Raising Money From Coworkers for a Syndication

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Is a coworker a pre-existing relationship?
Can you send one message to the whole team?
What does your employer allow?
What if you work in finance, insurance or real estate sales?
Should a manager raise from direct reports?
How do you keep the offer clean?
Our take
Trade-offs and who this is not for
How DoorRaise fits in
FAQ

Yes, you can offer a syndication to coworkers, but only if you already know them well enough for the offer to be a private one, and only if your employer's rules and your own licenses allow it. Under Rule 506(b) you may not generally solicit, so a message to the whole company is a problem. A one on one conversation with a colleague you know is different. If you work in financial services, extra rules may apply.

Is a coworker a pre-existing relationship?

It can be. Rule 506(b) bars general solicitation, and the SEC staff looks at whether you had a substantive relationship with the person before the offering began. A colleague you have worked with for years, who knows your judgment and finances, is different from someone in the next building you met at a holiday party. See pre-existing substantive relationships. Meeting someone to pitch them does not create the relationship.

Can you send one message to the whole team?

Not under 506(b). A broadcast to a company channel, a mailing list or a lunch room is generally general solicitation (what is general solicitation). If you want to speak openly, use Rule 506(c), where everyone who buys must be an accredited investor and you verify it (17 CFR 230.506).

What does your employer allow?

Read the employment agreement, code of conduct and any outside business policy. Many employers ask you to disclose outside business, bar solicitation on company time or systems, or protect confidential information. Do not use company email, messaging apps, directories or time. If a policy is unclear, ask in writing before you start. Breaking it can cost you the job that funds your sponsor business (syndicating while working full time).

What if you work in finance, insurance or real estate sales?

Extra rules can apply. If you are a registered representative of a broker-dealer, FINRA Rule 3280 on private securities transactions requires written notice to your firm before you take part, and the firm may restrict it. Investment adviser and insurance licensees can face similar duties. Selling securities for pay without a registration is a problem too (do you need a license to syndicate). Ask your compliance department first.

Should a manager raise from direct reports?

Be careful. Someone who reports to you may feel unable to say no, and a deal that goes badly can damage the team. If you do it, make the offer clearly voluntary, give written materials and time, never discuss it at work, and consider limiting it to investors who are accredited and not in your reporting line.

How do you keep the offer clean?

Talk privately, outside work. Give every investor the same offering documents and the same time (how to read a PPM). Use a questionnaire to confirm accredited status or sophistication (accredited investor questionnaire). Say no promises about returns, keep each answer consistent with the documents, and let a no be a no.

Our take

Coworkers can be good investors because they know you. They can also be the fastest way to put a sponsor career and a day job in conflict. Treat the work relationship as something the deal must never use, and the offer will be easier to defend.

Trade-offs and who this is not for

Money and work mix badly if the deal struggles. Expect that.
Not for managers who would pitch their own team. Pressure is a risk to you and to them.
Common mistake: pitching in a company chat. That is both a policy breach and general solicitation.
Not a substitute for counsel if you hold a securities, insurance or real estate license.

How DoorRaise fits in

DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from friends and followers who already trust them, under Rule 506(b) or 506(c). We are software, legal document preparation, escrow coordination and verification services. We are not a law firm, broker-dealer, investment adviser, funding portal, bank or escrow agent, and we do not hold investor money: investors wire their money to escrow at Enterprise Bank & Trust, in the deal's name.

A private deal page and a private link let you send the offer to one person at a time, outside work channels, with the documents and e-signature in one place. Flat fees, never a percentage of the raise (see pricing). Create your free sponsor page.

FAQ

Can I ask coworkers to invest if I do not work in finance?

Yes, if you have a real relationship with them, follow Rule 506(b) or 506(c) and respect your employer's policies.

Can I email my work contacts from my work account?

Do not. Use personal email and check your employer's policy before any outreach.

Do coworkers have to be accredited?

In 506(c), yes. In 506(b), up to 35 non-accredited investors may take part if they are sophisticated and receive required disclosure.

What if my employer says no?

Then do not solicit coworkers. You can still raise from friends and family outside work.

Sources

This article is general information, not legal, tax or investment advice. Talk to a securities attorney before you market an offering. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.