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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/

A Look Back on the Last Year of RegA+

Posted on by Oscar Jofre Tags: ,

Marking a huge step forward in equity crowdfunding opportunities for entrepreneurs and investors alike, one year ago, the SEC’s game-changing decision went into effect that allowed businesses to raise $75 million through RegA+ and $5 million from RegCF. These new limits were a significant increase from the former $20 million and $1.07 million limits for RegA+ and RegCF, respectively. To celebrate this one-year anniversary, we take a look back at the progress that has been made and how this new fundraising avenue is benefiting startups and businesses of all sizes.

The History of RegA+ and RegCF

Regulation A+ and Regulation CF are securities offerings brought to life through the JOBS Act, passed in 2012. They allow companies to raise money from investors without going through the process of a complete initial public offering.

Regulation A+ was created by the US Securities and Exchange Commission (SEC) as an amendment to Regulation A of the Securities Act of 1933. It allowed companies to raise up to $50 million from unaccredited investors, a limit increase to $75 million in March 2021.

Benefiting from JOBS Act Regulation

The main benefit of Regulation A+ is that it allows companies to avoid some of the more demanding regulatory requirements that are usually associated with a public offering. It is also less costly, which is essential in creating more opportunities for issuers to take advantage of the exemption. For Tier I offerings, companies are required to file audited financial statements and ongoing reporting. On the other hand, Tier II offerings do not have requirements to register with state securities regulators.

RegCF allows companies to offer and sell their securities to the general public, including unaccredited investors, through crowdfunded ventures. Both Regulation A+ and RegCF are a way for companies to raise money without giving up significant equity or control of their company. The main drawback to both RegA+ and RegCF is that they are not as well-known as other fundraising methods, such as an IPO or private equity. As a result, it can be more challenging to find investors who are willing to invest in a company through either of these methods, but there are ways to be ready for this capital-raising journey.

Despite this, there has been a surge in companies using Regulation A+ and RegCF in the past year. This is likely because traditional fundraising methods are becoming increasingly difficult  and cost-prohibitive for startups and small businesses. Another main reason is the substantial increase in the amount a company could raise with these regulations, making it also an attractive way to raise capital for larger offerings like in real estate or Medtech.

Increase in Capital Raised

Once more reliable Q1 numbers become available, we can better estimate how much was raised in the year since the capital that RegA+ could raise was increased. In 2020 before the change in the amount of capital companies could raise, it is estimated $1.48 billion was raised from RegA+. In 2021, when the increased capital raise was available for most of the year, over 2 billion was raised.

In 2020, $239 million was raised using RegCF before the changes to how much capital could be raised. When the amount that RegCF could raise was increased from a little over a million to $5 million, the total amount raised in these campaigns soared to $1.1 billion in 2021. We do not have exact numbers yet on how much has been raised in the year since the capital increase, but this figure is expected to double in 2022. This would mean that in the three years since the increase in how much capital could be raised, over $3.5 billion has been raised with these methods. This number will continue to grow as people become more comfortable with these types of investment vehicles and as the infrastructure surrounding them becomes more robust.

By lowering the requirements for entry into capital raising with these regulations and increasing the amount that can be raised, the JOBS Act has allowed more people to invest in the growth of small businesses. This, in turn, is helping to create jobs and support the economy.

David Weild, Former Chairman of the NASDAQ and Father of the JOBS Act, had this to say about the increase in how much capital companies could raise; “It means more capital will be available for entrepreneurs, allowing their ideas to become realities and helping create living wage jobs across the U.S.”

This is a huge win for small businesses, investors, and the economy. The increase in how much capital can be raised has allowed more people to invest in small companies, which helps create jobs and support the economy.

In the past year, there has been a surge in the number of companies that have used Regulation A+ and RegCF to raise capital. This is likely due to these methods being less well-known than other forms of fundraising, such as an IPO or private equity. The increase in how much can be raised with RegA+ and RegCF has allowed entrepreneurs more access to capital without giving up ownership or control over their company.

The Importance of Private Capital for Female Founders

Posted on by Oscar Jofre Tags: ,

It’s no secret that women face unique challenges when starting and running a business, with women-led startups only receiving 2.3% of VC funding in 2020. From a lack of access to capital to the prevalence of bias in the business world, female entrepreneurs have a lot stacked against them. However, thanks to women’s movements and the push for further diversity in the workplace, more people are beginning to realize just how important it is to support women in business. With the rise of private capital raising through JOBS Act regulations, we are begging to close this gap.

