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The Growth of Online Startup Investments

Posted on by Oscar Jofre Tags: , ,

Investments in online startups have been growing rapidly in recent years, and the trend is expected to continue well into the future, with the number of online startup deals growing nearly 10% in 2022, according to KingsCrowd. This growth can be attributed to several factors, including the increasing popularity of crowdfunding platforms and the decline in venture capital funding.

 

Why the Popularity Surge?

 

Online startup investing offers many advantages over traditional venture capital funding. For one, it’s much easier to get involved. Platforms like Wefunder and SeedInvest make it simple for anyone to invest in private companies. And because these platforms are online-only, there’s no need to travel or attend tedious meetings. Additionally, online startup investing is much more democratic than traditional venture capital funding. Anyone with a computer or smartphone can participate, which opens up investment opportunities to a much wider audience. With startups being able to grow online instead of requiring a physical presence, this migration to digital-only investing was inevitable.

 

Online startup investing is much less risky than traditional venture capital funding. In most cases, startups that raise money through crowdfunding are already well on their way to becoming successful businesses. This means that investors are far more likely to see a return on their investment. Overall, online startup investing is a great way for retail investors to get exposure to high-quality investment opportunities. With the right platform, getting started is easy, and there’s no need to be a financial expert. So if you’re looking for a way to get involved in the tech industry, online startup investing is definitely worth considering. 

 

Growth in Online Startups

 

With the occurrence of the pandemic and the rise of social distancing, there was a dramatic increase in the number of people working from home. This migration to digital-only workforces has been a boon for online startups. With more people working remotely, there’s been a surge in demand for products and services that can be delivered digitally. And as more and more of these startups pop up, it’s no surprise that online startup investments have been on the rise.

 

Interestingly, this trend appears to be here to stay. Even as some companies are beginning to allow employees to return to the office, many are opting to continue working from home permanently. This is good news for online startups, as they can continue to count on strong demand for their products and services. So if you’re thinking about investing in online startups, now is a great time to get started.

 

What’s Next?

 

With crowdfunding platforms reporting an increase in the amount of fundraising done, sometimes as much as double in the first four months of 2022, this method of startup funding is likely here to stay. This rise in online investing has given everyday Americans the chance to get in on the action and invest in some of the most innovative companies in the world. And as the overall economy continues to struggle, it is expected we’ll see even more companies turning to online crowdfunding platforms to raise money. So if you’re looking for a way to invest in the future, online startup investing is definitely something you should consider. With the right platform, it’s easy to get started, and there’s the potential to see significant returns on your investment. And for startups, this is a great way to raise money and show your company to a larger audience online.

 

KoreClient Spotlight: Brent Fawson, COO of Facible

Posted on by Oscar Jofre Tags: , , ,

Working at Facible, Brent Fawson believes that the company is poised to leave a lasting impact on lives around the world by making medical diagnostic testing more accessible. We sat down with Brent and talked to him about the medical industry, his company, and capital raising in the medical field.

Q: Tell me a little more about your company. How do you impact the Medtech space and the customers you serve?

A: Facible Diagnostics is a diagnostics company that uses our revolutionary Q-LAAD technology to take hospital-grade diagnostics out of the lab and to the point of care. Legacy diagnostic technologies often require a tradeoff between speed, accuracy, and ease of use. Q-LAAD technology enables the development of faster and more accurate diagnostic tests that are easier to run, and don’t require complex machinery so they can be run outside of a hospital laboratory making hospital-grade diagnostic testing available anywhere. It’s ideal for underserved and rural areas, urgent cares, physician’s offices or even the home.

Q: What excites you most about your industry?

A: I think with the SARS-CoV-2 pandemic, we have all seen the limitations with some of the legacy technology platforms. To have a revolutionary technology at the forefront of the industry is very exciting. I feel we are just scratching the surface of understanding and using medical data to improve our lives. There are companies out there, like Apple, that are beginning to use this data for research purposes. We can create richer data sets to understand and address big challenges we all face. With the COVID crisis, we have all seen not only current deficiencies in diagnostics, but also an unprecedented investment at the same time which will work to improve our lives.

Q: How do you see the LSI MedTech event having an impact on your company?

A: We are really excited to meet with like-minded people who understand the value a company like Facible can bring to the world through their partnership. We have a unique vision to offer investors and partners and love to collaborate and explore the endless possibilities of where our technology can go.

Q: Now that your company will be using Regulation A+ for your next offering, how do you see this helping your company?

A: A startup like Facible is always at risk of choosing the wrong funding pathway. Biotechnology development is expensive and it’s easy to start chasing money to keep the company going. You then run the risk of partnering with investors with different goals, objectives, and understanding of how best to use the funds provided.  We feel that because our technology is so revolutionary, we want to see our vision realized and Regulation A+ is the best path toward making that happen. This also is a great way to allow people that have supported us all along to finally be able to invest in our future.

Q: Why do you think education on RegA+ places such a vital role in expanding access to capital for medical companies?

A: Right now, there are very traditional ways to raise money. It’s such a well-worn path, it’s great to have these other alternate options out there and understand them. As we started looking at Reg A+ a couple of months ago, we knew nothing about it. It’s vital that entrepreneurs understand all of their options for capital to allow their company to be as successful as possible. Along with that, Reg A+ is so new that there are not many people that really understand how it works. It’s only through talking to people like Oscar (CEO, President, KoreConX) and Doug (Senior Principle, Regulation D Resources) that we have been able to understand it.

Q: What effect do you think Reg A can have on Medtech companies in general?

A: Medtech development is expensive. For a small company who has great ambition, amazing science, but few institutional connections it can be nearly impossible to fund a company. To have access to a broader capital market allows us to sell our vision directly to investors that understand and appreciate the impact that these emerging technologies can provide.

Q: What advice would you give a young Medtech entrepreneur as they begin their journey through capital raising and building their company?

A: You must have a good plan. You need to be willing to test your ideas with the right people so that you understand what value to bring. Make sure you are surrounding yourself with people who are willing to be critical. I have seen many companies try to move without fully vetting their vision. And beyond that, really try to understand what it’s going to take to bring your product to market. It’s an expensive and challenging process so make sure you go in with your eyes wide open.

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Regulation CF(RegCF), D (RegD), A (RegA+) Disclaimer


This communication may be deemed to be a solicitation of interest under Regulation CF (RegCF), D (RegD), A (RegA+) under the Securities Act of 1933, in which case the following applies:

  • No money or other consideration is being solicited, and if sent in response, will not be accepted;
  • No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is qualified, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date;
  • A person’s indication of interest involves no obligation or commitment of any kind; and 
  • An offering statement, which would include a preliminary offering circular, has not yet been filed with the SEC.

