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Credit Cards, Escrow, and Broker-Dealers for RegA+ = $75 Million for Cannabis Companies

Posted on by Peter Daneyko Tags: , , , , , ,

 

“It’s About Time”

 

Up until now, it was a real challenge for Cannabis companies to take advantage of Reg A+ exemptions that allow private companies to raise up to $75 million from the crowd; accredited and non-accredited investors alike.  So you have the investor community’s appetite, the table is set and they are ready, willing, and able; but what else do you need?

 

FINRA Broker-dealer

 

The regulation is meant to create jobs, allow private companies another way to raise capital, and allow for the investor community at large to participate. Before RegA+ exemptions, many potential investors were left looking into the candy store without any way to invest.  So with the democratization of capital and the ability of an untapped investor community to now have a seat at the table, the broker-dealer becomes an all-important intermediary.  In a highly regulated environment, the Broker-dealer takes the onerous task of KYC, ID verification, and AML ( anti-money laundering) off the issuer’s shoulder;  so you, the Issuer, can run your business without worrying about this important compliance requirement. As a result, you not only have the opportunity to gain large groups of investors but also develop brand advocates who share in your story.

 

Escrow Agent 

After the broker-dealer, you need an escrow agent that can hold funds from investors in all 50 states and territories and only charge you one flat fee. 

 

This key intermediary holds the investors’ funds on behalf of the Issuer until the broker-dealer completes the ID, KYC, and AML verification. Once these checks are complete, the escrow agent can release the funds. Until recently, a couple of historical challenges for industry sectors such as cannabis included the inability to get Escrow for their capital raises. Not only is Escrow now available but also at a cost-effective price point and with normalized fees, which is really the way it should have always been.  

 

Credit Cards 

 

Now below 2.9%  allowing both cannabis companies and their shareholders to be fairly treated when investing in the growth of their companies;  bringing jobs to communities and opportunities to those that believe in the company. Being responsible with your credit cards is common sense. Still, the ease of use and points as an added bonus is certainly one of the nice perks and perhaps a big reason for their high usage via crowd participation in private capital raises.

 

If you’re part of the Cannabis ecosystem looking to learn more about how KoreConX can help you on your capital raising journey, please fill out the form here.

Accredited Vs. Non-Accredited Investors: What’s the difference?

Posted on by Oscar Jofre Tags: , , , ,

There is a big difference between accredited and non-accredited investors. Understanding the difference is key to knowing which type of investor you are or understanding the type of investor your offering is targeting. Let’s look at each type of investor and find out more about their specific benefits and limitations.

 

Accredited Investors

 

An accredited investor is an individual or institution that has been approved by the Securities and Exchange Commission (SEC) to invest in certain types of securities. These investments are typically unavailable to the retail investor, as they are considered high-risk and high-return. Historically, accredited investors have been able to:

 

  • Access to exclusive investment opportunities: Traditionally, many startups and early-stage companies will only accept investments from accredited investors, as they were considered to be more sophisticated and able to handle the higher risk.
  • Invest in private companies: Many accredited investors choose to invest in private companies, as they can offer higher returns than public companies. Before the JOBS Act, only accredited were able to invest in these companies.

 

To become an accredited investor, an individual must meet certain criteria set forth by the SEC. These include:

  • Entities that have assets of $5 million.
  • Earning an annual income of $200,000 (or $300,000 for couples) for the past two years.
  • Having a net worth of $1 million (excluding their primary residence).

 

Investing in private companies is often considered a high-risk investment, as there is often less information available about these companies than public companies. However, accredited investors are typically seen as more sophisticated and able to handle the higher risk.

 

Non-accredited Investors

 

A non-accredited investor is an individual who does not have the financial qualifications to be deemed an accredited investor. This can be due to a low net worth or a lack of investment experience. Historically, many non-accredited investors may have missed out on beneficial investment opportunities, especially in the private market. However, with the rise of JOBS Act exemptions, we are seeing more companies looking toward nonaccredited investors. The benefits of being a nonaccredited investor include:

 

  • No SEC qualification: Anyone with the desire to invest can be a non-accredited investor. There are no criteria set by the SEC that must be met. 
  • Access to new and exciting companies: Companies can tap into a new pool of potential investors by marketing toward non-accredited investors. These investors can also tap into a broader range of investment opportunities that may have been unavailable before the JOBS Act was passed into law.
  • The ability to invest smaller amounts of money: For non-accredited investors, the minimum investment amount is often lower than it is for accredited investors. This can be helpful for those who want to get started in investing but don’t have a large sum of money to put towards it.

 

As the private market continues to grow, both non-accredited and accredited investors alike can take advantage of exciting opportunities to invest in growing companies. The JOBS Act has also done an incredible job leveling the playing field for investors, which will only incentive more companies to tap into the growing pool of potential investors.

What are the Benefits of Having a Diverse Investment Portfolio?

Posted on by Oscar Jofre Tags: , , ,

Building a diverse investment portfolio is one of the smartest things you can do for your financial health. By spreading your money across various asset classes, you can reduce your risk and maximize your return potential. Keep reading to explore the benefits of diversifying your investments and learn some tips for creating a well-rounded portfolio.

 

Benefiting from a Diverse Portfolio

 

A diverse investment portfolio is spread out across several different businesses, industries, and asset classes. This reduces the risk that any single investment will fail, making your overall portfolio more resilient to economic downturns. This is done by having less than 50% of your entire investment portfolio tied to any specific business, country, or industry. Instead, a good risk-averse strategy for investing would be spreading out investments among assets as much as possible: like investing in 10-20 companies, each with 7.5-10% of your investment capital in each. This will form a far more robust investment portfolio. It is worth considering a diverse investment portfolio, even if you are a more experienced investor, as it will help balance risk and reward.

 

The benefits of having a diverse investment portfolio include:

 

  • More resilience: A diverse investment portfolio is more resistant to economic downturns as it is not reliant on one specific industry or sector.
  • Better returns: A well-diversified portfolio will typically outperform a non-diversified one over the long term.
  • Reduced risk: By spreading your investment across many different businesses, industries, and asset classes, you are less likely to lose everything if one particular investment fails.

 

When deciding whether to invest in a diverse range of asset classes, you must consider your investment goals and financial objectives. For example, an investor with less experience and fewer aversions to risk may choose to invest in high-risk assets. In contrast, investors with more experience or less risk tolerance may shift their focus to lower-risk assets for diversification, such as fixed-income investments. Both investors will be able to diversify their portfolios, however, this diversification is based on a strategy they feel most comfortable with.

 

Systematic vs. Specific Risk

 

Systematic risk is the inherent risk in an investment that cannot be eliminated by diversifying your assets. This type of risk is also known as market risk, and it affects all investments in the same way. For example, a stock market crash will affect all stocks, regardless of whether they are in different sectors or countries. This type of risk is impossible to eliminate and must be considered when making any investment.

 

Specific risk is associated with one particular investment, such as a company going bankrupt. This type of risk can be diversified away by investing in different companies or assets. For example, if you are worried about the possibility of a company going bankrupt, you can diversify your portfolio by investing in other companies in different industries.

 

Diversification is important because it allows you to reduce the overall risk of your investment portfolio. By investing in various assets, you can minimize the impact that any one investment has on your portfolio. For example, if you invest only in stocks, then a stock market crash will significantly impact the value of your portfolio. However, if you also invest in bonds, the stock market crash will not have as significant an impact because bonds will still be worth something. Diversification is not a guaranteed way to make money, but it is a way to minimize risk.