In this blog post, we’ll look at the disparity in capital raised between male- and female-founded startups and explore some possible solutions.

Female-Led Private Capital

The lack of private capital for female-founded startups is a problem. Though women are starting to receive more capital funding, it is still disproportionately lower than male-founded companies. There are many reasons why this is the case. Still, one major factor could be that women tend to found smaller companies with more minor funding needs or investors who want to invest in specific industries where women are under-represented.

The Disparity in Capital Raised

When it comes to startup funding, female founders are at a disadvantage. In 2021, $456.6 million was invested in startups through crowdfunding. Of that total, female founders received 19.3%, and non-female founding teams received 80.7%. Everyday investors funded female founders 9x more than traditional VC funding in the same year, which poses a great opportunity for women raising capital through methods like RegA+ and RegCF.

One reason for this disparity is that fewer women-founded startups are raising capital. This is partly because women are still underrepresented in entrepreneurship. It will take time for them to catch up to their male counterparts. Another reason is that some investors might prefer to invest in specific sectors where women are still underrepresented. Or, it could be because sectors where women run businesses may have fewer funding needs.

Whatever the reasons for the disparity, it is clear that female-founded startups receive less funding than their male counterparts. This is a problem that needs to be addressed to promote equality in the startup world.

Improved Capital Raising Techniques

However, the online private market is challenging VC’s biases and progressing towards a more equitable funding model. Crowdfunding is one example of this, as it allows female-founded startups to raise capital from a wider pool of investors.

This is one of several ways to overcome the discrepancy between how much capital is raised by male-founded startups and female-founded startups. Another is to increase the number of women-led businesses by providing support and resources specifically for female entrepreneurs. This deficit is also overcome by investing more into industries that women are highly represented in or investing in getting more women into predominantly male-run industries.

We’ve looked at the disparity in capital raised by male- and female-founded startups, and we need to continue raising awareness and encouraging people to invest in female-founded businesses. With enough support, we can move closer towards an equal playing field for all entrepreneurs.

KoreClient Spotlight: Peter Kassel, CEO and Co-Founder of HealthySole

Posted on by Oscar Jofre Tags: , ,

Peter Kassel is the CEO and co-founder of Healthysole, a remover of 99.99% of infectious bacteria, viruses, and spores that are tracked on your shoes. As the co-founder of HealthySole Peter has been with the company for its entire journey, which began in 2011. We recently sat down with Peter to discuss his company, the growing Medtech space, and the use of capital raising in this field.

Q: Tell me a little about your experience, company, and your company’s impact on clients and the Medtech space.

A: I have been working in the Medtech space for ten years as CEO and co-founder of Healthysole. Ten years ago, my family started this company on the simple concept that shoes and floors are dirty. We are now hoping to make a significant impact on the Medtech space. My family and I decided to address this issue when a family member acquired a near-fatal infection during a standard medical procedure. While Hospital Acquired Infections and Infection Control are prevalent issues, we found that shoes and floors were regularly overlooked as potential contributors to the problem.

Once we pivoted our product towards the Medtech and healthcare space, top leaders in the field contacted us to test their hypothesis and push the narrative of better protecting the patient and healthcare provider. We see that there is greater value and response for this product within the healthcare setting and beyond. We view the product as simple as washing your hands for the soles of your shoes. When people wash their hands with greater frequency, the environmental presence of pathogens decreases; HealthySole PLUS safely and unobtrusively applies the same principle, only to the soles of shoes in just 8 seconds. This helps limit the pathogens on one of the dirtiest parts of a hospital, shoes. HealthySole can be implemented to lower the amount of infectious pathogens responsible for hospital-acquired infections by addressing and limiting pathogens on your soles.

Q: What excites you most about the sector?

A: It’s one of these examples of a market sector where innovation has very little potential of downside. When working in the Medtech space, you’re trying to improve the experience of patients and healthcare professionals while lowering the chance of infection, better preventing illness, and reducing the spread of germs in facilities.