Labor Day: Democratization and Opportunities to Create Jobs

Posted on by Oscar Jofre Tags: , , , ,

The growth in Regulation A+ and Regulation CF offerings fuels entrepreneurship and job growth in the United States. Since 2016, there have been over 4,600 capital offerings utilizing Reg A+ or CF, with over $500 million raised in 2021 alone. This capital helps companies grow, create jobs, and positively impact their local communities. Crowdfunding is a robust tool for businesses to secure funding, with an average of 43.8% of pre-revenue startups successfully using this method.

 

Crowdfunded Capital and Democratization

 

When businesses utilize crowdfunding, they can access a much larger customer base, allowing them to have a more significant impact on their local communities. it is particularly well-suited for getting loyal customers, employees, suppliers, and other stakeholders to become investors in your company. Crowdfunding enables the democratization of the private capital market by giving these parties an opportunity to participate in the investment process, something that has not been practical before with traditional investing. For many companies, this unlocks a powerful opportunity and  42% of raises reach their goal in 3 days. 

 

Creating Job Opportunities

 

With over $1 billion in capital raised through Reg CF at an average of $1.3 million per raise, these businesses create innovation and bring economic change to local communities in the form of spending and jobs. An estimated $2.5 billion went into local communities from crowdfunded companies in 2021 alone, with money changing hands as much as six times before leaving the local economy. This demonstrates how crowdfunding directly impacts many communities across the country. It brings money to a community by creating jobs; companies that utilize regulated crowdfunding support over 250,000 American jobs across 466 industries. That number is expected to grow as the private market continues to expand. 

 

Crowdfunding allows all types of businesses to access the capital they need to grow and create jobs through Reg A+ and Reg CF. Between 2000 and 2019,  small businesses created 10.5 million US jobs, while large companies only created 5.6 million, according to 2020 data from the US Small Business Administration. This highlights the importance of small businesses within the economy. However, many small businesses have not traditionally had the same access to capital as large ones. This changed with the JOBS Act, increasing the availability of capital for these small businesses and leveling the playing field. As these companies continue to receive capital from the JOBS Act exemptions, the economy continues to benefit from the democratization of capital. 

 

It’s not only the number of jobs that are important but also the quality of those positions. Good jobs lead to a better living standard. When people have good jobs, they can afford to make purchases, give their children better access to education, access healthcare whenever needed, and many other positive benefits for these individuals. At the same time, they support businesses within their community, which helps those grow as well. A strong economy also attracts business investment from other parts of the country and the world. All of these factors lead to more jobs, and the cycle continues.

 

Investing in the Future

 

The expansion of crowdfunding presents opportunities for anyone interested in becoming an investor, with a chance to get in on the ground floor of the next big thing, while also supporting businesses and creating jobs. It’s a win-win for everyone involved, and it all starts with the democratization of capital. When you invest in a company through crowdfunding, you can invest in your community. The money that is raised through these offerings stays local, and as the businesses grow, they pump even more money back into the economy.

 

Crowdfunding is an excellent way to support businesses and create jobs, but it’s also a great way to invest in the future. With the industry expected to continue to grow, now is the time to get involved. With opportunities for everyone, from accredited to retail investors, there has never been a better time to get involved in the democratization of capital. So this Labor Day, remember that when you support businesses through crowdfunding, you also help create jobs and create a brighter economic future.

 

The SEC Can Stop Your Regulation A Offering At Any Time

Posted on by Mark Roderick Tags: , , , , , ,

The SEC has two powerful tools to stop your Regulation A offering anytime.

Rule 258

Rule 258 allows the SEC to immediately suspend an offering if

  • The exemption under Regulation A is not available; or
  • Any of the terms, conditions, or requirements of Regulation A have not been complied with; or
  • The offering statement, any sales or solicitation of interest material, or any report filed pursuant to Rule 257 contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which they are made, not misleading; or
  • The offering involves fraud or other violations of section 17 of the Securities Act of 1933; or
  • Something happened after filing an offering statement that would have made Regulation A unavailable had it occurred before filing; or
  • Anyone specified in Rule 262(a) (the list of potential bad actors) has been indicted for certain crimes; or
  • Proceedings have begun that could cause someone on that list to be a bad actor; or
  • The issuer has failed to cooperate with an investigation.

If the SEC suspends an offering under Rule 258, the issuer can appeal for a hearing – with the SEC – but the suspension remains in effect. In addition, at any time after the hearing, the SEC can make the suspension permanent.

Rule 258 gives the SEC enormous discretion. For example, the SEC may theoretically terminate a Regulation A offering if the issuer fails to file a single report or files late. And while there’s lots of room for good-faith disagreement as to whether an offering statement or advertisement failed to state a material fact, Rule 258 gives the SEC the power to decide.

Don’t worry, you might think, Rule 260 provides that an “insignificant” deviation will not result in the loss of the Regulation A exemption. Think again: Rule 260(c) states, “This provision provides no relief or protection from a proceeding under Rule 258.”

Rule 262(a)(7)

Rule 262(a)(7) is even more dangerous than Rule 258.

Rule 258 allows the SEC to suspend a Regulation A offering if the SEC concludes that something is wrong. Rule 262(a)(7), on the other hand, allows for suspension if the issuer or any of its principals is “the subject of an investigation or proceeding to determine whether a. . . . suspension order should be issued.”

That’s right: Rule 262(a)(7) allows the SEC to suspend an offering merely by investigating whether the offer should be suspended.

Effect on Regulation D

Suppose the SEC suspends a Regulation A offering under either Rule 258 or Rule 262(a)(7). In that case, the issuer is automatically a “bad actor” under Rule 506(d)(1)(vii), meaning it can’t use Regulation D to raise capital, either.

In some ways, it makes sense that the SEC can suspend a Regulation A offering easily because the SEC’s approval was needed in the first place. But not so with Regulation D, and especially not so with a suspension under Rule 262(a)(7). In that case, the issuer is prevented from using Regulation D – an exemption that does not require SEC approval – simply because the SEC is investigating whether it’s done something wrong. That seems. . . .wrong.

Conclusion

As all six readers of this blog know, I think the SEC has done a spectacular job with Crowdfunding. But what the SEC giveth the SEC can taketh away. I hope the SEC will use discretion exercising its substantial power under Rule 258 and Rule 262(a)(7).

 

This post was written by KorePartner Mark Roderick and the original post can be found here. Mr. Roderick is an attorney at Lex Nova Law, where he leads the firm’s Crowdfunding and Fintech practice. He writes a widely-read blog at CrowdfundingAttorney.com and is a featured speaker at Crowdfunding and Fintech events across the country, including New York, Texas, Chicago, and Silicon Valley. Mark is one of the most prominent Crowdfunding and Fintech lawyers in the United States. He represents portals, issuers, and others across the country and around the world.

KoreClient Spotlight: Notarized.com

Posted on by Oscar Jofre Tags: , , ,

Notarized.com is a company that provides on-demand traveling notary services nationwide to businesses and individuals, as well as offering remote online notarization services in a convenient and secure way to sign documents online. Their system is encrypted with the highest level of security, and all documents are certified and legally enforceable. Recently we spoke with Notarized.com CEO Omar Kubba about the company and what they hope to accomplish with their RegCF offering.

