatar Charity 4. Beneficiary wallets are funded by Qatar charity, who then place orders on Sarafu based on their personal needs. Sarafu delivers to their doorstep. 5. Qatar charity can monitor all payments, all products ordered and all delivered items to each beneficiary 6. Extra funds can be recovered and re-allocated to other beneficiaries. This means every dollar spent is 100% allocated to support beneficiaries and the remitting organization is fully aware down to the SKU level what beneficiaries are recieving and when they are recieving it. The solution demonstrates how an integrated wallet + digital commerce platform can generate value for users and create transparency and efficiency otherwise not possible. When developing digital solutions the question you must answer is: What value can I create digitally that is not possible with the analog alternative? In this case, Qatar charity could not retain visibility on disbursements without our solution. If there is any other charitable organization operating in Tanzania, we are happy to support with similar solutions or adjust to their specific needs. Furthermore. the same solution can be used for businesses who face challenges in procurement where managers struggle to track spending on departments or vendors/contractors who are tasked with procuring supplies. If you need transparency on usage of funds, or greater visibility on how payments are being made in your supply chain, we have a total solution that can help you focus on managing your business instead of worrying about who is making what payment to whom.