 

Tips for a Diverse Portfolio

 

When it comes to investing, it’s always important to diversify your portfolio. This way, if one of your investments fails, you still have others thriving. Here are some tips for diversifying your investment portfolio:

 

  • Invest in various industries: This will help minimize the effects of any one industry downturn. Allowing you to see growth in other sectors still.
  • Spread your investment across several companies: This will help ensure that if one company fails, others still have the potential to make you money.
  • Invest in a variety of asset classes: This includes things like index funds, bonds, equities, commodities, and dividend stocks. This will help you balance risk and reward.
  • Choose the right mix of investments for your situation: This will vary depending on your financial goals, objectives, and your risk tolerance.

 

By following these tips, you can help to ensure that your investment portfolio is well diversified. Even with a diverse selection of assets, it is essential to monitor your portfolio regularly to confirm that your continued investment is still in-line with your goals, protecting you if one of your investments fails.

 

If you’re looking to explore your options for investments, consult your financial, tax, or investment advisor. You should also be aware of and accept the risks of investing. This article is not financial advice.

 

This post was adapted from content by our KorePartners at Rialto Markets. You can view their article here.

Do you really have permission to use those logos?

Posted on by Theresa Hyatte

This post was originally written by our KorePartners at CrowdCheck. View the original article here. 

 

The Theranos jury’s fraud convictions of Elizabeth Holmes, former CEO and founder of the now defunct Theranos, Inc., should give pause to startups seeking to build their reputation by touting their relationships with other companies.  In the press to find financing, it can be tempting to use the logos of other companies, especially those that command market attention, to persuade investors to come on board.  In the case of Theranos, Ms. Holmes placed the logos of Pfizer and Schering-Plough on Theranos reports without receiving permission from those companies.  In her testimony, Ms. Holmes stated that she did not mean to deceive investors or business partners.  However, the jury disagreed.  In a Wall Street Journal article, Susanna Stefanek, also known as Juror No. 8, was quoted as saying that the unauthorized use of the logos was “the first smoking gun ….”  “Jury in Elizabeth Holmes Trial Seized on Two ‘Smoking Guns’ to Convict Theranos Found, Juror Says,” Jan. 6, 2022.

 

Startups should view this as a warning that using the logos of other companies to boost their profile and make their technology, services or products appear more developed than they actually are may be found fraudulent.  Startups and their founders should protect themselves by obtaining written authorization from other companies before displaying their logos for investors, including on their website, campaign page and marketing materials.  Even if a smaller company has a written agreement with a larger company, it is best practice to obtain the larger company’s permission to use its logo.  First, the use of the larger company’s logo may appear to be an endorsement of the startup and its technology, which may exceed the scope of the agreement between the companies.  Second, from the perspective of the larger company, this type of endorsement may cause it to become entangled in any materially misleading statements made by the startup and its founders – a risk assessment management of the larger company may need to undertake before giving authorization.

 

Further, companies should carefully consider the context in which they use other companies’ logos.  For example, displaying such logos for the purpose of touting certain companies as “potential partners” or “potential customers” might be perceived as misleading in light of the Theranos case.  In that instance, Theranos had engaged in discussions with Pfizer and Schering-Plough, but neither company had further contact with Theranos.  By subsequently adding the logos to the investor materials, Ms. Holmes was viewed by the jury as falsely representing the relationships between the companies.

 

Although not at issue in the Theranos case, displaying the logos of companies that happen to employ certain people who choose to invest in the startup could also be viewed as misleading.  Unless those investors did so on behalf of their employer, then the investment was made on an individual basis and the startup should not display the employer’s logo.

 

If Ms. Holmes decides to appeal her case, there is always the possibility that one or more convictions may be overturned.  Until that day, however, companies are on notice and should carefully consider how, when, and in what context, they display the logos of other companies.

Foreign issuers using Reg A and Reg CF

Posted on by Sara Hanks

This post was originally written by our KorePartners at CrowdCheck. View the original article here. 

 

For some reason, this issue has been coming up a lot lately. Our usual response to the question “Can non-US issuers make a Reg A or Reg CF offering?” is to point to the rules:

  • Rule 251(b)(1) says Reg A can only be used by “an entity organized under the laws of the United States or Canada, or any State, Province, Territory or possession thereof, or the District of Columbia, with its principal place of business in the United States or Canada.”
  • Reg CF Rule 100(b) says Reg CF may not be used by any issuer that “is not organized under, and subject to, the laws of a State or territory of the United States or the District of Columbia.”

Slightly different formulations, as you can see, and note that Reg CF doesn’t say that the company needs to have its primary place of business here. But both exclude non-US or Canadian companies.

But we are getting a lot of pushback and “what if?” questions, so here are responses to a few of the most common:

  • What if we redomicile to the US? Well ok, that might work for Reg CF. It might work for Reg A too, if your management changes their domicile too (you need a bona fide principal place of business here). However, have you considered the tax consequences in your original home jurisdiction? Also, note that you’ll still need two years audited or reviewed financial statements, in US GAAP and audited or reviewed in accordance with US auditing requirements (US GAAS).
  • What if we form a subsidiary and it makes the offering? Yes, you can form a subsidiary here (it’ll have to have its principal place of business here too, for Reg A) and it can raise money under Reg CF. But the money it raises here has to be legit used for the sub’s own purposes. It can’t be upstreamed to the parent, because that would likely make the parent a “co-issuer” that needs to also file a Form C or 1-A and can’t. So the sub needs to be planning to undertake its genuine own business. Even then, if it’s not a new business but just taking over some part of the parent’s business, then the sub might need to produce financials (again, using US GAAP and US GAAS) from the parent’s business or the part of business it’s taking over, because that’s a “predecessor.”
  • What if we create a holding company in the US? Yes, although the same issues come up. If using Reg A, you need to move your principal place of business here. For either exemption, the foreign company that is now your subsidiary will be the “predecessor” company and so again we have the need for two years’ audited or reviewed financials using US GAAP and US GAAS.
  • What if we create a new company that licenses the foreign company’s product or service? This may be the most promising option, but it’s really going to depend on facts and circumstances. Proceeds of the offering have to be used for the new company’s operations, in the case of Reg A the company’s primary place of business has to be here, and you’ll have to look carefully at whether there are any predecessor issues.

How to Get Sued

Posted on by Jamie Ostrow

This article was originally written by our KorePartner Jamie Ostrow at CrowdCheck Law. View the original post here. 

 

If you work with us, you will hear it many times that we strongly advise against financial projections …  as they can get you in trouble. However, companies always seem to want to include projections that start from zero, and grow exponentially. This type of financial projection that is untethered to reality is a primary driver of what will cause investors to sue for being misled because investors expect companies to believe that those projected results are attainable.

 

One such commonly used financial projection is the hockey stick graph, as in the example below:

 

CrowdCheck Law’s projected legal revenues. (FYI, the size of the entire global legal market is anticipated for 2026 to be $1.1T)

 

This example is pure bunk, because this is not the type of service that can grow exponentially. Maybe you believe that your company can achieve these types of results, and we appreciate that potential competitors may have used these types of projections when presenting to the institutional investor market. However, when done correctly, those numbers are reviewed by industry insiders who understand all the assumptions and trends that underlie these charts, along with the factors that will make these projections speculative.

 

Another common area where companies’ enthusiasm can run afoul of anti-fraud rules is potential market share. While we appreciate your enthusiasm, if you are a guy or a gal in a garage, you probably do not have a rational basis for assuming you will compete with multinational companies and have a 25% market share in the next couple years (or really at all).