 

With a passionate team, Notarized.com wants to change how people view closings. Streamlining the notary order process, Notarized.com makes it easy for busy people to find a notary, schedule an appointment and get the job done quickly. Notarized.com also offers a cloud-based notary solution that is convenient and easy to use for scheduling a remote online notarization. This process protects your confidential information and electronic signature with encryption and offers a legally binding document. Customers can sign documents electronically from anywhere in the world at any time, or they can schedule a traveling notary on demand to come to them, documents in hand. 

 

A remote online notarization solution allows the entire document signing process to be seamlessly conducted in the cloud, eliminating paper, hassles, and wasted time while saving money. This is an excellent solution for title companies, independent escrows, real estate professionals, lenders, and attorneys.

 

Omar Kubba founded Notarized.com in December 2016. As a second-generation title professional with over 20 years of sales experience in the title insurance industry, Omar is a multiple award-winning sales executive ranked in the top 1% of title professionals in the nation. “My firsthand experience in the industry highlighted inefficiencies that could be solved with a signing solution. I started the company to create a better process,” said Kubba. Notarized.com has been entirely self-funded since its inception in 2016. Notarized.com only began the journey of capital raising because they have an extensive plan to expand the company to serve their clients better. “Because of what we were trying to offer, we decided to raise capital to bring that dream to fruition,” said Omar.

 

In the future, Notarized.com aims to expand its product and service offerings to clients, increasing the number of verticals it operates under. In their roadmap is a complete overhaul of the online notarization experience to include a sophisticated, innovative, and revolutionary remote, online notarization platform, and mobile app, a secure e-signature solution, nationwide deed preparation software engine, a Notarized.com certified training program for notaries, and a contract lifecycle management (CLM) platform that empowers users to manage every stage of business contracts, among other additions to its suite of capabilities. 

 

To help achieve these goals and facilitate the capital raising process, Notarized.com has contracted 21st Century Capital to guide them through the process of capital growth. With 20+ years of capital experience, 21st Century Capital has a track record of delivering results to the companies they work with. 

 

Notarized.com has chosen to raise the capital for its expansion via the crowdfunding provisions of the JOBS Act and is using the KoreConX All-In-One Platform. “Notarized.com has an opportunity to present itself to a huge group of worldwide investors and let these people get in on the ground floor. While I still raise capital the traditional way, [RegCF] has changed my way of thinking about raising capital,” said David Bernard, Notarized.com advisor.

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Regulation CF(RegCF), D (RegD), A (RegA+) Disclaimer


This communication may be deemed to be a solicitation of interest under Regulation CF (RegCF), D (RegD), A (RegA+) under the Securities Act of 1933, in which case the following applies:

  • No money or other consideration is being solicited, and if sent in response, will not be accepted;
  • No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is qualified, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date;
  • A person’s indication of interest involves no obligation or commitment of any kind; and 
  • An offering statement, which would include a preliminary offering circular, has not yet been filed with the SEC.

Crowdfunding Platforms Pose a Significant Opportunity for Global Investors

Posted on by Oscar Jofre

Across the world, there are an estimated 4.7 billion people with the means to invest in the private capital market. While this may be a rough estimate, it provides a good starting point for understanding the reach of potential investors worldwide. And, thanks to the rise of online crowdfunding platforms, it is easier than ever for these potential investors to make their investments. Through these platforms, both retail and accredited investors can invest small sums of money in startups looking to raise capital through the JOBS Act exemptions. 

 

This can be risky, but it can also be very rewarding if the startup is successful. The general principle of investment risk is to never invest more than you can afford to lose. But, with smaller individual investors, people who can only afford to lose a little are no longer excluded from these opportunities. However, any reputable equity crowdfunding platform has strict compliance standards that ensure that the companies being funded are legitimate and compliant with all securities laws, thus, reducing some risks to the investors. When both funding portals and issuers adhere to all compliance requirements, the risks of losing money to fraud or incompetence. Still, investors must keep in mind that regulations are unable to protect them from changes in the market.

 

The Landscape of Funding Platforms

 

In the United States, there are over 70 FINRA-regulated crowdfunding platforms that companies can choose to utilize for their offerings. Being a FINRA-registered platform ensures that funding portals are following FINRA regulatory oversight and reporting requirements, introducing a layer of protection for investors against fraud. Before choosing to invest, potential investors should check with FINRA to ensure the funding portal is regulated. 

 

Equity crowdfunding is a relatively new phenomenon, but it has already impacted the startup ecosystem and companies have already raised more than $1 billion using RegCF alone since the JOBS Act was enacted in 2012. By allowing companies to raise capital without an IPO while allowing investors to leverage the power of the Internet to capitalize on up-and-coming companies, everybody wins.

In 2021 alone, equity crowdfunding raised over $500 million for companies. This means that businesses have a wide range of short- and long-term investment sources to choose from seeking capital to grow and support their business objectives. With equity crowdfunding, various industries can benefit from improved access to capital, while investors can prosper from getting in with a company on the ground floor.

Arcview Access & Cannabis Investment Summit Takes Places October 19th-21st in NYC

Posted on by Oscar Jofre Tags: , , ,

If you’re an investor, cannabis company, or industry specialist looking to make connections in the legal cannabis industry, the upcoming Arcview Access & Cannabis Investment Summit is not to be missed. Taking place in New York City from October 19th-21st, this event will bring together some of the biggest names in the business for three days of networking and learning. Arcview has been a trusted global leader in the cannabis industry for years, and this event is highly anticipated. This summit offers investors, companies, and entrepreneurs unparalleled access to top regulators and an opportunity to pitch their businesses to a panel of expert judges in hopes of winning investment funding. Attendees can expect two days of engaging main stage content, workshops, and panels on topics such as capital raising, company valuations, and opportunities in the cannabis market. 

 

Arcview serves the hemp and cannabis industry, with a keen focus on investing, education, and networking. Approximately 60% of attendees are expected to be investors in public cannabis companies, private equity funds, accredited individual capital, and more. Another 30% of the audience is expected to be cannabis companies in various niches with company valuations ranging from $2m to $200m, while the rest are expected to be industry specialists. 

 

The cannabis investment summit is an excellent event to attend for many reasons. For starters, it gives investors an opportunity to learn more about the industry and explore potential investment opportunities. Additionally, it’s a great opportunity to network with other like-minded individuals and make connections that could prove to be beneficial down the road. Whether you are in the industry or just looking to invest, this three-day event will have something for you. The event will take place at Convene, located at 45th and Park Ave in Manhattan. It will start with a reception on October 19th and continue into two full days of highly curated content, speeches, and even a field trip.

 

Come network with some of the biggest names in the business, learn from top regulators, or pitch your businesses to a panel of expert judges. If you want to make connections and do business in the legal cannabis industry, this event is for you! You can register now here.

