Use the Chapters list below to select the part of the video you want to watch.
Chapters:
- How to optimize the fundraising choices in a Regulation A+ filing
- Opinions on Tier 1 Reg A+
- Reg A+ audit requirements
- The Most important mistakes to avoid when starting a Reg A+
- Choosing the optimal per-investment minimum
- Selecting law firms and auditors
- Payment options during capital raising
- Marketing and advertising
- Share price changes during the offering
Disclaimer:
The content in this webinar is not and shall not be construed as investment advice. This information is meant to be informative and for general purposes only.
MSC is not a law firm, valuation service, underwriter, broker-dealer or Title III crowdfunding portal and we do not engage in any activities requiring any such registration. We do not provide advice on investments. MSC does not structure transactions. Do not interpret any advice from MSC staff as a replacement for advice from service providers in these professions.
Rod Turner
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
www.ManhattanStreetCapital.com
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
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Don’t set a high escrow minimum, unless you have to, if you buying a building, if you're going to, if you're a sole purpose in the offering is raise $20 million to buy a company. And the price is $20 million and you don't have any choice. Right. But, um, the problem with doing that of course, is you have a lot of expense before you get to close escrow. It just gets very cash cashflow negative until you close escrow. We, so wherever possible, um, have a zero, a minimum that's that is the norm, unless you're buying an asset. I had a low maximum raise at a higher maximum raise because there could be some pleasant surprises for you, George being your one-year offering. Like it was easier to raise the money than you thought, uh, or that you have an acquisition opportunity that's come along and now you can fund it more easily, uh, et cetera, et cetera. So set a higher maximum. Then you need, there is no reason to set a low one, and then you don't have to hassle with trying to change that post offering don't waste time with tier one, probably in 2020, we'll find that 2% of capital raise via Regulation A+ was in tier one, virtually nobody does it anymore. Um, I will dwell on that. Just avoid tier one,
Two-year-old, it's a required two-year audit saw only required if your company has been around for two years, you know, if your company has existed for a year, then a year old, it is fine. Some people get confused by that. NASDAQ does require that companies, which list Regulation A+ IPO companies that list on the NASDAQ have at least a two-year operating history. So, you know, you kind of done something else and then come along in the form of brand-new entity that has no history and go public on the NASDAQ by Regulation A+ if you have a history, that's a good thing in order to support that transaction.
Single mistake to avoid and Regulation A+ I would say the two biggest mistakes to avoid really one is, um, self-serving very self-serving, which is don't do it yourself. You know, we have this frustrating experience from time to time with companies that approach us and these characteristics that they show who as they go through it that I recognize now, and I call them do it yourself. And very few of them end up succeeding basically. Uh, so I recommend not doing that. Use the professionals. We're good. We're great. I'm biased. But there are other companies out there doing this as well. I would recommend that you work with experts, not rather than do it yourself. The second big, big thing to, to avoid is doing a Regulation A+ possible. You shouldn't be doing it because it's not going to work. You know, if it's too hard to explain your business, you can, if you have a company that's solid, uh, and is difficult to explain, then you can raise money via a dancehall frame that pays an attractive dividend, preferably monthly.
Um, then that's a good, can be a good way to go. If you can carry that, if you're ready to do it. And if you can carry that burden, um, some companies will make a reserve for a few years in order to be able against capital raise in order to pay that dividend. That's the case where you've got a company that's solid, but boring and hard to explain hard to motivate people to invest in. But my point is, is that it's really important not to waste your time doing an offering that is by definition, not going to succeed. That's where we add a lot of value upfront. The last thing we want to do is help you do an offering that's pretty old age to fail, right? What's the point? We're all about doing offerings that succeed and where the investors will celebrate that they, that they participate later. That's it? Those are our two biggest goals. And I'm sure they're yours as well.
Setting a high per invested minimum, a lot of companies that haven't done a Regulation A+ come from, you know, it's sort of the higher, the minimum amount, the more, the better it feels, perhaps the more credible your company is, you know, it feels good to have a high minimum when you're dealing in reg D but in Regulation A+ the dynamic when you're marketing. And again, this is almost always the case where marketing arrays to lots of people, who they were doing something else. And they see a social media advertisement, which appeals to them. And they parachute in for a few seconds to look at the offering. Now we've got to quickly show them that what they thought they were going to see they're seeing, but it's compelling and exciting that it's credible. They're allowed to do it. They're allowed to invest in it. And that the amount of money that the minimum amount that they have to invest is play money for them.
Right? So, if you set the max the minimum to be per investor, $5,000, it's the kiss of death. The vast majority of people that will parachute in, if they see the 5k they'd gone and they're all coming back because that's, that's more than play money. They might come in if they were, if they were hypothetically to stay the course, to stay involved and like it, and love it, they might invest 5k later, but we've lost their attention forever already. So have a high, have a low minimum, like 200, 300, $400, uh, in order to lose the minimum number of engaged investors, and then they'll invest and then they'll monitor it. And if they like it, they'll invest more. And then in a few months, they might come back from the managed IRA and invest a heck of a lot more. And that's what tends to happen.