 

A third of the many ways to be sued is absolute statements about future revenues that have conditions over which the company has no control.  For instance, in the Elizabeth Holmes trial (Theranos), one of the two “smoking guns” was financial projections of $40 million a year. Maybe Theranos could have reached those future revenues, but only if the science worked and the FDA cleared the product. Without qualifying statements of future potential revenue with what needs to happen to get there, the company, and Elizabeth Holmes, was found liable.

 

This is only a small sample of what can get a company sued. The universe of possibilities is only limited by the fury of disgruntled investors.

How Does A Convertible Note Work?

Posted on by Raise Green Tags: , , , ,

This article was originally written by our KorePartners at Raise Green. View the original article here. 

A Cornerstone of Regulation Crowdfunding

Convertible notes are a form of debt that converts to equity over time; said simply, convertible notes allow investors to loan money to a startup or early stage venture and receive equity in return, instead of their principal loan plus interest.

The greatest advantage of convertible notes is that investors and the note issuer do not have to finalize a valuation of the company at an early stage, which is especially important for companies that don’t have comprehensive data or time that allows an accurate valuation. Instead, investors “loan” their money to the business and in return will receive equity when an event, such as a future financing round, where the company’s valuation becomes more concrete. This type of security is very popular with Silicon Valley technology companies that have great interest from angel investors at an early stage, but lack the ability to make a proper valuation of the company’s worth.

Investing In A Convertible Note

So you’ve identified a compelling company that’s offering the sale of convertible notes for early stage fundraising. You’re interested in purchasing one or some of these convertible notes, but where do you start? It’s important to understand the terms of a convertible note before you invest.

Here’s the main aspects of a convertible note to know before you make any investment decisions.

Discount Rate

The discount rate represents the discount that you receive when purchasing a note relative to investors in a later round of funding, compensating investors for their additional risk taken by investing at an earlier point.

Valuation Cap

The valuation cap is an extra bonus for taking on risk by investing early. This tool limits the price at which your debt notes convert to equity, allowing investors to receive a greater return on their investment if the issuing company grows quickly.

Interest rate

As a convertible note acts as a loan from you (the investor) to the company issuing the note, there will be interest that accrues on the principal amount you invest. Instead of being paid out to investors in cash, this accrued interest converts to equity, increasing the total number of shares the investor receives upon the note’s conversion to equity.

Maturity date

This is the “due date” for the convertible note, signifying the date on which the issuing company must repay their investors.

Why Purchase a Convertible Note?

Convertible notes allow you to invest in early stage companies and projects that you believe have the opportunity to grow exponentially. By getting in at the ground floor and purchasing a convertible note, individual investors stand to earn a higher return on their investment. Whereas investing in early stage startups and projects has historically been off limits to the wider public, Regulation Crowdfunding now allows almost everyone to invest in companies that have the possibility to grow exponentially. Convertible notes carry risk like all forms of investing, but offer early investors bonuses for their willingness to accept this risk. As many companies and projects in the climate space are young and need funding, convertible notes provide a simple way for these businesses to raise capital that they desperately need, while offering their early believers a way to get them off the ground.

Online is Proving Successful for Minority Founders

Posted on by Oscar Jofre Tags: , , , ,

Minority-owned startups are proving to be incredibly successful in gaining exposure on online platforms, growing their customer base and raising capital. In 2021, funding from crowd raising grew 33.7%, showing the increasing use of online fundraising.

A Lack of Diversity in Traditional Capital 

Online platforms for startup investing are more inclusive than traditional options. They don’t rely as heavily on already established personal relationships and networks between founders and investors. Instead, they provide a level playing field for all types of founders online.

These entrepreneurs can now get the funding to launch or expand their businesses through RegA+ and RegCF. Online startup investing platforms are also transparent, allowing founders to see which startups are doing well and which ones aren’t. This information was often hidden from view by traditional VCs, which could lead to bias. 

The Internet is Improving Equity Crowdfunding for Minorities

In 2020, only 2.6% of VC dollars were invested in minority-founded businesses. However, over $486 million were invested through online startups in 2021 – a significantly higher sum than traditional VC investment. Through regulations like RegA+ and RegCF, investors have the opportunity to invest in promising startups led by underrepresented founders. These online platforms level the playing field, allowing minority founders to receive the support and capital funding they need to succeed.

As more investors engage with these platforms and more promising startups seek funding through regulations, we will see continued growth in minority-founded companies receiving the support they deserve. Overall, online startup investing has the potential to create a more diverse and dynamic VC landscape – one that better reflects the diversity of several markets.

The Future of Online Funding

There are several reasons why online fundraising is such a valuable tool for minority entrepreneurs. In the past, minority entrepreneurs have often been shut out of traditional funding sources. Also, they have often been pigeon-holed into stereotypes by the mainstream media. But with online fundraising, they can bypass the traditional gatekeepers and structural obstacles, speaking directly to potential investors. They can tell their own stories and showcase the unique strengths of their businesses.

As the world becomes more digital, so too does entrepreneurship. This is especially apparent in how online fundraising is helping businesses of all sizes to raise money. It’s also becoming an increasingly important tool for these minority entrepreneurs.

How Liquidity Impacts Investing

Posted on by Jim Caboy Tags: , , ,

This article was originally written by our KorePartners at Rialto Markets. To view the original article, please click here. 

 

Liquidity is a term used in finance to describe how easy or difficult it is to buy or sell an asset in a market without affecting its price – in other words, how simply an asset can be exchanged for cash.

Many private companies struggle to create cash events and liquidity for their shareholders or growth plans and, in what is possibly the largest market of all, this is starting to change with the advent of crowdfunding and secondary trading platforms, known as ATSs (alternative trading systems). The private securities market, currently worth $7 trillion and forecast to be $30 trillion by 2030, is expected to transform when it starts to demonstrate the same kind of liquidity that the public markets offer today.

Stocks in publicly traded companies, mutual funds and bonds can all be categorized as liquid assets; generally, an asset is liquid if there is a constant high demand for it, thereby making it much easier to find potential buyers.

Stocks as liquid assets

Generally, any stock listed on a stock exchange is considered a liquid asset because there are people constantly buying and selling stocks at the market price, making it easier to liquidate stocks into cash.

Conversely, stocks traded on smaller marketplaces and lower value stocks like so-called ‘penny stocks’ (shares of small public companies that trade for less than $5s per share) would not be considered fully liquid assets, as concessions on the price or quantity of these stocks may be needed to liquidate them in a timely manner.

The liquidity of a stock is also never completely fixed; factors that influence a certain company or the stock market, such as economic downturn or complete market crashes can significantly impact the liquidity of any given stock. Most of the time this effect is only temporary, as the market tends to bounce back, but the liquidity of even the most reputable and better-performing companies usually suffers some decline.

What does liquidity mean for your investments?

Investing in early-stage companies was typically a long-term investment more open to the wealthy, through venture capital and private equity funds, but early-stage companies are going public through an IPO (initial public offering) much further into their life cycle. So, where this used to average three years, an IPO was stretching to at least 12, but having an ATS to monetize an investment now explodes the number of investors willing to invest. Although the liquidity will not be as robust as on the NYSE or Nasdaq it is available as an option should an investor have a life event or another priority that requires monetization of their shares.

KorePartner Spotlight: Curtis Spears, President and CEO of Andes Capital Group

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

Curtis Spears, President and CEO of Andes Capital Group, has over 25 years of experience in the asset management arena. At Andes Capital Group, he is responsible for overall firm strategy, strategic direction, and day-to-day operations. 

 

Andes Capital Group is a boutique firm that prides itself on its long-term relationships and excellent customer service. With a diversified client list that includes public and corporate pension funds, foundations, investment advisors, and endowments, Mr. Spears has had a hand in delivering bottom-line results for various customers.