Opportunities to Invest in the Private Capital Market

Posted on by Oscar Jofre Tags: , , , , , ,

The private equity market is rapidly growing, fueled by expansions to the JOBS Act exemptions in 2021. By 2030, the private capital market is anticipated to grow to a total value of $30 billion. This is largely driven by more companies seeing the potential in regulated crowdfunding through RegA+ and RegCF, and the rising interest of retail investors looking to move into the private space. Plus, research has shown that there is nearly $5 trillion in uninvested funds held by private equity firms alone. In addition, retail investors now represent 25% of the security trading volume in the public markets, a significant increase from the previous decade. According to BNY Mellon, “a new generation of younger retail investors are purchasing equities with the intention of becoming long-term market participants.” These factors have coalesced to create a favorable environment for investments in the private capital market. 

 

With favorable conditions to invest in public companies, there are many emerging and attractive industries for investors. Some of these include:

 

  • Medtech: Every day, companies are creating lifesaving technologies to improve human health and revolutionize medical care. Medtech companies often require high amounts of capital to fund clinical trials, research and development, and the many other processes they must go through. Since offerings limits for RegA+ were expanded to $75M, Medtech companies are increasingly viewing the exemption as a viable choice for raising capital.

 

  • Cannabis: The cannabis industry is rapidly growing, especially as public perception grows more favorable and legalization at the state level spreads across the US. However, cannabis companies are often underserved by traditional financial institutions due to the illegality at the federal level. With RegCF and RegA+, cannabis companies can tap into a vast market of retail investors who are willing to invest in an evolving industry.

 

  • Real Estate: Traditional real estate investments are capital intensive, making them cost prohibitive for many investors who are not high net worth individuals, private equity, or institutional investors. However, with RegA+ and RegCF, retail investors can own fractions of properties. And in, 2020, insurance, finance, and real estate accounted for 53% of qualified RegA+ offerings and 79% of the funds raised through the exemption. This indicates that real estate is an attractive investment opportunity for many investors. 

 

  • Franchises: JOBS Act exemptions create new opportunities for franchisees and franchisors to raise capital. These companies often have existing customers, who can become investors and brand ambassadors.

 

Regardless of the industry, a key component of any offering is the broker-dealer. Many states require issuers to work with a broker-dealer when selling securities in those states. A broker-dealer ensures that the issuer follows all SEC and state securities laws. More importantly, working with a FINRA-registered broker-dealer gives investors confidence by verifying that the issuer has provided all required information for the investors to make a sound investment decision. FINRA protects American investors by ensuring that brokers operate fairly and honestly. Plus, the broker-dealer also completes compliance activities, such as KYC, AML, and investor suitability and due diligence on the issuer themselves. 

 

Working with a broker-dealer ensures that the issuer behaves compliantly and gives the investor peace of mind when investing in one of the many investment opportunities within the private capital market.

 

Benefits of Digital Securities for Investors and Issuers

Posted on by Jason Futko Tags: , , , , ,

With the emergence and development of blockchain technology, digital securities have seen wider adoption by investors and investment firms. Arising from the need for protection against fraud and as a way for investors to ensure asset ownership, digital securities are a digital representation of traditional securities and follow the same regulatory rules. Since their first appearance, digital securities now include any debt, equity, or asset that is registered and transferred electronically using blockchain technology. 

Digital securities are made possible by blockchain, also known as “distributed ledger technology”. Distributed ledger technology is a database where transactions are continually appended and verified by multiple participants, ensuring that each transaction has a “witness” to validate its legitimacy. By the nature of the system, it is more difficult for hackers to manipulate, as copies of the ledger are decentralized or located across multiple different locations. Changes to one copy would be impossible, as the others would recognize it as invalid.

Distributed ledger technology allows digital securities to be incredibly secure. Ownership is easily recorded and verified through the distributed ledger, a huge benefit over traditional securities. Any transfer of digital securities is also recorded and with each copy of the transaction stored separately, multiple witnesses of the transaction exist to corroborate it. 

Traditional or digital

With traditional securities, investors can lose their certificate of ownership or companies can delete key files detailing who their investors are. Without a certificate, proving how many shares an investor owns would be incredibly challenging. In contrast, digital security ownership is immutable. Investors are protected and always able to prove their ownership since the record cannot be deleted or altered. Additionally, investors can view all information related to the shares they’ve purchased, such as their voting rights and their ability to share and manage their portfolios with both accuracy and confidence. 

Since the record is unchangeable, it also serves as a risk management mechanism for companies, as the risk of a faulty or fraudulent transaction occurring is removed. Digital securities are also greatly beneficial to the company when preparing for any capital activity since the company’s records are transparent and readily available. With traditional securities, the company would typically hire an advisor to review all company documents. If the company has issued digital securities, this cost is eliminated, as it is already in an immutable form.  

Smart contracts made possible

The use of digital securities also makes smart contracts possible, which have preprogrammed protocols for the exchange of this kind of securities. Without the time-consuming paper process, companies can utilize digital securities to raise funds from a larger pool of investors, such as the case with crowdfunding. Rather than keeping manual records of each transaction, the smart contract automatically tracks and calculates funds and distributes securities to investors. 

Companies looking to provide their investors with the ability to trade digital securities must be aware that they are required to follow the same rules set by the SEC for the sale and exchange of traditional securities, such as registering the offering with the SEC. This ensures that potential investors are provided with information compliant with securities regulation worldwide. According to the SEC, investors must receive ongoing disclosures from the issuer so they can make informed decisions regarding ownership of their securities. Companies that are not compliant with the SEC can face severe penalties and may be required to reimburse investors who purchased the unregistered offerings. 

Besides the companies offering securities, broker-dealers must also register with the Financial Industry Regulatory Authority (FINRA). Similarly, platforms on which digital securities can be traded must register as an Alternative Trading System operator with the SEC. Both broker-dealers and ATS operators can face severe penalties if not properly registered. 

Secondary market (ATS) also benefits

Possibly the greatest benefit of digital securities is that it allows for smoother secondary market transactions. With records of ownership clear and unchangeable, an investor can easily bring their shares to a secondary market. Transactions are more efficient and parties have easy access to all necessary information regarding the securities being traded, removing the friction in traditional securities. 

At KoreConX, the KoreChain platform is a fully permissioned blockchain, allowing for companies to issue fully compliant digital securities. Records are updated in real-time as transactions occur, eliminating errors that would occur when transferring information from another source. The platform securely manages transactions, providing investors with support and portfolio management capabilities. Additionally, the KoreChain is not tied to cryptocurrencies, so it is a less attractive target for potential crypto thieves. KoreChain allows companies to manage their offerings and company data with the highest level of accuracy and transparency.

Since digital securities face the same regulatory rules as traditional ones, investors are protected by the SEC against fraudulent offerings. This, together with the security and transparency that blockchain allows, creates a form of investment that is better for investors and issuers alike. Since the process is simplified and errors are decreased without redundant paperwork, issuers have the potential to raise capital more efficiently. They will also be better prepared for future capital activity. For investors, a more secure form of security protects them from potential fraud and losses on their investments. With digital securities still in their infancy, it will be exciting to see how this method of investment changes the industry. 

