
Ask HN: A felon has offered to invest in my startup, what are the implications? - ThownAway
I&#x27;m in a friends and family round, and a long time friend with a felony drug conviction from 15 years ago has kindly offered to invest in my business. This person never served time, rehabilitated himself and is a small business owner in a very legal and interesting profession.<p>I&#x27;m in the process of taking on funds for my own business and I really need money, but I don&#x27;t want to screw up anything down the line.<p>He will not have a board seat, will not actively participate in the business.<p>Do investors care about backgrounds of other investors if the F&amp;F have no say?
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davismwfl
I would third what you have heard here. A person that never served time for a
felony that was not financially focused (e.g. wasn't a crime of dishonesty)
would not be excluded from participating in a round of friends and family.
Especially with no voting or board seat.

If you are exceptionally concerned have the individual invest via a LLC or
separate company, but I doubt any future investors will care either way as
they will only be focused on your ability to deliver and as long as that isn't
compromised you are good.

There are some restrictions on a felony conviction in the SEC rules but I do
not believe you would trigger them by taking funds from the person. IANAL but
I believe they only become a factor if the person has a material interest or
has a voting/board position in the company.

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jeffmould
IANAL, but there is nothing illegal about an investor with a felony record,
and there is nothing illegal about having an employee or board member that has
a felony conviction. Now with that said, in the case of moral turpitude
charges (i.e. fraud, theft, etc..) there could be some push back from
investors or the board if the individual is going to have a say in operations
or a seat on the board. There could also be pushback if the charge was
business related (i.e. they stole from a previous employer, were involved in a
investment scheme).

In this case though from what you say, a drug charge, no convictions since,
with that much time since conviction, I personally wouldn't even worry about
it. If you know the individual well, are willing to go to bat for that
individual, and it is a problem for someone else, that is their problem and
probably not worth your time fighting over to convince them otherwise. At the
friends/family stage though, this level of concern is even further reduced in
my opinion.

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edoceo
From my experience, old (>15yr) convictions that didn't require time served
are a non-issue. Especially given the recent small business operation.

Investors do care about the group they are investing with. I think you can
make a clear case that this party is a low risk.

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brudgers
Investors invest to make money. As outlined, it doesn't sound like it would
make a difference beyond providing an excuse. For what it's worth Robert
Morris of Morris Worm fame is a YC partner.

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sarciszewski
15 years is a long time. Don't hold it against him.