 

Additionally, Curtis Spears is deeply committed to giving back to his community, as a Chicago native. He previously served on the Governing Board for UCAN and on auxiliary boards for the Steppenwolf Theater, the Field Museum, and the Primo Center for Women and Children. In these roles, he helped raise funds and increase awareness for various causes.

 

Curtis Spear’s years of experience in the financial services industry and his dedication to giving back make him an excellent KorePartner. We were excited to sit down with Curtis recently to ask him about himself and the capital industry.

 

Q: Why did you become involved in this industry?

 

A: I got lucky! I knew nothing about this industry coming out of college. When I first started in finance, I was a computer programmer, writing programs to manage index funds. As my role evolved, I became more interested in working directly with investors and spent the last half of my career servicing clients and raising capital. Over the years, I developed a particular interest in helping people get access to deals and access to capital that they historically would not have access to.

 

Q: What services does your company provide for RegA offerings?

 

A: As a KoreConX partner, we provide deal due diligence, AML/KYC, etc. However, since the bulk of our business is private placements, we have the ability to offer fundraising and general advisory services for every aspect of a deal.

 

Q: What are your unique areas of expertise?

 

A: Since the majority of our reps cut their teeth in asset management, fundraising is a crucial aspect of what we do. We have relationships that span every type of investor, from the most prominent institutions to the smallest retail individual. We are somewhat industry agnostic, but much of what we see tends to all be in the Medtech, fintech, and proptech areas.

 

Q: What excites you about this industry?

 

A: Over the years, outsized returns have been earned primarily in the private markets. What excites me is giving issuers even more access to capital with a new investor class and allowing the average investor to play. 

 

Q: How is a partnership with KoreConX the right fit for your company?

A: In talking with Oscar and the KoreConX team over the last couple of years, we learned that our interests and goals are truly aligned. That is important to us. Also, working with other like-minded partners and leveraging their expertise will really allow us all to propel this part of the industry forward.

 

Foreign Investors Key Considerations for Your Next Deal

Posted on by Nate Dodson Tags: , , , , , , , 1 Comment on Foreign Investors Key Considerations for Your Next Deal

This post was originally written by our KorePartners at Crowdfunding Lawyers. View the original post here. 

 

When discussing fundraising for your deals, most of our attention has previously focused on U.S. citizens investing their own money. That’s to be expected, but it’s important not to overlook another potential funding source: foreign investors. This article will explore what you should know about working with foreign investors in the U.S. and their potential impact on your deal.

Foreign Investors in the U.S.

Foreign investors are those individuals or companies outside of the United States who invest their money into U.S.-based businesses. And foreign money can be great. But, of course, there are advantages and disadvantages to know here and some pretty important restrictions.

How Foreign Investments Work

Before we dive into how these investments work or the pros and cons of foreign investments, we should touch on the restrictions put in place by the U.S. government. You’ll find that they’re twofold. First, there are restrictions set out by the country’s government in which you’re raising funds that you need to consider, as well as those applied by the U.S. government. Second, there are also regulations regarding how much money can be raised from foreign investors.

Foreign Investment Regulations

Each country has its own rules regarding investments. It is your responsibility to investigate what those are and how they may impact you, your investors, and the money that you raise. Some factors to consider include how much money you’re raising and the level of involvement between citizens of foreign countries.

It’s important to stay in legal compliance within all countries, which means you need to know the true cost of remaining completely legally compliant within each’s borders. In some cases, you may find that it is simply too expensive to develop a feasible plan. For example, suppose you’re raising a small amount of capital in a foreign country to transfer to the United States, and you’re not being fraudulent. In that case, complying with local securities laws might be somewhat cumbersome.

Too often, those raising funds focus more on securities laws here in the United States rather than in the other country, but this can hamstring you.

Limitations on Who Can Invest

In addition to the laws governing investments in the other country, you’ll also need to consider our domestic Office of Foreign Assets Control, or OFAC, here in the U.S. This organization determines which foreigners can invest and which ones should be blocked. In some cases, the OFAC focuses on the individual or the nation in question. In other instances, their review centers on the foreign country and the investment amount.

For instance, if an investor has 15% of greater assets in North Korea, Iran, Syria, and some other countries, they cannot invest here in the U.S. Again, you will need to check the OFAC website to see who is on the blocked persons list.

This is all part of getting to know your investors. It’s an enormous risk, but it can be potentially rewarding. You don’t want to take any money from people that you shouldn’t be because it can lead to problems beyond the scope of securities law.

Of course, these rules are implemented with good reason. They help ensure that you’re not taking money from a terrorist, helping someone launder money, for instance.

U.S. Securities Laws

We’ve touched on these briefly, but they bear deeper scrutiny. U.S. securities laws have a significant role to play when it comes to foreign investors. For instance, we have a law called “Regulation Asks,” which states that the securities laws for foreign investors don’t apply because they’re foreigners to the SEC. Regulation S states that if you investors are outside the country, most securities laws do not apply.

With that being said, if you commit fraud in any way, dealing with foreign investors will not prevent the SEC or any other authorities from investigating you and your investors. So it’s important to avoid the assumption that Regulation S protects criminal behavior – you should always do the right thing.

However, this brings up an important point. Since securities laws may not apply the same way to foreign investors that they do to U.S. investors, are you still required to provide disclosure? Absolutely, yes. The best path forward is to comply with Reg D as much as possible because then at least you’re providing proper disclosure to your investors and not taking advantage of the vulnerable out there.

Potential U.S. Tax Implications for Foreign Investment Deals

The tax situation is never simple, and adding foreign investors to the mix can muddy the waters a great deal. The tax consequences here can be substantial because when you add foreign investors to the mix and operate as an LLC, there’s pass-through taxation.

You will also have to deal with increased IRS scrutiny. The IRS is extremely worried about what your foreign investors will do – will they take their earnings and leave without paying taxes? Ultimately, you are responsible for their actions. This can mean that if a typical deal requires approximately 30% in withholdings, you should withhold the proper amounts from your investors’ earnings and pay it to the IRS on their behalf.

We also have FIRPTA, the Foreign Investment in Real Estate Property Tax Act of 1980. It requires you to withhold 15% from investors’ returns, although you should check with your tax specialists on the sale of real estate for any distributions that will go to foreign investors.

Avoiding Tax Complications with Foreign Investors

There are a lot of potential downsides to working with foreign investors. So how can you avoid them? Just don’t take on any. How do you avoid them, though?

It just comes down to requiring foreign investors to create their corporation or LLC within the U.S. This ensures that you’re able to let them into the deal, and you no longer have to worry about taking 45% of their returns and transmitting them to the IRS. You’ll also be able to deduct all of their expenses and losses against their income since they won’t be considered “pass-through” entities.

In addition, you can set up a separate bank account for each investor, and ensure that they only receive payments through that account. That way, you can keep track of who has paid what and make sure that everyone pays their fair share.

So, while it might seem like a good idea to work with foreign investors, you need to think twice before doing so. If you do decide to go ahead with it, you’ll need to consider these issues carefully and consult with a skilled attorney.

The Canadian Exemption

While the rules we’ve discussed here apply to investors from most nations, there is an exemption for Canadian investors under certain circumstances. The U.S. maintains a treaty with Canada that states these investors are not subject to the tax withholdings we just talked about. That means Canadian investors can be taken on without too much worry, at least about tax withholdings, with one caveat – you must have a limited partnership and cannot use an LLC or C corp or any other business formation option.