How to Manage Investment Information

Posted on by Oscar Jofre Tags: , , , ,

For entrepreneurs, it’s crucial to understand the private capital market well. Companies no longer need to go public to raise capital, enabling entrepreneurs to maintain more control of their companies. With regulations such as RegA+ and RegCF, accredited and non-accredited investors can be part of capital raising. Plus, the available pool of capital is expected to reach up to $30 trillion by 2030, making it a promising resource for companies. At the same time, investment management has become even easier with online services and platforms coming that provide end-to-end management for private companies to streamline the process.

 

Understanding KYC and KYP

 

It is vital for investors and issuers alike to know who they are dealing with. This is where KYC (Know Your Customer) and KYP (Know Your Product) come into play. Before making any investment decisions or accepting an investment, you should always know the issuer or investor’s identity. 

 

KYC is an essential component of risk management. As an issuer, it can help you to understand who your investors are and determine whether they would be a risk to your company. KYC can be complicated but helps to protect against money laundering and fraud.

 

KYP is most applicable to broker-dealers and is all about understanding the investment products or services you are offering to your customers. This includes knowing something about the issuing company, and understanding the structure of investment products, eligibility requirements, and other information that can help a broker-dealer determine whether an investment opportunity is right for an investor.

 

Remain Compliant

 

Compliance is another crucial aspect to consider regarding private capital raising. The Securities and Exchange Commission (SEC) has enacted many rules and regulations to protect investors. These include the requirements for disclosure, registration, and filing. In addition, there are restrictions on who can invest and how much they can invest. All of these requirements are designed to protect investors and issuers from fraud.

 

It’s important to note that certain compliance issues must be considered when raising capital privately. For example, under RegA+, companies must file a Form 1-A with the SEC. This form provides information about the company, the offering, and the risks involved. In addition, companies must provide audited financial statements and disclose any material changes that have occurred since the last filing. Under RegCF, companies are required to file a Form C with the SEC, requiring similar information to that of Form 1-A. 

 

Compliance may seem like an inconvenient chore, but in fact, it offers issuers many benefits, including avoiding unnecessary costs and delays, understanding the shareholder base, identifying potential high-risk investors, and encouraging best practices in record-keeping generally. By taking a proactive and whole-hearted approach to compliance, issuers will not only have an easier time completing their raise, but lay a better foundation for more efficient and smoother operations going forward

 

When managing your investments and staying compliant with the law, it is important to have a solid grasp of KYC and KYP processes. KoreConX can help you with your compliance needs with our complete end-to-end solution for private companies and broker-dealers. Our platform includes a KYC/KYP tool and a compliance management system to help you efficiently and securely manage compliance activities.

 

RegA+ Offers Stability for Issuers

Posted on by Oscar Jofre Tags: , , , ,

When a company decides to go the RegA+ route, they are opting for a more stable and regulated way to raise capital. This is due in part to the stability of the price; once a company goes public, its stock price can change rapidly and unpredictably because of factors like news, earnings reports, analyst ratings, and supply and demand. By contrast, a RegA+ stock is only allowed to fluctuate within a certain percentage from the original offering price, which makes it a more stable and predictable investment. With a RegA+ offering, the price is set ahead of time and will not change unless there is a significant shift in the market. This makes RegA+ an attractive option for investors looking for a more stable investment.

 

For example, companies that do a RegA+ raise and set their company shares at $5.80 a piece will likely see their shares at a similar price 12 months later. Because shares are unlisted on a public exchange, the share price will stay the same for a while, giving investors some stability in their investment. This stability can be ideal for companies and their shareholders, as it gives them a chance to better plan and predict their finances. 

 

It also gives companies more control over the price of their shares, especially when there are selling shareholders. For example, ATLIS’s stock price went from $5.88 to $15.88 to $27.88 before being listed on the NASDAQ. When companies like this do a Reg A+ before other raises, they can halt and reprice their company before going public. 

 

The stability of RegA+ can be attractive to both companies and investors. It allows for better planning and forecasting of finances and peace of mind knowing that the share price will not rapidly change. This predictability is one of the main reasons why Reg A+ has become such a popular way to raise capital in recent years.

 

If you’re looking for a more stable investment, RegA+ may be the right option for you. With a set price and no sudden changes, you can know what to expect from your investment. This makes it an ideal choice for those looking for a regulated and predictable way to raise capital. Whether you’re a company or an investor, the stability of RegA+ may be just what you’re looking for.

 

KoreClient Spotlight: Bruce Lewis of BulletID

Posted on by Oscar Jofre Tags: , , , ,

Bruce Lewis is a serial entrepreneur who has had his share of successes and failures. He is now 82 years old and has started a new company that he’s made his life’s mission. Through this venture, BulletID, Lewis aims to reduce gun violence by tracking ammunition. We recently got to sit down and speak with him about his work with BulletID and how JOBS Act regulations will help his company grow.

 

With his years of experience growing companies and his entrepreneurial spirit, Bruce Lewis is confident that BulletID will be able to make a difference in the fight against gun violence. Lewis is no stranger to hard work and determination, and he hopes his latest venture will be successful in positively impacting the world. As an entrepreneur since childhood, Lewis has always had a knack for starting and scaling businesses. He has tried various ventures, some of which have been more successful than others. However, he has never given up and always maintained the entrepreneurial spirit he received from his father and grandfather. 

 

One of Lewis’ earliest and most successful businesses came from a restaurant equipment supply company that he owned and operated after he married his high school sweetheart. By acquiring the 45 companies that supplied his restaurant supply company with unique products, Lewis was able to create a company that would eventually grow to 100 million in sales and over 1,000 employees by 1988. One of these companies was an early adopter of placing UPC barcodes on items, and his partners put it out in the rest of the world, while Lewis implemented it in Canada. BulletID would eventually utilize this barcode concept. 

 

Lewis was devastated after hearing the heartbreaking story about a four-year-old killed by a stray bullet at a birthday party; he knew he had to make a difference. In 2016, Lewis started BulletID to reduce gun violence by tracking ammunition using the same barcode technology originally designed to let supermarkets better manage their inventory. Through this company, law enforcement and military personnel can instantly track essential information about a bullet, such as inventory, ownership history, manufacturer, and type. This is done through a barcode printed into the brass cartridge. With this information, it will be easier for authorities to trace a bullet back to its owner and determine if it was used in a crime. Additionally, it makes it easier for the military to track their ammunition, especially when hundreds of millions of dollars worth of ammo is scrapped each year because of poor tracking capabilities. With BulletID, the process is as easy as scanning the cartridge on a smartphone, and from anywhere in the world, law enforcement and military can see available details within 10 seconds. 

