I’ve lead a couple of small financing rounds in my day, so I know more than I would like to about the various “exemptions from registration” that can be applied, either in Canada or in the US. And I’ve worked in and around the valley for long enough to have heard a variety of first-hand reports about how things can go with stock options - both the good, and the bad. An interesting story was the fact that both Red Hat and VALinux issued “friends and family” class stock options to members of the linux development community, prior to their IPOs. And it got me thinking…

…what, exactly, is the definition of a “friend”? The most common SEC exemption (and the one that small businesses rely on without even knowing it, typically) is the so-called “three-F” class - “Friends, Family, and Fools”.  (Fools only qualify if they’re investing a minimum of $30,000, or if they’re a “high-net-worth individual”, who automatically qualifies as a registered investor.) But according to Myspace, I have 40,000 friends - can they buy stock in my company?

This has some really cool implications for BountyUp, as well - if “friendship” in an online social network, (such as BountyUp) is sufficient for the SEC, then total strangers could quite easily become friendly enough to invest in a mini-max private placement, which could actually be posted (with sufficient blue-sky disclaimers) as a bounty. Expect to see this as a feature in a future release.