If you wish to work with Canadians, you’ll need to set up a limited partnership to receive their investment. If you choose to do so, make sure you understand all the risks involved with doing so.

The Big Questions to Consider When Taking on Foreign Investors

We’ve covered a lot of ground here in a short time. So, to sum up, let’s go over the big questions you’ll need to answer when you consider taking on foreign investors within your deal.

  • Are they from a country subject to sanctions, like North Korea, Syria, Iran, or Russia? Note that this list changes from time to time as sanctions are placed and lifted. Always check the OFAC list to ensure that your investors are clear about bringing their money into the U.S.
  • Are you following the securities laws of the other country? Are you doing enough business in that country that you need to be concerned about these laws?
  • Are you complying with U.S. tax rules as they pertain to your deal? For example, are you withholding the proper amount and remitting it to the IRS? If not, you’ll be held responsible unless your partners are American entities or have an exemption.

Do you understand all the risks involved in dealing with foreign investors? Do you know where to find information about each country? Is your legal team familiar with international law? These are all things you’ll need to think through before you sign off on any deals and it’s important to consult with an experienced attorney to help guide you

How Do I Get Foreign Investors Involved in My Deal?

If you want to attract foreign investors, you’ll need to make sure that you’re meeting their needs. To start with, you’ll need to understand why they would invest in your project. What are their goals? What are their motivations?

You’ll then need to determine if you can meet those goals and motivations. Can you provide them with something unique? Something that’s hard to find elsewhere? A good place to start is by looking at what you offer and comparing it to what others offer.

Once you’ve determined that you can meet their needs, you’ll need to figure out how to get them involved. There are two ways to approach this. One is to simply ask them to invest directly. They will likely require some sort of equity stake in your company. In exchange, they’ll receive a return on investment (ROI) based on the success of your venture.

Alternatively, you may choose to take a more traditional route. You can form a limited liability company or corporation, and invite them to join as shareholders. Their shares will be treated as income-generating assets, which means they’ll pay taxes on their share of profits. This is also known as “passive” investing.

In either case, you’ll need to know the law in both countries so that you don’t run afoul of local regulations. We’ve already touched on this briefly, but it bears repeating. Be aware that you may be required to register as a broker-dealer, and comply with all applicable federal and state securities laws.

What Happens After I Take On Foreign Investors?

Now that you’ve got investors, you’ll need a plan for managing them. How do you keep them happy while still keeping your own interests protected? You’ll need to set expectations early on. Make sure everyone understands what they’re getting into.

One thing to remember is that you’re dealing with people who have different levels of experience. Some may be new to investing, while others may have been around the block many times before. It’s important to make sure that everyone understands the risks involved.

As you go through the process, you’ll also want to make sure that you have a clear understanding of the terms of the agreement. For example, you should know whether you’re going to issue stock, sell debt, or use other financing methods. As we mentioned earlier, you’ll need to be prepared to deal with taxes. If you’re issuing stock, you’ll need to decide whether you’re going to treat the shares as long-term capital gains or short-term capital losses.

Finally, you’ll want to make sure that your business plan takes these things into account. You’ll need to consider how you’re going to finance the project, how you’re going to manage risk, and how you’re going to handle any potential legal issues.

In Conclusion

In the end, working with foreign investors is a tricky situation, but with proper guidance from both experienced tax and legal professionals, it can be profitable for both you and your investors.

Hosting Webinars For Your Equity Crowdfunding Campaign

Posted on by Jason Fishman Tags: , , , , , ,

This article was originally written by our KorePartners at DNA. View the original post here. 

 

Why are webinars so important for your equity crowdfunding campaign?

Webinars are an incredible tool to help you connect with your investors, allowing them to ask any burning questions they may have. You can also repurpose these webinars to use for later content!

With everyone having access to the internet at their fingertips, there is no better time than now to start taking advantage of the many perks that webinars have to offer.

In today’s article, we are going to walk you through 8 important steps you need to know before hosting your first webinar!

Choose the Right Platform

Make sure your hosting platform (such as: Zoom, Google Meet, Vimeo) have all these qualifying features:

  • Event Registration Via Email

  • Q&A or Chat Features

  • Attendee’s Video and Audio Turned OFF

  • Screen Sharing

  • Automatic Email Reminders

  • Recordings

Set up a Registration Link

Keep your investors informed on what they’re signing up for, make sure to include the following in your registration page:

  • Date and Time of Event

  • Short Description of Event

  • Your Logo

  • The Speakers Attending the Event

 

Market Your Event

 

To encourage as many investors or potential investors as possible, it’s important to market your event across all channels (ad, social media, email, portal update)!

Make sure you’re sending out your initial announcement two weeks prior to the event, and follow up with a one week and one day out reminder.

Understand Compliance Rules

There are lots of things you are able to say and not able to say during your crowdfunding raise!

To ensure your webinar is compliant, you’ll want to have a firm understanding of the compliance rules based on what type of raise you’re running.

Create a Brief Pitch Deck Presentation

An important step in hosting your webinar, is creating a pitch deck presentation for the first 10-15 minutes of the event to get your audience engaged!

Things to include on your deck: team information, market opportunity, competitor analysis, unique differentiators, and existing traction.

Leave Enough Time for an Open Q&A Session

The purpose of these webinars is to allow existing and potential investors to learn more and ask their burning questions!

Be sure to encourage the audience to drop these questions in the chat, and then address them out loud. On the chance that your audience may be shy, come up with common questions before the event to keep them engaged.

Have a Call to Action

 

Every webinar needs a strong call to action.

 

Don’t forget to encourage investors to head over to your raise page and invest! Don’t be afraid to even point towards this call to action throughout the course of the event.

Post-Market the Event

 

For those who are unable to attend the event, make sure you share the recording!

 

You’ll want to post the video onto YouTube or Vimeo and share this link on your: blog, emails, portal updates, and social media!

KorePartner Spotlight: Nate Dodson, Managing Member at Crowdfunding Lawyers

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

Nate Dodson has over 15 years of experience helping clients with securities, financing, real estate, asset protection, and mergers and acquisitions. Not only has he served as an advisor in real estate transactions, financing, and investments, but he has also successfully developed ground-up commercial properties and participated on the GP side of approximately 4,000 multifamily units over the years.

Before his legal career, Nate worked as a stockbroker, giving him unique experience in investment sales, structures, and asset protection. By leveraging his industry expertise and the help from his long list of trusted connections, he has personally represented over $2 billion in real estate and business funding transactions over the years. While Nate’s full-time efforts are focused on the securities practice with and management of Crowdfunding Lawyers, he remains a partner at his diversified namesake law firm Dodson Legal Group, founded in 2007 and focusing on transactional, litigation, and family law work. Between both firms, their experienced legal teams have represented more than $5 billion in transactions.

Crowdfunding Lawyers is a boutique law firm focusing exclusively on representing securities transactions across the United States. As a specialty-focus law firm, the firm works with investment sponsors/operators and their advisors to develop capital funding strategies, investment offerings, and securities platforms. By taking a unique team-based approach to the firm’s client services, their clients work with a multitude of experienced, dedicated securities attorneys in the representation of Regulation D, Regulation A, Regulation CF, and S1/S3 public (IPO) offerings. The firm has provided services to 1,000+ clients, and its attorneys have, with CFL or through prior engagements, many billions in capital transactions over their respective careers. Because Crowdfunding Lawyers’ focus is limited to federal securities laws, they regularly coordinate with local attorneys and tax counsel to ensure well-rounded representation for clients. However, the firm’s attorneys have considerable experience in real estate, business, regulatory, and finance transactions and activities.