 

“Criminals never leave the gun behind, but they do leave the shell cases behind. A homicide detective can scan [the casing] and it tells them who owns it. It’s a miracle but it works,” said Lewis of how BulletID can be used by law enforcement. Lewis hopes that by tracking ammunition, law enforcement and military personnel will be able to reduce gun violence by keeping ammunition out of the hands of criminals or easily identifying suspects in a gun-related incident. 

 

Lewis is hopeful that BulletID will successfully make a positive impact on the world and plans to make this his mission for the rest of his life. He, and his team, are filled with energy and excitement for what they’re building. And, with the help of JOBS Act regulations like Reg A+, BulletID continues to raise the necessary capital to accomplish this goal. As he says, “the technology is there. Governments just need to embrace the technology.”

___________________

Regulation CF(RegCF), D (RegD), A (RegA+) Disclaimer


This communication may be deemed to be a solicitation of interest under Regulation CF (RegCF), D (RegD), A (RegA+) under the Securities Act of 1933, in which case the following applies:

  • No money or other consideration is being solicited, and if sent in response, will not be accepted;
  • No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is qualified, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date;
  • A person’s indication of interest involves no obligation or commitment of any kind; and 
  • An offering statement, which would include a preliminary offering circular, has not yet been filed with the SEC.

Supporting Improvements to RegA+ Secondary Trading

Posted on by Oscar Jofre

Since the JOBS Act was passed in 2012, RegA+ has evolved tremendously. With companies able to raise up to $75 million and utilize methods of online capital formation, the market continues to grow as more companies turn to the exemption to fund growth. Yet, the need for improved liquidity for this asset class has been given little attention by lawmakers and the Securities and Exchange Commission.

 

Without secondary trading, investors are left with few options. Traditionally, private securities only provide an off-ramp for investors in the event of a merger, acquisition, or IPO. The unfortunate reality is that while a fragmented regulatory environment does allow for some secondary market transactions, issuers are not pre-empted from state securities regulations. As a member of the Small Business Capital Formation Advisory Committee, Sara Hanks recently spoke to highlight the challenges issuers face. “The end result is it becomes very difficult to trade companies,” said Sara, founder of Crowdcheck. And for the companies that she works with, it does not generally work for them.

 

Many believe the SEC should allow pre-emption for securities issued under Tier 2 of RegA+, supporting secondary market trading. The consensus of the committee was that the SEC should act on this recommendation and make secondary trading available for securities issued under Reg A+. Otherwise, small businesses will continue to suffer, and investors will be faced with limited opportunities for liquidity.

 

The committee also said it would be worthwhile for the SEC to consider harmonizing rules between Reg A+ and crowdfunding offerings to provide more clarity and simplicity for companies that rely on both forms of funding. If a solution to secondary trading is not found, it could limit the amount of money raised under Reg A+ and make it harder for small businesses to get the funding they need to grow. 

 

Based on the recommendation of the Small Business Capital Formation Advisory Committee, the SEC should allow pre-emption for securities issued under Tier 2 of Reg A+. Pre-emption would enable small businesses to access the capital they need to grow and thrive.

 

 

The JOBS Act as the Founding Father Of A New Economy

Posted on by Jason Futko Tags: , , ,

April 5th, 2012. On this day, Barack Obama, 44th President of the United States, signed the JOBS Act into law. This has touched so many lives in so many ways that simply saying the JOBS act has democratized access to capital, does not fully capture the impact. We are talking about creating jobs, and helping people realize their dreams by developing solutions, and not only about capital markets. We can call the it The Founding Father Of A New Economy.

David Weild IV, father of the JOBS Act, has remarked that this was not a political action; it was signed in “an incredibly bipartisan fashion, which is really a departure from what we’ve generally seen. It actually increases economic activity. It’s good for poor people, good for rich people. And it adds to the US Treasury”.

Expanding Benefits In A New Economy

Five years later, in July, 2017, the SEC started expanding access to the JOBS Act benefits originally available only to emerging growth companies (EGC). These could submit draft registration statements relating to initial public offerings for review on a non-public basis. Permitting all companies (not just EGCs) to submit registration statements for non-public review, provides companies with more flexibility to plan their offerings. 

More Investors empowered by the JOBS Act

Private capital markets have grown more important, as both accredited and non-accredited investors started to be a bigger part of raising capital and actually becoming shareholders. There are more than $5 trillion of uninvested funds currently available, and this number is only expected to grow in the coming years.

ESG

This strategy that considers environmental, social, and governance factors. This investing style has been gaining in popularity in recent years, as more and more investors are looking for ways to invest in companies that positively impact the world. The focus on this kind of company, with strong commitment to ESG concerns, will grow especially among equity crowdfunding. 

Is it safe?

With the private capital markets blooming and so many new firms and platforms surfacing, it is only natural that users, issuers, and even broker-dealers and transfer agents feel confused and overwhelmed with logins and uncertain about compliance issues. This is something that the regulations were very careful about: protecting both investors and issuers, creating safe investment ecosystems.

As the JOBS Act has really opened up new ways to operate as the Founding Father of a new economy, there will be many opportunities for new players to enter the markets. These are very exciting times for being optimistic about the future of our startups.

The SEC Released its 41st Annual Small Business Forum Report

Posted on by Oscar Jofre Tags: , , , , ,

For 41 years, the Securities and Exchange Commission has hosted its annual Small Business Forum. The event, led by the SEC’s Office of the Advocate for Small Business Capital Formation, aims to gather feedback from both the public and private sectors to improve capital raising and sheds light on many issues facing small businesses and investors to help event participants develop policy recommendations.

 

Highlighting the needs of small businesses within the US is crucial, as they play a vital role in the economy and job creation. Over the past 25 years, 2 out of every 3 jobs created can be attributed to small businesses. These businesses serve as the lifeblood of their communities.

 

Some of the key takeaways from the four-day event included the fact that more entrepreneurs need to be made aware of resources available when raising capital, as many have great ideas, but lack the knowledge and experience to raise capital effectively. This also means expanding access to capital to both underrepresented groups and locations, especially outside of major “tech-hub hotspots.” Additionally, panel discussions highlighted the issues minority entrepreneurs continue to face when seeking traditional funding options, such as venture capital or private equity. These funding methods often rely heavily on networks and connections that exclude many entrepreneurs. 

 

According to sources such as Crowdfund Insider, the Commission has addressed past issues such as democratizing the definition of an accredited investor by empowering a more significant segment of the population to gain access to Reg D private securities offerings. However, other suggestions often face political challenges and regulatory obstacles.

 

Even so, Commissioner Hester Pierce urged the Commission and forum participants to be inspired by the JOBS Act. She also commented: 

 

“Heightening the importance of this year’s Forum is the Commission’s current posture of, at best, indifference, and at times, hostility to facilitating capital formation. As it happens, today is the tenth anniversary of President Obama signing into law the Jumpstart Our Business Startups (JOBS) Act. That bipartisan legislation required the SEC to write rules lessening the burdens on small companies seeking to raise capital. Some of the Act’s provisions were things we could have done on our own. Congress and the President got fed up waiting for the Commission to take small business capital formation seriously.”

