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    1 Reply Latest reply on Jul 16, 2008 10:19 PM by dotnet_ohio

    Can we start a hedge fund to raise money for a business?

    BioMan Newbie
      We are raising startup capital for Capital BIofuel, a company which makes biofuels out of trash and waste stream products. We take trash in, make fuel and leave NO waste unused! Our business is attracting lots of interest from local small would-be investors.

      SInce we will be a privately held corporation we can't sell $100 worth of shares to just anyone. Can we start a hedge fund whose primary purpose would be to fund Capital Biofuels start-up? Would we need someone outside the organization to start and run the hedge fund? We are hoping to be able to allow that largest amount of small investors to get in early in our opportunity but to do so in a legal and ethical way.

      Could this hedge fund allow say, people on ebay to buy into the hedge fund for $25, $50 or $100? $1000, $5000 or whatever they choose?

      We don't want to start our business by angering the SEC or the Feds (Capital BIofuel will be a US based Deleware Corporation) but we want to allow lots of people to invest relatively small sums of money. What would be the best angle if the hedge fund isn't it?

      All together we need to raise $8M and we have $500K so far.

      Many Thanks!

      Chad Currin
        • Re: Can we start a hedge fund to raise money for a business?
          dotnet_ohio Newbie
          There are many problems with doing this, and I am not a lawyer, so the first thing I would do is consult a licensed attorney before you proceed with any type of endeavor simliar to this. If you are near a law school many times they will offer free (pro bono) consultations for small businesses or the SBA in your area might be willing to help you out with this.

          The SEC is really funny when it comes to selling stock, and if you don't do it in a certain manner, then you risk serious penalties. Additionally, hedge funds are very regulated, but you can find information on the SEC website. One other place to look is at the NASD, who I think would be the final say in hedge fund regulations. I seriously doubt that you could sell stock in any form on ebay and would caution you to make very sure that you are not violating any securities laws. The penalties are stiff, I know that some violations are automatic felonies with mandatory federal prison terms.