Nate’s experience with crowdfunding makes him a valuable addition to the KoreConX ecosystem. He is passionate about providing regulatory clarity across jurisdictions to ensure raises are compliant and efficient. His ultimate goal is to help investors and businesses succeed in the digital age.

We took some time to speak with Nate and learn more about himself, his organization, and his thoughts on the future of crowdfunding.

What services do Crowdfunding Lawyers provide for Regulation A offerings?

We handle the legal process from beginning structuring throughout the qualification process for Regulation A offerings. We never expect our clients to come to the table with anything other than their plans and ideas. After structuring, we draft all the documents and form any needed entities. Our goal is to file Form 1-A with the SEC within 45 days of engagement.

Because our services are comprehensive, we’ll start with consulting on our client’s business plans and advise the best strategies and structure for funding through a Reg A offering. We also introduce our clients to great vendor partners and team members, like KoreConx.

To meet our self-imposed 45-day timeline, we ensure that we have complete information, including broker-dealers, if involved, or financial audits and introductions are made when appropriate.

How is a partnership with KoreConX the right fit for your company?

We love working with KoreConX and refer to them regularly to serve as the transfer agent for our Reg A offerings. It is essential to have a good transfer agent system involved, as they manage your investors and investment opportunity administration.

KoreConX is not an attorney. Crowdfunding Lawyers is not a transfer agent. Both are necessary for your success with your Regulation A offering.

What excites you about this industry?

Our entire team has a passion for the investment industry, but we’re not a diversified firm. We have a team of very qualified attorneys that solely focus on securities transactions. All of our attorneys come from prestigious law schools and have worked in the legal field for years. If they are newer in the securities realm, it’s only because they have so much experience in startups, entrepreneurship, real estate, investing, and corporate law. Our attorneys have similar impressive pasts and a drive for our client’s success. 

As an example, I worked as a stockbroker until the internet stock bubble burst around 2000, selling investments on the phones before crowdfunding became available after the JOBS Act of 2012.

What services do Crowdfunding Lawyers provide that are different?

We always spend substantial time in the initial stages of representation, where we get to know our clients and their business. We strive to structure your opportunity so that you can meet both market expectations as well as investor expectations, and our client’s primary goal is to get funded faster.

While we focus heavily on real estate funds and syndications, approximately one-third of our clients are focused on business and investment funds. With our real estate fund representations, we often represent Regulation A offerings for REITs (Real Estate Investment Trusts) and series LLC offerings. Our clients can replicate their traditional syndication model with Reg A series offerings by breaking down the Regulation A offerings into unique project-specific classes. This is where our clients can continue to offer a real estate syndication model with all the benefits of placing offerings through Regulation A, which is a different twist on setting up a $75 million blind-pool fund.

 

The 4 Things You Can’t Do While Marketing a New Reg CF Fund

Posted on by Dawson Russell Tags: , ,

This post was originally written by KorePartner Dawson Russell at Capital Raise Agency. View the original article here. 

 

Your Reg CF Marketing has qualified, and it’s time for the next step! As exciting as this is, there are several things to be aware of before throwing any marketing ‘out there.’ It all includes having a marketing professional, the verbiage and images used, and types of marketing. Now let’s take a closer look at each of these marketing aspects of a Reg CF Marketing to know better Reg CF meaning and Reg CF platforms. The following details apply to ‘test the waters’ (TTW) and marketing after your Reg CF qualification.

Use of Improper Verbiage and Images

Marketing in the general sense is to sell a product, sometimes with slight fabrications or indications of potential success or future opportunities. Keep a keen eye to separate Reg A vs Reg CF verbiage. With Reg CF platforms, these are common pitfalls that must be avoided. Did you know something as simple as the word amazing, promising, commit, or golden is considered improper in Reg CF Marketing? These words are over-the-top statements implying merit, interest, offering anything ‘special,’ or a return of any degree. As for images, it is similar in thinking to verbiage. No money, cash registers with overflowing tills, graphs with arrows pointing skyward, and the like are a no-go.

Lacking an Online and Digital Presence

Strategic digital and online marketing plans are no longer an option. Potential investors, especially new generations, will expect a significant digital presence including a well-structured website, social media presence, and more often than ever, a related app. Social media is essential because each follower gained is a potential investor (and their followers will see they’ve followed your Reg CF, which means more potential investors).

Making Investors Search for You

With any marketing plan, you have to stay top of mind. Potential investors will expect ‘face time’ to build a connection with your Reg CF mission and vision. The term ‘face time’ is about communication from you or your executive team through webcasts, online video events, and meet and greets with question-and-answer sessions. After all, they may be investing in your Reg CF, and it’s by far the least you can do.

Do-it-Yourself Reg CF Marketing

While setting up a website is an easy task in our digital world, it does take considerable time and effort to keep up with constant content. As seen above, ensuring your website complies with Reg CF advertising rules and regulations is another task altogether. To get your best return on investment hiring a professional who understands the Reg CF world is worth every penny. Professional marketers can provide the initial setup of a website, regular updates, social media posts, videos, regular email notices, and additional marketing pieces. Plus, it frees up your time to interact with potential investors.

Why Are Brand Ambassadors Valuable Investors?

Posted on by Oscar Jofre Tags: , , ,

 

When it comes to raising capital, it’s important to think outside the box. The JOBS Act created a new type of investor a “brand ambassador”, with whom companies should build strong relationships to help the business grow. This community of investors can be extremely valuable for your company, capital raise, or product. Brand ambassadors are often passionate and can connect with others, which can help promote a product or investment opportunity. Because of this, brand ambassadors can often be valuable investors, especially when it comes to RegA+ and RegCF offerings.

 

The value of brand ambassadors when raising capital

 

Brand ambassadors can be defined as individuals that have a vested interest in the success of a company or product. They are often passionate about the company and its mission, and they work to promote the company and its products to their friends, family, and online followers. Because of these attributes, they are also valuable investors, as they can help a company raise capital through their investment dollars and in-person or online networks.

 

They can use their social media platforms to promote the company, which can help drive sales and bring attention to capital raises. However, brand ambassadors themselves can be seen as value investors because of their connection to a brand and their willingness to invest in a company they already believe in. When a brand ambassador invests in a company through RegA+ or RegCF, they show not only their belief in the company but also their faith in its future success.

 

By investing their own money in the company, brand ambassadors can help it raise the capital it needs to grow and succeed. And as the company grows, so does the value of the brand ambassador’s investment, and they share this excitement and are often more willing to invest in subsequent offerings or drive others to invest. Brand ambassadors are thus extremely valuable investors for companies using RegA+ or RegCF to raise capital.

 

Increased capital raises with the help of ambassadors

 

Brand ambassadors help promote a company because of their affinity towards an organization, which can be just as helpful with raising capital. These individuals may often be the first to invest in your capital raise because they already believe in your company.

 

Ambassadors can also help a company by providing feedback, product testing, and market research to help improve the product before raising capital. Furthermore, they may already have an established relationship with key influencers in the same industry as the company they’re investing in. Some key benefits for companies when brand ambassadors invest in them are:

  • The brand ambassador brings not only money to the table but also invaluable social capital.
  • The powerful brand ambassadors can help the company save on marketing costs.
  • The brand ambassador can be a powerful voice in promoting the company to their networks.
  • The brand ambassador is invested in the company’s success and future.

 

While there are many different types of crowdfunding, one that has been particularly successful for early-stage companies is RegCF and RegA+. One of the benefits of raising capital through these methods is that they provide companies with access to a wider pool of potential investors. By seeking to build relationships with brand ambassadors, companies can tap into a new pool of potential investors and benefit from the social capital that brand ambassadors can provide.