 

Additionally, Commissioner Allison Lee remarked:

 

“Many investors are business owners and vice versa. And capital raising and investor protection are not at odds with one another or a zero-sum proposition. Rather, investors need appropriate investment opportunities, and investor protection increases investor confidence, which in turn helps promote capital raising. The relationship between the two is symbiotic and we can and should seek to balance the need for both robust capital raising opportunities and robust investor protection.”

 

Hopefully, seeing how the JOBS Act has expanded capital formation will encourage the SEC to continue the momentum and create more tools and resources to support small businesses. In the meantime, companies should explore existing options and opportunities for capital, such as through the JOBS Act. Small businesses should not wait for the SEC to create more opportunities – they should take advantage of the rules and regulations that are currently in place to raise the capital they need to grow their businesses.

4 Ways to Build Better Shareholder Relationships

Posted on by Oscar Jofre Tags: , , , , , ,

As a business owner, you know that communication is key to success. But when it comes to shareholders, shareholder communications can sometimes take a backseat. They’ve already invested, so customer communications to generate revenue often steal the show. However, it’s essential to keep shareholders in the loop since they own a piece of the company and are entitled to know what you’re doing with it. After all, the more involved they are, the more willing and able they will be to help, reinvest, or promote the brand. So how can you build strong relationships with your shareholders? While email has been the go-to method for shareholder communication in the past, other options may be more effective in building relationships with your shareholders. Here are four ways to enhance the way you communicate with shareholders, and a good communication strategy will make use of several of these strategies.

 

1. Webinars

Webinars are a great way to connect with shareholders and provide them with valuable information about your company. You can use webinars to give updates on your progress, share financial information, and answer questions from shareholders. Plus, webinars allow shareholders to get to know you and your team better and help put a face to the company. Since webinars can feel like you’re talking with rather than just to your audience, they can help build a powerful connection and establish trust, as well as give you valuable feedback from people who care about the company.

 

2. LinkedIn Page

Having an updated and informative LinkedIn page is a great way to connect with shareholders online. Use your page to share company updates, industry news, and other relevant information that shareholders might find useful. You can also use your LinkedIn page to answer shareholder questions and build relationships with them. By maintaining an active presence on LinkedIn, you can show shareholders that you’re committed to keeping them updated on your company. By providing value on your LinkedIn page, you can also attract new shareholders who may be interested in investing in your company.

 

3. Podcasts

Podcasts are a great way to share detailed information about your company with shareholders. You can use podcasts to give updates on your progress, share financial information, and answer questions from shareholders. By providing valuable information in your podcasts, you become an industry influencer by providing this information and can more easily build trust with shareholders that are listening. You can also interview other industry leaders whose thoughtful insights into your industry your audience may find informative.

 

4. Shareholder Management Tools

After your successful RegA+ or RegCF offering, you can anticipate many new shareholders to welcome on board. As shareholders, they have a vested interest in how your company performs. Thankfully, shareholder management is streamlined when you eliminate Excel sheets, CRM, or email. The Shareholder Management solution from KoreConX sets the new standard, empowering you and shareholders with transparency, compliance, and confidence. Keep shareholder documents secure and engage shareholders with portfolio management tools that allow them to see detailed information about their investments. To learn about the many great features of the KoreConX platform, get in touch with our team for a demo or any additional information. 

 

The most important thing you can do to build relationships with shareholders is to maintain communication with them. Whether you’re using email, webinars, podcasts, or blogs, make sure to keep shareholders updated on your progress and answer any questions they might have. By maintaining regular communication with shareholders, you can show them that you’re committed to keeping them informed and building trust with them.

Jumpstart Our Business Startups: Democratizing Access To Capital

Posted on by Jason Futko Tags: , , , , 1 Comment on Jumpstart Our Business Startups: Democratizing Access To Capital

The JOBS Act (Jumpstart Our Business Startups) reached its 10th anniversary in 2022 and we keep working on education to empower people through private capital markets. Even though it has already been a decade, we are still clearing the land to open up more opportunities. The Wharton Magazine anticipated that the JOBS Act would be as impactful in changing how we allocate capital as social media has been in how we manage time. Both entrepreneurs and regular people, such as customers, are able to be part of the financial market. Brand advocates, for example, can easily become shareholders, democratizing access to capital.

 

Meaningful changes

 

Title V in the JOBS Act raised the number of possible shareholders to 2,000, while 499 can be non-accredited. To give an exact feel of how deep this change is, before the JOBS Act, the maximum number of shareholders was 500, all of whom had to be accredited. This opens up opportunities for nearly everyone who wants to invest in the private capital market. And the bigger pool of potential investors also benefits the companies looking to raise capital. 

 

With regulations such as A (RegA+) and crowdfunding (RegCF), both accredited and non-accredited investors can be part of capital raising. Companies do not need to go public anymore to raise capital as entrepreneurs maintain control. Using RegA+, companies can now raise up to $75 million every 12 months. For RegCF, the limit is $5 million.

 

Market size

 

There are plenty of possibilities that arise from the regulations and how they change companies’ perspectives. The available pool of capital is expected to reach up to $30 trillion by 2030, making it a promising resource for companies. Also, there are several online services and platforms that have come up in recent years, such as KoreConX, but we will talk about those in other posts.

 

Equity Crowdfunding with RegCF

 

This form of capital raising for non-accredited investors is very new (2016) but it has shown steady growth since it was introduced. In its first full year (2017), $76.8 million were raised like this. In 2021, this number skyrocketed to $502 million. Startup customers, closest clients in a database, and closest network members can become valuable investors. Brand advocates can be more motivated to make a difference in a startup’s life once they can become shareholders.

 

RegA+

 

Although there are great possibilities for companies going for a RegA+, there are still some important investments involved. As a general rule, it is a good idea to be ready to spend at least $250,000 on a successful RegA+ offering. There are several steps that have to be accomplished, such as filing, which involve fees for lawyers and auditors, broker-dealer firms, investor acquisition costs like PR/advertising and social media, and online roadshows.

 

How Regulations Democratize Access to Capital

 

If you think about it, democracy is all about empowering as many people as possible to participate in and have a say in how society develops. The JOBS Act does that first and most directly by giving ordinary people more opportunity to own a stake in businesses, to become shareholders. But that wider pool of potential investors also empowers more entrepreneurs to get the funding to bring their ideas to fruition, which in turn creates jobs, empowering still more people to participate and, if they choose, to make their own investments. The entire ecosystem flourishes.

 

If you want to understand more about how the regulations help business grow and jumpstart our business startups, you can take a closer look at presentations from the father of the JOBS Act, David Weild IV, founders, funding portals and investors in our YouTube Channel.