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

A: We have been around for ten years. Once we proved out the device and had momentum, we felt we had a viable tool. Groups that adopted our product to deal with disease infection rates from patient to provider saw the benefits. At the very same time, all these world-shattering events kept occuring, putting a startup like ours at a disadvantage. When we want to put out our results, there’s lots of international news and we are unable to rise above the noise. LSI gives us the opportunity to speak directly to the medical community at large about the threat shoes and floors pose and how HealthySole PLUS can easily and effectively address it.

Q: Now that your company will be using Reg A+ for your next offering, how do you see it impacting your company?

A: It’s night and day. Medtech companies have a very hard time raising money, you need the talent to sell it, but you also need capital to support those sales efforts. Capital is needed for manufacturing at a greater scale, international advertising, researching, and Reg A+ helps us do all these things.

Q: Why do you think education on topics like regulation A+ play such a vital role in expanding access to capital for Medtech.

A: Every human interacts with a medical device, in a multitude of ways, numerous times throughout their life. Medicine is something every human must encounter. As a society, we want better outcomes, and this will never stop. We see during unprecedented events like COVID that the healthcare systems are incomplete. They work during times of calm, but can find it difficult to adapt to rapid change. Investing in a simple, yet effective product within the Medtech space provides an excellent prospect for investors, giving them the opportunity to financially benefit while changing the world of medicine to improve health outcomes all around the world.

Q: How do you see Regulation A+ impacting Medtech companies?

A: I see it transforming medicine as we know it. Medical innovations such as products, procedures and software come with a high cost and a number of difficult regulatory hurdles, leading to large investors’ hesitancy. With Reg A+, we can spread the risk and the reward so the general population can put their money towards a future they want to see. I see the renewed access to capital and alongside the ability for everyday investors to invest in products they believe in, changing the medical industry for years to come.

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

A: It’s similar to being an entrepreneur in any company. You will need more capital than you expect because the world of medicine moves very slowly. Anything you do will take three times longer, and if it takes three times longer, it will be three times more expensive as well.

___________________

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.

KoreClient Spotlight: Dr. Joseph McGinley, Founder and CEO of McGinley Orthopedics

Posted on by Oscar Jofre Tags: , ,

Joseph C. McGinley. M.D., Ph.D. is a highly accomplished musculoskeletal intervention and sports medicine physician with over 15 years of experience in the field. He holds a Bachelor’s and Master’s Degree in Mechanical Engineering and a Ph.D. in Physiology and an MD from Temple University. He completed both his residency and fellowship at Stanford University. Dr. McGinley became the founder and CEO of McGinley Orthopedics, a company that designs, develops, markets, and sells orthopedic medical devices.

We recently sat down with Dr. Joseph McGinley to ask him about his company, the industry’s future, and raising capital for a Medtech company today.

Q: Can you tell me a little about your experience, your company, and your company’s effect on patients and the Medtech space?

A: My background is originally in mechanical engineering and I then went on to obtain a  medical degree and Ph.D.. Following that, I attended Stanford University for both my residency and fellowship in musculoskeletal radiology. After my fellowship, I transitioned into private practice in Casper, Wyoming, where I reside today. My passion for problem-solving and engineering inspired us to create our products. The idea was founded and conceptualized at a dinner meeting with colleagues when I was still in medical training. A surgeon was discussing a case about a teenager with a wrist injury. To repair it,  a screw was inserted, and it inadvertently plunged the bone, subsequently tearing the tendon on the far side of the bone. He reported that due to the inaccuracies of the depth measuring process, surgeries may result in incorrect screw sizes.  We knew if we placed sensor technology in the surgical tools, we could improve the surgical outcomes and reduce the occurrence of these all too frequent results.

The current standard of care when in orthopedic plate and screw surgeries is to manually measure depth and “feel” when to stop on the far side of the bone. This process is prone to errors that can be costly and impact patient outcomes. The IntelliSense Drill Technology® improves the level of care by putting sensors in the tools that simultaneously measures depth, telling the surgeon what size screw to use and has auto-stop features to help prevent plunging past the bone.  It makes it easier for the surgeon to expedite the procedure and improve the patient’s care level. The IntelliSense Drill® has been on the market for 7 years and is currently being used in operating rooms across the country.  As a company, we have continued to create products with the mission to improve the standard of care in orthopedic surgeries. Today our company boasts of over 137 patents in various stages of development.

