Accredited Investor Attestation
While the regulatory landscape is constantly changing, a path of clarity made by the SEC is the 506(b) exemption under Regulation D. Assuming any investment vehicle follows the guidelines outlined here, an unlimited amount of accredited investors can join a special purpose vehicle (SPV) to invest in a wide range of securities (startup equity, a venture capital fund, etc.).
A core component of that guideline is for each investor to produce a self-accreditation questionnaire. This form asks questions about an individual's income, net worth, or knowledge that qualifies them to be an accredited investor. A similar set of questions exist for entities (LLCs, CCORPs, etc.). Here's a sample of one below:
These questions were adapted directly from Cooley, LLP.
Traditionally, your self accreditation data is held custody by a fund administrator— that's anything from a platform (e.g. AngelList, Carta) to a licensed CPA/accountant, to the lead investor of the deal themselves.
Traditional methods fall short on many dimensions:
- Privacy: there exists a document outside of the user's control containing sensitive information about one's net worth, income, involvement with funds/family offices, business health etc. This data can be solicited to others without your knowledge for gain that you cannot realize (e.g. many venture tooling companies keep this data private as a moat for their platform)
- Verifiability: It is nearly impossible to truly prove that an individual or entity signed off on the questionnaire. DocuSigns are not often used for these questionnaires, and users are instead relying on the data integrity (and moral integrity) of a centralized fund administrator to keep this data safe and in the right hands.
- Interoperability: For every new venture tool that requires individuals be accredited investors, you'll have to re-fill out the accredited investor questionnaire. High friction user experience aside, this opens up new attack vectors for personal data to be leaked, and for companies to use your data as a moat.
Seed Labs' self-accreditation in zero knowledge technology fundamentally changes this paradigm.
We couple the latest in zero knowledge proof cryptography with the open verifiability of EVM-blockchains to enable a trustless claim of an individual or entity's accreditation status. With our product, the following is possible:
- Interoperability: our proof technology ends up as metadata onto industry-standard ERC-721 contracts. This enables any project— web2, web3, within or outside of Seed Labs— to build products for you (fund administration services, consumer experiences, deal flow communities).
- Open verification: no regulator, fund administrator, deal lead, or fellow investor ever needs to trust a venture tooling company again. Instead, anyone can verify for themselves that a user truly claimed to be an accredited investor.
- Next-generation privacy: you never have to trust our servers or our data integrity policy to ensure your information doesn't go into the wrong hands. Your personal information never leaves your local device. A hash of the computation over that data, instead, is stored publicly, which is impossible to reverse thanks to our ZK-SNARKs technology.
- 1.Fill out an online accredited investor questionnaire. This data never leaves the client. (this can be validated by monitoring the network logs)A sample question adapted from the accredited investor questionnaire. This data is never uploaded anywhere.
- 2.Compute a zero knowledge proof. In one click, you'll run your accreditation data through the zero knowledge circuit to determine if you qualify as an accredited investor.
- 3.Upload the proof to an immutable server. We upload the proof output to IPFS, an always-alive distributed data storage protocol validated for security by hundreds of thousands of computers. An example of the data uploaded can be found here
After these steps, you are left with the ability to prove your self-accreditation to any platform for any product. Other's can trustlessly verify your proof. For example, feel free to verify the proof for mohib.eth below:
The future of venture capital is open to all and privacy-preserving. Self-accreditation in zero knowledge is only the beginning.
Disclaimer: no statement in this document is intended as legal advice. Please consult with your own legal team as needed. Seed Labs does not encourage any illegal activity in violation of the law, including SEC securities law.