Why RegA+ Offerings Fail

Posted on by Oscar Jofre Tags: , , , , ,

When it comes to RegA+ offerings, there are several reasons they may fail: a failure to comply with regulatory requirements, a failure to budget for the offering properly, or a failure to assemble sufficient expertise. Most of these can be attributed to a lack of commitment; if organizations do not take these necessary components of the process seriously, then RegA+ offerings are set up for failure from the start.

 

Compliance for RegA+ Raises

 

Complying with regulations is one of the most important aspects of a RegA+ offering. However, many companies try to cut corners regarding compliance, thinking they can save time and money. This is a huge mistake that can have disastrous consequences. Not only will failing to comply with regulations result in fines and penalties, but it can also jeopardize the entire offering. When experiencing an audit or investigation, companies that have not been compliant with regulatory requirements often face much harsher consequences than those who have made an effort to stay compliant. Even if the raise completes without fines or penalties from the regulator, sloppy or half-hearted compliance raises the risk of being sued by an investor for some real or imagined offense. By wholeheartedly committing to the spirit and letter of the regulations from day one, and with the assistance of professionals well-versed in the regulatory requirements (a FINRA broker-dealer, an escrow agent, or an SEC-registered transfer agent), you can increase your chances of a successful RegA+ offering while protecting your company from potential legal problems down the road.

 

Budgeting for a RegA+ Raise

 

Budgeting is essential for a successful offering. Companies must have the proper funding to hire professionals, comply with regulations, and market the offering effectively. Without adequate funding, a company is likely to run into problems along the way. A RegA+ raise is a complex and costly undertaking, and companies should be prepared to commit the necessary funding before beginning the process. Including a well-thought-out budget in your business plan is one of the keys to success when raising capital through a RegA+ offering.

 

Affinity Marketing

 

Many companies turning to RegA+ aren’t just looking to raise capital; there’s something they want to do with the capital. Whether this is a product they want to make or a service they want to provide that they’re passionate about, they’re committed to that mission. Affinity marketing is a great way to connect with like-minded investors, show them that commitment, and bring them on board. This is much harder to do if the company isn’t actually committed to that mission in the first place.

 

Technology and Expertise

 

For issuers learning new technologies and working with experts in a field that they don’t know much about, it can be a daunting process. It takes commitment to learn these new technologies or do what the broker-dealer is advising, understanding that this is the path toward a successful offering. If you’re not sufficiently committed, you might just shrug this off as not worth the cost or effort.

 

Companies should take away from this that a successful RegA+ raise requires a commitment to the process from start to finish. Commitment is a willingness to put in whatever it takes to succeed: to invest the time and resources necessary, comply with regulations, budget appropriately for the offering, and assemble a team of experienced professionals. With a commitment to these essential components, a company can increase its chances of success and avoid the pitfalls that have led to the failure of other RegA+ offerings.

 

What is the Estimated Budget for RegA+ Issuance?

Posted on by Jason Futko Tags: , , , , , , , , , 1 Comment on What is the Estimated Budget for RegA+ Issuance?

Navigating the fundraising process and understanding how much to budget from a financial standpoint is one of the most frequent questions we receive. In the process of conducting a RegA+ offering ourselves, KoreConX has researched the estimated budget for a RegA+ offering.

 

While the budget varies based on several factors, you need to keep in mind the size of your raise and sector. As a general rule of thumb, it is a good idea to be ready to spend at least $250,000 on a successful RegA+ offering, $50,000 of which should be dedicated to getting your investor acquisition started. Most of your budget will be spent on Investor Acquisition. Now, this will not apply to every company but should serve as a general guide as to what you should expect a RegA+ offering to cost depending on the amount raised. 

 

Estimated Costs for USA-Based Companies:

What Why/ Work to be done When How much
USA Lawyer To file your SEC Form 1A and state filings First step in moving forward $35-$75k 
Auditors Are required to be filed with your Form 1A   First step requirement $3,500 +
SEC/State Filings Required regulatory Filings    $5k 
FINRA Broker-Dealer 8 States require you to have a Broker-Dealer to sell securities to investors  Begin engagement when you start with lawyer  1-3% fees 
Investor Acquisition

  • PR Firm
  • IR Firm
  • Video
  • Social media
  • Media Firm
  • Advertising
  • Webinar
  • Newsletter
  • Publishers
 These firms prefer to be engaged right after you file, as the clock begins and gives them only 45-60 days when you go live.  Depending on size of offering you will spend up to $200k-$400k. Before you file your Form 1A  $25-50k at the beginning to start
Investor Relations Director Hire an internal resource to manage incoming inquiries from potential investors.  Handle outbound calls from investor leads. $4,500/month
KoreConX All-In-One platform End-to-end solution $4,500/month
Investment Platform Requires 45-60 days to set up After you retain your lawyer  Included with your KoreConX All-in-one platform 
Live Offering During the live offering you will have to pay for ID, AML fees required   Ranges from $0.58/person, these fees are provided at cost
Live Offering During the live offering you will have to pay for your Payment processors ( Credit Card, ACH, EFT,  Crypto, WireTransfer, IRA)   These fees are provided at cost
SEC-Transfer Agent Required as part of your Form 1A filings  After you sign up with lawyer  Included with your KoreConX All-in-one platform 
Secondary Market Ability for Shareholders to trade private company shares. Included with your KoreConX All-in-one platform 
TradeCheck Report Ability to trade in all 50 states, include Blue Sky registration, and listing National Securities Manual Included with your KoreConX All-in-one platform 

 

 

Estimated Costs for Canada-Based Companies:

What Why/ Work to be done When How much
USA Lawyer To file your SEC Form 1A and state filings First step in moving forward $35-$75k 
Canada Lawyer $5k-$10k
Auditors Are required to be filed with your Form 1A   First step requirement $3,500 +
SEC/State Filings Required regulatory Filings    $5k 
FINRA Broker-Dealer 8 States require you to have a Broker-Dealer to sell securities to investors  Begin engagement when you start with lawyer  1-3% fees 
Investor Acquisition These firms prefer to be engaged right after you file, as the clock begins and gives them only 45-60 days when you go live.  Depending on size of offering you will spend up to $200k-$400k Before you file your Form 1A  $25-50k at the beginning to start
Investor Relations Director Hire an internal resource to manage incoming inquiries from potential investors.  Handle outbound calls from investor leads. $4,500/month 
KoreConX All-in-one platform $4,500/month 
Investment Platform Requires 45-60 days to set up After you retain your lawyer  Included with your KoreConX All-in-one platform  
Live Offering During the live offering you will have to pay for ID, AML fees required   Ranges from $0.58/person these fees are provided at cost
Live Offering During the live offering you will have to pay for your Payment processors ( Credit Card, ACH, EFT,  Crypto, WireTransfer, IRA)   These fees are provided at cost
Transfer Agent Required as part of your Form 1A filings  After you sign up with lawyer  Included with your KoreConX All-in-one platform 
Secondary Market Included with your KoreConX All-in-one platform 
KoreTrade Report Ability to trade in all 50 states, published in the Securities Manual Included with your KoreConX All-in-one platform 

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