Chapter 2 | Know The Rules & Regulations
"It's all a racket, it's the same thing, just the risk that you take...”
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“TECs in the dresser, money off tech, pushing a Tesla… Rolled up a fresh one, it's one IPO to the next one… Rich from corporate or thuggin', expensive mistakes… It's all a racket, it's the same thing, just the risk that you take.”
Store Run - Nas
The Ghetto VC is a challenge to the status quo system in place that helps the rich get richer through laws that allow them to multiply their wealth, while those who are not wealthy have limited options to do the same with their own money. In this chapter, we’ll start breaking down the ways that you can invest like a venture capitalist, even if you don't have millions of dollars in assets under management.
It's incredibly important to understand the rules and regulations as we dive deeper into the various methods of investing in privately-held companies. A major key to remember is that all investments involve risk — meaning your investment could become worthless and you could potentially lose your money.
The U.S. Government gets very particular about how and where money flows within the economy, who gets to invest capital, what types of businesses individuals get to invest in, how much they can invest, and ultimately who gets to build wealth. More specifically, our government operates various agencies such as the Securities and Exchange Commission (SEC)1 to provide regulations that protect investors from fraud and other illegal investment activities.
Regulations exist to protect investors.
These regulations exist to protect investors from bad actors — individuals or companies creating fraud, manipulating financial markets, or simply failing to operate with the best interests of their investors. Unfortunately, some companies may defraud investors by taking their money and investing in things that are not a part of an agreed upon deal, or even investing in questionable or illegal assets. The SEC exists to ensure that companies and investors in various asset classes such as public stocks, private equity, and other securities are abiding by the rules.
Some of the most prominent laws governing the private markets today, such as The Securities Act of 1933, are nearly 100 years old. Although some may seem antiquated and overly restrictive, companies and investors alike that fail to abide by these regulations can potentially face legal ramifications including fines and jail time.
“For those who make the laws, I'ma always have smoke for them…”
Jay Z - GOD DID