“Should you accept an investment offer from a non-accredited angel investor in Malaysia?” “Do you need to get accredited as an angel investor?” “What if the angel who invested in my startup wasn’t an accredited investor? Will I get into trouble?”
No, there is no law requiring an investor to get accredited before he or she can invest as an angel in Malaysia. But receiving capital from an accredited angel as opposed to a non-accredited angel is generally a better decision from an ESG (especially on the “G” side) corporate governance standpoint. Here’s a simple reason why.
An accredited angel is someone that has satisfied the “hygiene” test. To get accredited, he had to pass through a background check. He must submit his personal details, details of his source of income/ fund, latest tax filings. He may also need to fulfil other KYC checks done as needed the accrediting officers at the Malaysian Business Angels Network (MBAN), the sole entity in charge for accrediting angel investors in Malaysia and representing angels group in the country.
If your angel is an MBAN member, you should be comforted that he’s good for the money. He had taken the time to get himself registered as angel. He has disposable cash and ready to deploy if the asset matches his risk appetite.
As a founder, deciding who gets to invest in your business is one of the crucial decisions that you need to make as a founder. In my experience as a startup lawyer, I’ve had founders approaching me telling me about a certain so and so investor bringing cold hard cash inside a briefcase to insisting on taking the cash first and settling the paperwork afterwards. It may sound flattering and convincing at first, but this is usually a red flag on the type of investor you may want to avoid in your cap table.
Ultimately, there are smart money and dumb money out there. Wealth people so silly things at time such as not get accredited for various reasons. As a founder, you have to do your own ‘hygiene’ test like getting the angel to share his other portfolio so that you can ask other startups he had invested in previously. Institutional investors (i.e. serious financial investors that invests money on a daily basis like corporates and venture capitals) do due diligence not just on your business but usually look at the present shareholders, including all the investors giving you prior capital.