So that's one, I covered that automatic, but Lee, that seam yeah. Avoid big name, expensive law firms. Many of them don't know Regulation A+ and charged a lot of money and take a long time. We want people that are experts in this space. We have, that's what we do. We specialize in being the service providers in that know what they are doing and are cost effective and time effective, absolutely avoid big name auditor's because they may never get the audit done. We have one company planning, a New York stock exchange IPO. The NYC loved the company was growing one of those unusual companies growing at a very rapid clip and highly profitable. At the same time, we just don't see that very often. And yet they were irreversibly attached to having Deloitte do their audit. And there were two non us entities and a us entity.
And this company was too small for Deloitte to get out of their own way. And they never did get an audit done in time, like simple us gap audit. And in the end, the board told the CEO to kind the whole idea. I needed that no choice. He'd lost credibility with his board of directors, big name auditors very expensive. Another practice you see in, even in mid-range, auditor's is coming in and bidding a price for your us gap audit, which is not plaques theoretically, and then jacking up the price when it's too late for you to switch. Because if you switch to another auditor, guess what? You have to start all over again. They can't depend on the word done by the person I wrote it. So be careful with the auditing side of things. Oh yeah. We have great auditors that we recommend that, uh, aren't going to do that kind of thing.
Obviously, it taking, expecting to only raise money in the us is easier generally. And then it's not that easier, not so much easier because a lot of people outside the U S would love to invest in us companies that they might not otherwise get into. So, expanding your reach and then getting the agent, the marketing agency to do so as big using debit and credit cards is not risk-free especially credit cards because the investors can go back to the credit card company and ask their money back. But it's a heck of a lot easier for the investor to invest when you take that or, and or credit cards. So that's a good thing to do to make it easier to reduce the marketing expense. You, the way I look at it is if you got an investor that wants their money back and you are allowed to give them their money back, either the money back, you don't want squeaky wheels that day.
Yeah. That are unhappy, but easy for me to say, right? Remote control. No, it isn't all going to happen on its own. There's a lot of work involved internally. We'll coach you through the relevant learning, especially front end loaded. How are we doing on time? Doing fine. Um, don't neglect social media. The primary online source of raising capital is through social media advertising. The lovely thing is that when people like it, they'll share your ads. It's a lovely dynamic. The bad news is there are people out there that want to poison the well and they will. And you need to expect that there'll be some amount of time involved in, uh, responding to genuine questions in social media and on the offering page, obviously. But social media is where the problem lies because there are people who, for some reason, want to poison the well, make allegations that aren't justified and really create a negative vibe. So, it takes a proactive, positive, engaged effort on somebody's part on the team internally to engage with those folks in order to manage that you can't just delete the messages because the sec says, Hey, we want to market this stuff. It's an open forum. If somebody's got a legitimate criticism that has to stay public, you lie. You want to have the praise. You want to have the shares. You've got to have both sides of the coin.
Another aspect that the SCC cares greatly about is equal information. So, we'll help you with that. You know, if you answer a question that's an all new one before you answer it, you got to decide, do I want to answer this? Because I'm going to have to publish the answer and the question. So, everyone gets equal information. So, you know, that's a useful filter, but that's a detail to get into more than we need to right now.
You can change this. If it's a share offering, you can change the share price during the rays. If it's a debt offering, you can change the terms of the offer of the debt offering during the raise with proper preparation, the sec is more responsive. They're doing a faster job of turning around Regulation A+ offerings than prior to COVID. And I'm digressing into COVID for a moment. And the cost of marketing, our company's offerings is lower than before. COVID significantly eight, 10, 12% less than it used to be. Uh, so that's, uh, a very positive dynamic. It makes sense. When you go and study, what's gone on in the past, especially in China, where they've had more locked down, tight activities with viruses in the past. Um, in each case there was a surge of increased activity with online businesses, which sustain thereafter. And we're experiencing that because guess what, what are we doing? We are taking what was an in-person kind of activity, brick and mortar based, putting it online. It's going virtual. And this is accelerating Regulation A+, and other aspects of online investing, crowd investing, if you will.
THIS TEXT TRANSCRIPT HAS ERRORS IN IT THAT WERE CAUSED BY THE SPEECH TO TEXT CONVERSION SOFTWARE WE USED. DO NOT DEPEND ON THE TEXT TO BE ACCURATE. WATCH THE RELEVANT PARTS OF THE VIDEO TO MAKE SURE YOU ARE PROPERLY INFORMED. DO NOT DEPEND ON THIS TEXT TRANSCRIPTION TO BE ACCURATE OR REFLECTIVE OF THE STATEMENTS OR INTENT OF THE PRESENTERS.