Open Access

Robert LoBue

• In the current age of innovative business financing opportunities available from fintech apps, social media crowdfunding sites such as Kickstarter, Indiegogo, and RocketHub, et.al., and friends and family private equity investors, start-up firms can strategically source their venture capital funds from many globally disperse organizations and individuals. As the firm in this case learned, the benefit of alternative investing sources comes with a critical hidden risk for corporate governance. After a financial restructuring, a typical Silicon Valley software start-up found itself with close to 300 external individual shareholders, some of whom had not been documented as accredited investors. The regulatory agency could decide that the prior actions of the founders and the decisions of the board had been prejudicial to the interests of the minority investors. The management of this small private company faced an atypical investor relations dilemma, before its initial public offering (IPO).