 

The future of capital

 

Helping with everything from spreading awareness to bringing in new investors, brand ambassadors can be key players in a successful raise. As a good example, Piestro has effectively utilized brand ambassadors using the exemptions. This company was able to raise significant amounts of capital and grow its business with the help of passionate brand advocates.

 

Brand ambassadors are valuable investors because they have a personal stake in the company and its success. They can be influential in promoting the company to their social media followers, and other potential investors or simply contributing to capital raises themselves.

What is the Opportunity in RegCF for Franchisees and Franchisors?

Posted on by Oscar Jofre Tags: , , ,

Raising capital is a critical part of any business, and it can be especially challenging for franchisees and franchisors. Fortunately, there are several options available, notably Regulation CF crowdfunding. This regulatory framework, which was created as part of the JOBS Act, allows businesses to raise up to $5 million per year from a wide range of investors and introduced significant opportunities within the capital raising journey.

An Opportunity for Franchises

Regulation Crowdfunding, RegCF for short, is a securities regulation that allows companies to offer and sell securities to the general public through a crowdfunding portal. Since being passed into law just over 10 years ago, companies have raised over $1B in capital through this exemption.

Of course, there are also risks associated with investing through RegCF. As with any investment, there is always the potential that it may not gain the traction issuers anticipate and the desired capital may not be raised. However, if done carefully and with due diligence, RegCF can be an excellent way for franchisees or franchisors to raise capital.

Advantages of Reg CF for Franchisors and Franchisees

Several key points should be highlighted when it comes to the advantages of crowdfunding through Regulation CF for both franchisors and franchisees. Reg CF opens up a new way to raise capital for franchisors while retaining full ownership and control of their company. This is thanks to the lower investment minimums required and the ability to raise capital from both accredited and non-accredited investors. On the other hand, franchisees can use Reg CF to improve the reach of their franchise (with the approval of the franchisor) and raise the necessary capital to get their franchise off the ground or expand it.

When it comes to Regulation CF, there are a few key advantages that both franchisors and franchisees can enjoy, including:

  • Lower investment minimums are one of the key selling points of Reg CF for both franchisors and franchisees. This means that issuers can raise capital from their fans, customers, and others who already support the company.
  • The ability to raise capital from both accredited and non-accredited investors is another key advantage of Reg CF, which allows issuers to tap into a larger pool of potential investors.
  • Improved reach is thanks to the fact that Reg CF allows for the use of social media and other online platforms to reach a wider audience of potential investors and increase the likelihood that an offering will receive the exposure needed to be successful.

Getting Involved in Reg CF

For franchisees and franchisors, the opportunities are plentiful with Reg CF. However, the main thing to remember is that to be successful in Reg CF campaigns, you need to have a great product with an even better message.

The first step is to get your product in front of potential investors. This can be done through several channels, including social media, online advertising, and PR. Once you have people interested in your product, it’s crucial to provide them with more information about why your product is worth investing in. This is where having a strong value proposition comes in. Once you have an audience for your product, you can begin the process of getting your offering qualified with the SEC and listing it on a funding portal.

Your value proposition should be clear, concise, and compelling. It should address the needs of your target market and explain how your product can meet those needs. Additionally, your value proposition should be supported by data and customer testimonials. These will help to show potential investors that your product is the real deal.

Finally, it’s important to remember that raising money through Reg CF is a team effort. To be successful, you’ll need to build a strong network of support. This includes family, friends, members of your target market, and a supporting team of key players from lawyers to broker-dealers and marketing professionals to help you reach your goal in the most efficient way possible.

Preparing for the Future with Reg CF

This regulatory crowdfunding framework offers numerous opportunities for early-stage businesses to raise capital from a large pool of investors. Through RegCF, startups and small businesses can offer securities to the general public, allowing investors of all income levels to participate in their growth. Franchising is a great way to expand a business and bring it to new markets. With RegCF, there is now an opportunity for franchisees and franchisors to raise capital from everyday investors through equity crowdfunding.

10 Years Later: How the JOBS Act Has Revolutionized Capital Raising

Posted on by Oscar Jofre Tags: ,

It’s been ten years since the JOBS Act was passed, enabling companies to raise capital in ways never before possible. What started in Washington, the brainchild of David Wield, is now a well-oiled machine that has funded thousands of companies and is constantly evolving. Ten years on, the various JOBS Act regulations have been put to great use, and we are only at the tip of the iceberg.

Looking Back Ten Years

The JOBS Act was passed in 2012 to help small businesses and startups raise capital. The main idea was to make it easier for private companies to raise money from investors, without requiring them to go through the cost-intensive process of going public. The JOBS Act did this by introducing new regulations, such as Reg D, Reg CF, and RegA+ for raising capital from accredited or non-accredited investors.

Before the JOBS Act, companies were limited in raising money. They could only raise money from accredited investors and eventually needed IPO to access such a hefty amount of capital. With recent expansions of regulations like RegA+ and CF, companies can now raise $75 million and $5 million, up from $50 to $1.07 million. On the tenth anniversary of this monumental legislation, we can look back and see how this legislation has impacted businesses and the economy as a whole.

A Monumental Success

The JOBS Act has been a monumental success in helping businesses raise significant capital. The various regulations have allowed companies to raise more money while remaining private and giving them more fundraising options.

One of the most popular regulations is Reg A+, allowing companies to raise up to $75 million from non-accredited investors. This has allowed thousands of companies to raise billions in capital, with an estimated $1.48 billion being raised with Reg A+ in 2021 alone. In addition, the exemption has been upgraded to make it significantly more usable and has seen a surge in businesses utilizing it.

Another popular exemption is Reg CF, which allows businesses to raise up to $5 million from non-accredited investors.

Reg D has also been popular, allowing businesses to raise capital from accredited investors only, and has been a popular option for companies looking to remain private.

Keeping Companies Private

The JOBS Act has many benefits for companies who want to raise capital, but staying private is one of the biggest advantages. Staying private is growing even more attractive to companies, especially considering they can make a secondary market available for shares bought under JOBS Act exemptions.

Plus, by raising capital through these methods, companies can continue to grow and expand without worrying about private equity firms or other investors taking control. This allows the company to maintain its independence and gives management the ability to make long-term decisions without worrying about short-term results.

The JOBS Act has made it easier for companies to stay private by increasing the amount of capital they can raise and reducing the regulatory burden. This has made these regulations a very popular option, evening the playing field and decreasing the reliance on IPOs to raise capital.

Continued Success for the JOBS Act

The JOBS act has been a resounding success in helping businesses raise capital. This is because the JOBS act allows businesses to raise money in new ways. Additionally, the JOBS act opens the market to a wider pool of potential investors, allowing even the everyday person to enjoy the opportunity to invest in a promising company on the ground floor. The success of the JOBS act has been a boon for the economy as well, helping to create jobs and spur innovation.

The JOBS Act has been a great success, benefiting entrepreneurs and investors alike. After ten years and the recent increase in the amount companies can raise, the JOBS Act has continued to be an attractive opportunity for private companies. But there is always room for improvement, some possible developments in the future include:

  • The SEC could raise the offer limit under Regulation CF, which would fill the current gap between Reg CF and Reg A+ Tier II.
  • The SEC could eliminate investment limits for retail investors, allowing people to assess opportunities and risk tolerance without limits.
  • The SEC could make the exemption from the 12(g) Rule permanent, which would remove a burden for many issuers who are not ready to face the rigors of registration.

