News & Analysis

VC firm blazes general solicitation path

ff Venture Capital becomes the first venture capital or private equity firm to take advantage of recently relaxed mass advertising rules.

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New York-based ff Venture Capital is the first venture capital firm out the gate to begin experimenting with recent reforms allowing private issuers to raise capital publicly, the firm said in a statement.

As of yet, no private equity firms have issued similar releases or publicly revealed a desire to begin using general solicitation in their marketing and branding efforts.

Over the summer the Securities and Exchange Commission (SEC) lifted a general solicitation ban on private issuers relying on Regulation D that was mandated by the Jumpstart Our Business Startups Act (JOBS Act).

The reforms allow private issuers to broadcast their fundraising efforts in the public domain, but many firms have adopted a “wait-and-see” approach before taking advantage of mass marketing rights, multiple industry sources tell PE Manager. Many cite compliance concerns as cause for the hesitation.

ff Venture decided to publicly announce its money raising efforts as “the age-old SEC ban on general solicitation” is the biggest reason venture firms have struggled to raise money recently, according to a blog post from John Frankel, ff Venture’s founding partner. The firm is currently marketing its third fund, which is targeting between $50 million and $70 million.

“The ban has long hindered funds and firms from letting anyone know that they are raising capital, and from sharing their historical performance, infrastructure, and capabilities. As a result, capital has flowed to players with brand and ego, based on tales around pretty much anything other than return on capital (or even return of capital),” said Frankel.

The firm provides a link from its website to an investment page whereby potential investors can submit their details to receive more information about ff’s latest fund.

The page also contains a tick box to ensure only accredited investors can submit their information. GPs that publicly advertise their funds must ensure that only wealthy enough investors are able to make fund commitments.