Q: What excited you the most about this sector?

A: For me personally, it is all about making a difference in patient care. As a physician, we usually help patients on a one-on-one basis. Technology such as the IntelliSense Drill ® improves patient care and outcomes on a much larger scale impacting patient care worldwide. Many of us at some point may also find ourselves on the other side of that care. It is great to help provide a solution to enhance many lives globally.

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

A: We’re excited to be back at LSI. Last year was our first time attending the meeting, and we met many interesting people in diverse business sectors. It made us think about our company, improve ideas, and how to best set up success. There are a lot of innovators at the conference and I have learned from their expertise. We will use the platform of LSI to reach a variety of unique investors that can help change the standard of orthopedic care and improve the quality of care given to patients with their investment. All our investors are part of our team, and we are looking to tap into the experience of those involved. We are also excited to have a platform to share and get the word out about our products. Because we are addressing a real need in orthopedics, we know our message and goals will resonate with many in attendance.

Q: Since you are using Regulation A+ for your next offering, how do you see that fundraising style impacting your company?

A: We are new to Regulation A+. This opportunity will give us access to a broad investor base and allow us to promote our products on a larger scale. We are excited to share our products with new investors through this platform. Reg A+ allows for us to raise capital without losing control of the company.  It is an exciting time at McGinley Orthopedics. The influx of funding into our company will afford us the opportunity to grow and reach more patients with our technology. The funds will not only benefit our current technologies but allow us to bring to market numerous additional products in our pipeline.

Q: Why do you think education on the topic of Reg A+ plays such a vital role in expanding access to Medtech companies?

A: Until recently, I did not have a full understanding of Reg A+ and how it could help our company. I am excited to share what I have learned about its benefits to educate other companies about this approach. In the investment world, we are not used to a privately held company being able to solicit on a large scale. This approach levels the playing field while benefiting the company and the investor by eliminating the middleman. It has also opened doors to additional resources that I know would benefit other medtech companies.

Q: How do you see Reg A+ impacting the Medtech industry?

A: I think we are at the tip of the iceberg regarding Reg A+ in the Medtech industry. It gives companies the ability to access capital in an early stage a lot more easily. I think we will see an increase in adoption and a shift in private equity to Reg A+ in the future. You will see companies like ours reap the benefits, and it’s great for the entrepreneurial world.

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

A: I would say it’s hard, and it requires dedication. If you want to be successful, you must think outside traditional approaches. Don’t eliminate any possibility and think of what works best for you. There is no easy path to success. We are an innovative company and sought unique ways to innovate while raising capital.  We innovate with our products, innovate with our sales, and innovate with how we raise capital including this new approach with Reg A+. It will be hard work, but hard work is part of the journey. Try to get varying perspectives, understand the pros and cons, and do what is best for your company.

___________________

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.

What are the Benefits of a Cap Table in Capital Raising?

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

If you’re running a business, then you know that keeping track of your finances is essential. And if you’re looking to raise money from investors, then you’ll need to create a cap table. But what is a cap table, and what are the benefits of having one? In this blog post, we’ll answer those questions and more. So keep reading to learn more about the benefits of a cap table for your business.

What is a cap table?

A cap table is a document that records all information regarding shareholders and the equity they own in a company. The purpose of a cap table is to provide transparency to shareholders, investors, and employees about the company’s current and future equity. A well-managed cap table can save time and can benefit companies and investors. The benefits of using a cap table include:

  • Records the voting rights of each shareholder.
  • It documents when shares are issued and diluted.
  • It keeps track of all equity holders, past and present.
  • It records who owns what percentage of the company.
  • Increases transparency among shareholders and investors.
  • Quicker and more efficient transactions due to up-to-date information.
  • It shows how much money each shareholder has invested in the company.

There are several ways in which a company can benefit from having a well-managed cap table. A cap table can help founders keep track of who owns what percentage of the company, allowing for transparency among shareholders and investors. This is essential Information when negotiating with investors or preparing for a capital raise.

Importance of Cap Tables

A well-managed cap table is an essential tool for any company, especially when looking to raise capital. A cap table allows transparency and clarity between shareholders, founders, and investors. Investors need to quickly and easily understand the company’s current equity structure to make informed decisions about investing in a capital raise. With the continual growth of regulations like A+ and CF, managing a cap table is crucial for success.

