Yes, you must be accredited. To qualify, you must meet the below criteria.
If an individual, Subscriber has a net worth, either individually or upon a joint basis with Subscriber’s spouse, of at least $1,000,000, or has had an individual income in excess of $200,000 for each of the two most recent years, or a joint income with Subscriber’s spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year.
Subscriber is an irrevocable trust with total assets in excess of $5,000,000 whose purchase is directed by a person with such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of the prospective investment.
Subscriber is a bank, insurance company, an investment company registered under the Company Act, a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (the “Exchange Act”), a business development company, a Small Business Investment Company licensed by the United States Small Business Administration, a plan with total assets in excess of $5,000,000 established and maintained by a state for the benefit of its employees, or a private business development company as defined in Section 202(a)(22) of the United States Investment Advisers Act of 1940, as amended.
Subscriber is an employee benefit plan and either all investment decisions are made by a bank, savings and loan association, insurance company, or registered investment advisor, or Subscriber has total assets in excess of $5,000,000 or, if such plan is a self-directed plan, investment decisions are made solely by persons who are accredited, investors.
Subscriber is a corporation, partnership, limited liability company or business trust, not formed for the purpose of acquiring the Interests, or an organization described in Section 501(c)(3) of the Code, in each case with total assets in excess of $5,000,000.
Subscriber is an entity in which all of the equity owners, or a grantor or revocable trust in which all of the grantors and trustees, qualify under clause (i), (ii), (iii), (iv) or (v) above or this clause (vi).
Subscriber cannot make any of the representations set forth in clauses (i) through (vi) above.
STRT Fund (#1) is a 10-year term, with exits targeted between 3-7 years.
35% +
For demonstration purposes, at 35% IRR a 10x return would be realized at 5 years, and a 20x return at 10 years.
A section 3(c)(1) fund may not be beneficially owned by more than 100 shareholders.
The fund supports a diversified portfolio of startups, so this is not an option through the fund, but we do partner with co-investment, and take side car deals.
Currently, there are seed investments into 5 operating companies going through various stages.
From working many years deeply immersed within the startup and investment communities, we have numerous connections that consistently bring fresh ideas to us. Typically we look for game-changing innovation, and a clear solution to solve a major problem in the marketplace. We also are heavily involved in advancing the startup ecosystem and creating relationships with co-investors — vastly expands our view into emerging innovations, ideas, and technologies.
Additionally, our principals and the team have a unique understanding of how to leverage education through digital media. Due to our 506(c) status, we are allowed to educate investors on the benefits of investing in startups within a professionally-managed portfolio.
Before we launched the STRT Fund (#1) we had accredited LPs make soft commitments, understanding that the differentiating factor for the STRT Fund is not only in finding innovative ideas and providing necessary capital, but in actively working hand-in-hand with the founders and startups to enhance their value by adding a significant amount of intellectual capital, experience, knowledge, and focused guidance.
A natural byproduct of being out in the community, whether online or in-person through community work, in associations with universities and accelerators, or participating in advisory boards consistently creates awareness for the fund, and consequently a steady flow of target assets for our review.
The management company plays an essential role in operating the STRT. For the STRT, the investment management company is responsible for providing professional services to the GPs as it relates to finance, accounting, securities law, deal flow, competitors, strategic partners, compliance, and optimal business practices, among others.
The differentiating factor and long-term value to LPs is that STRT Investment Management company keeps the portfolio plan on track. The STRT Investment Managers combined with the STRT GPs are ultimately managing the criteria for exponential scalability and high operating leverage.
When looking at investment, The STRT Investment Committee (IC) stewards the charter and mitigates against potential challenges for biased agenda divergence. The committee is well adept at governance and is in place with a pledge to uphold the following criteria:
- Approaching every decision with a fiduciary mindset.
- Adhering to the mandates and sector focus areas.
- Making strong financial decisions and evaluating equity.
- Showing up with participation, urgency, and action.
- Extending trust to hands-on operational teams.
The ICs role is to assess the target assets for a pre-admittance decision. The committee has no fiduciary responsibility to any individual portfolio company, or the STRT. It is an independent group. The IC discusses possible success factors such as scaling a balanced portfolio, investing in durable technologies, and seeking opportunistic plays. Once the target asset is invested into, the growth team takes over with long-term stewardship and guidance. The IC has no influence, bias, or conflict of interest in individual Portfolio Companies.
LPs value this stewardship because even though the fund is a long-term investment, those who invest in startups are looking for opportunistic companies that grow exponentially with diminishing marginal costs — namely utilizing technology where the costs of producing additional units or acquiring additional customers continually shrink.
STRT invests in technology companies, or companies that utilize technology because they can scale faster with fewer complications than traditional non-tech companies. Leveraging technology allows companies rapidly grow, bringing on more customers for little to no operational change — while the increased cash flow is invested back into the companies for faster and more growth.
Additionally, STRT communicates monthly in updates so LPs understand what is happening within the investments — the caveat being that the investments are for the long-term investor who is not interested in one-hit overnight returns.
The success of the Partnership’s investment strategy and trading activities will depend strategically on the General Partner’s ability to identify scalable opportunities, manage such opportunities, and otherwise exploit and create value.
The qualified small business stock (QSBS) exclusion is a U.S. tax benefit that applies to eligible shareholders of a qualified small business (QSB). The QSBS exclusion is one way to offset some of the risk associate with investing in startups.
The QSBS tax exclusion is set forth in Section 1202 of the U.S. Internal Revenue Code. When shareholders sell or exchange their qualified stock, the exclusion can provide a break on capital gains tax—potentially up to 100% exclusion of tax on capital gains.
QSBS was designed to considerably decrease financial risk and tax liability by creating tax savings for startup shareholders.
When a portfolio company meets all qualification requirements for this tax break, it’s known as a qualified small business until found otherwise. Those requirements are as follows:
- The company must be incorporated as a U.S. C-corporation.
- The company must have had gross assets of $50 million or less at all times before and immediately after the equity was issued.
- The company must not be on the list of excluded business types.