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Upstart Business Journal – Elio Motors launches JOBS Act investment option to crowdfund with credited investors

SOURCE: Upstart Business Journal

By Michael del Castillo

Upstart Business Journal Technology & Innovation Editor

The UpTake: Elio Motors is taking advantage of a little discussed provision in the JOBS Act that lets some investors get involved with much less money than before.

Elio Motors today is launching an investment option made possible by the JOBS Act, passed with bi-partisan support in April 2012, and signed into law by President Obama.

The investment option, called 506 (c), lowers the minimum amount required to invest to $15,000, but still requires the investor be accredited. It’s like crowdfunding, for wealthier Americans.

“Our capital markets aren’t set up for a project like Elio,” said Paul Elio, the company’s founder and CEO during a phone call yesterday. “You have the VCs who are comfortable with startups but they hate this many zeroes and you have the private equity guys who are comfortable with the zeroes, but hate startups.”

The current fundraising goal is $30 million, Elio told me. But the total amount needed to go into production is $230 million. Investors will receive a convertible note that will turn into shares if the company raises its Series A round of funding.

Under the terms of the JOBS Act accredited investors—those with $1 million in assets or two years of income of at least $200,000—can participate in the smaller investments, according to a statement. Those interested will have to provide proof they are accredited investors and sign a non-disclosure form. Once eligibility is verified, a private placement memorandum (PPM) will be provided for investment consideration.

Last month we published a report on the unveiling of what may be the first American-made gas-powered car engine in a generation. In response, we received many notes from skeptics who doubted the ability of Elio, who was on our inaugural Upstart 100 list, to pass safety standards, as he promised, since motorcycles—as his vehicle is currently classified—aren’t subject to the same tests.

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