While these suggestions would improve the JOBS Act, it is ultimately up to the SEC to show true vision by deregulating as per the suggestions above. Only time will tell what the future holds, but it is clear that it has been a success.

Overall, the JOBS Act has been a massive success in helping businesses raise capital and has increased the number of companies with access to capital. It has also helped enterprises stay private and given them more options for fundraising.

The JOBS Act has been in effect for ten years now, and it has completely revolutionized the way companies raise capital. Regulations like CF and RegA+ have made it significantly easier for companies to access capital, and KoreConX has been there every step of the way to help companies navigate these new waters.

What is a Fund and How Can it Utilize RegA+?

Posted on by Oscar Jofre Tags: ,

In the traditional sense of a fund, you may be thinking of something like a hedge fund, or other sort of entity that invests in smaller portions of other entities. However, these types of funds are not able to raise capital using Regulation A. So when it comes to RegA+ exemptions, what is a fund and how does it work?

In 1940, the Investment Company Act was passed into law, regulating how investment companies are organized and they types of activities they are permitted to conduct. This law also specifies the requirements for various types of funds, including open or closed-end mutual funds. However, under Regulation A, companies that fall under this definition of an investment company are prohibited from using the exemption to raise investments.

For a “fund” to utlize RegA, it is required to have an exemption from being an investment company. Some rules do apply here, such as the exemptions of having less than 100 investors or having certain qualified investor are not applicable. In the case of Regulation A+, a common exemption is that the fund is not investing in securities. Instead, it may be investing in assets such as real estate or collectibles.

Other considerations must be taking into account when trying to have the offering qualified by the SEC, such as being able to explain how investors will be getting their money back. For RegA+, funds must also have a business plan in place. For example, they must define the types of companies they are looking to invest in or acquire, especially by defining which companies specifically.

However, the process is generally complex, and requires careful planning and discussions with legal advisors to ensure that the raise is done compliantly and according to SEC regulations.

What Due Diligence Do I Need for My RegA+ Offering?

Posted on by Oscar Jofre Tags: , ,

If you’re thinking of conducting a RegA+ offering, you’ll need to do some due diligence first. This blog post will outline what you should investigate before proceeding with your offering. We’ll cover the key areas you need to look at, including the company’s financials, management, and business strategy. So if you’re ready to take the plunge into RegA+, make sure to read this post first.

Be a Diligent Issuer

Due diligence is an essential part of the securities offering process. Issuers must carefully examine all aspects of their business and operations to comply with securities laws and regulations. Due diligence aims to identify and assess any risks associated with the offering, including reviewing the company’s financial statements, business plan, and disclosures. Issuers must also consider potential risks related to proceeds, insider trading, and other potential conflicts of interest. Due diligence is vital for RegA+ issuers because it helps to ensure that the offering is compliant with securities laws and regulations. It also helps to protect the company and the investors by identifying any potential risks associated with the offering.

When it comes to RegA+, issuers must conduct significant due diligence to ensure a successful offering to protect their interests and stakeholders. The first step in due diligence is the review of all documentation, including the offering circular and any other related materials. The goal is to get a complete understanding of the offering and to identify any potential risks. They can protect their interests and those of their stakeholders by doing so.

The next step is the assessment of activities. Issuers must assess their actions and identify any potential risks so they can ensure they meet regulatory requirements. They must also be clear in their marketing materials to ensure that they are not misleading potential investors.

The final step in due diligence is the review of marketing materials. Issuers must ensure that their marketing materials are not misleading and that they comply with all regulations. They can protect their interests and those of their stakeholders by doing so. If information is not accurate or is contradictory with information the issuer has published elsewhere, it can cause problems for the offerings.

Tips for Issuers

When you’re looking to conduct due diligence on your own business, it’s essential to have a clear plan of attack. Here are five things to keep in mind when preparing to complete due diligence for a RegA+ offering:

  1. Start by reviewing your business plan and finances. Make sure you understand your company’s goals and how it is making money.
  2. Look at your management team and Board of Directors. Ensure they are qualified and have the experience to run a successful business.
  3. Conduct a thorough review of your company’s operations. Make sure you understand your manufacturing process, marketing strategy, and sales channels.
  4. Keep your cap table up to date; ensuring it documents who holds shares in your company.
  5. Ensure you do not have information on your website that contradicts information in your offering documents.

These are just a few aspects that help you conduct due diligence more effectively and efficiently. Due diligence is an integral part of any business transaction, so it’s worth getting it done right.

Be Diligent with your Offering

When working with an attorney, you must provide them with all of the relevant information about your company and the offering. This includes both the business and financial aspects of your company and any legal issues or risks that you may be aware of. Attorneys will then use this information to help assess the offering and to identify any potential risks.

Auditors will also need access to all relevant information about your company and the offering. They will use this information to verify that everything is in order and that there are no financial risks associated with the offering. Auditors will also work with the attorney to identify any potential legal risks.

Working with both an attorney and an auditor during the due diligence process will help to ensure that your RegA+ offering is successful. By providing them with all of the relevant information, you can help reduce the risk of mistakes being made and help to keep everyone on track.

Tremendous Growth in Investments in Online Startups

Posted on by Oscar Jofre Tags: , ,

Online startup investing has become more prevalent in recent years as the JOBS Act exemptions continue to evolve and grow more popular as a way of raising capital for private companies. This is evidenced by the growth seen in the number of new raises occurring each year and the amount of money raised. These trends are incredibly positive for the future development of the online private equity markets. JOBS Act exemptions are incredibly powerful in allowing businesses to raise needed capital while providing investment opportunities to investors that would not have been possible otherwise. This blog will discuss why this is growing in popularity and its benefits.

The Growth of Online Startup Investments

Online startup investing has grown significantly in the past few years, with more money being raised for private companies through an online portal. From 2018 to mid-2021, there was a 327% increase in the number of companies raising funds and a 472% increase in money raised. This trend is only projected to continue in the coming years as online private equity markets grow. This number of new raises is exciting; it will only continue to open new opportunities for investors and companies alike, create jobs, and leave a positive impact on the economy.

There are a few factors that have contributed to this rapid growth. Firstly, the new $75 million and $5 million raise limit that went into effect in March 2021 for Reg A+ and Reg CF has made it easier for companies to raise capital and expand capital raising to companies for whom previous limits weren’t high enough. Looking forward, the increasing number of raises is an incredibly positive trend for the private capital market.

An Increase in Online Business Investment

In 2021, the amount of money raised through Regulation CF surpassed $1 billion, a figure expected to exceed $5 billion raised because it is a promising opportunity for companies and investors. For companies, regulation crowdfunding is an efficient way to raise money as allows companies to retain more control than traditional methods. At the same time, investors can benefit by getting involved in early-stage startups and have the potential to see a return on their investment if the company is successful. This is one of the key benefits of JOBS Act exemptions; no longer are the everyday investor locked out of deals in the private market. Regulation CF offerings are open to non-accredited and accredited investors alike, removing the barrier to entry in this space.

While the number of raises is quickly increasing, growth in the amount of money raised from the beginning of 2018 to the first quarter of 2021 is similarly astonishing. The amount of capital raised in this period increased by 627%, from $15.5 million in 2018 to $112.8 million in 2021.

Equity crowdfunding is proving to be a promising opportunity for companies looking to raise capital and for investors looking to get involved on the ground floor of young startups. The steady increase in the number of raises and amount raised is an extremely positive indicator for future growth in the online private equity markets. For these reasons, we expect the amount invested in online startups to continue through 2022 and beyond.

Additional knowledge sources

https://kingscrowd.com/online-startup-investments-have-grown-by-470/

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