Improve Cap Table Management

When a company has already raised money from investors, the cap table becomes an even more important document. KoreConX’s cap table management software can help keep track of all shareholders and their respective equity. The software can also help manage voting rights and keep track of who invested when and how much. This information is crucial for companies as they undergo funding rounds because it allows them to be transparent with potential investors. Investors want to know who is in charge, what voting rights each person has, and what kind of leverage they have when negotiating. Having all of this information readily available in the KoreConX all-in-one platform will help avoid any delays in the investment process.

A well-organized and up-to-date cap table is an essential tool for any company looking to raise capital. It can help simplify the process for both the issuer and the investor and ensure that everyone is on the same page about ownership and valuation.

Secondary Market Trading for RegA+, RegCF, and RegD

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

As more and more companies look to raise capital in the private capital market, it’s essential to understand the different exemptions available for this purpose. In this blog post, we’ll look at three common types of capital raises; Reg A+, Reg CF, and Reg D. We’ll discuss the critical differences between each one and how they are traded on the secondary market. By understanding the nuances of each type of raise, you’ll be better equipped to make informed investment decisions.

If you are raising capital, three main exemptions will be used in the private market. Before we discuss the differences, let’s cover what each regulation does:

  • RegA+ is a securities exemption that allows companies to offer and sell securities to US investors and raise up to $75 million in a 12-month period through Reg A+.
  • RegCF allows companies to offer and sell securities to US investors and raise up to $5 million through online marketplaces and crowdfunding sources in a 12-month period.
  • RegD is a securities exemption that allows companies to raise capital from accredited investors without limit within a 12-month period.

There are a few key differences between the three types exemptions but today we’re focusing on those differences as they pertain to the secondary market. The important thing to consider is the time an investor is required to hold the security before selling it on a secondary trading platform. Reg A+ is the closest to an IPO, and assets can be sold the next day, and there is no lockout period. On the other hand, securities sold under RegCF cannot be sold for the first 12 months after buying it unless it’s sold to an accredited investor, back to the issuing company, or a family member. With Reg D, investors can not sell these assets for six months to a year unless they are registered with the SEC.

We’ve covered other differences between the three exemptions in a previous article, including the number of investors and the amount they can invest. However, once the raise ends, the secondary market is the next important difference to be aware of so that shareholders can be properly informed before, during, and after the raise is complete.

How to Ensure Your Marketing is Compliant During an Equity Crowdfunding Raise

Posted on by Jason Fishman Tags: , , , ,

You may be wondering, “Why is a marketing agency talking about compliance?”.

We’re obviously not lawyers, but it is pivotal that compliance is offered at the forefront of your marketing planning.

Now we are not soliciting any legal or financial advice today. The purpose of the webinar is to give you a good introduction to the most common rules so you can better plan your campaign and protect yourself from trouble.

Today we’re going to cover some of the basics and get into some of the tactics that you can use to ensure that your marketing is compliant.

Why is Compliance Important?

If you’re going to run an equity crowdfunding campaign, then you need to be aware of all the restrictions.

With the SEC enforcing strict regulations on what you can and can’t say, running an equity crowdfunding campaign is much different than your traditional marketing campaign.

When you are creating your marketing campaign, it is important to make sure it is compliant with current regulations regarding the promotion of securities. If you do not comply with these guidelines, then you do not only risk your investments but are also subject to penalties from the Securities and Exchange Commission (SEC).

What Can You Say Before the Launch?

Do not publicly or privately mention your equity crowdfunding raise if it is not a test-the-waters campaign!

That might sound obvious, but you would be surprised at how frequently founders get this wrong. By “publicly mention”, we mean:

  • Put a link to your offering on Linkedin, Facebook, Twitter, Instagram, etc.
  • Email your extended network and encourage them to invest.
  • Post your offering in any online group.
  • Encourage friends or family to share or forward the offering to anyone they know.

By “privately mention”, we mean:

  • Mention the offering to people you meet for the first time, such as at networking events, conferences, meetups, etc.
  • Contact anyone who has done business with you in the past and ask them to invest.

Now, What Can You Say After?

The two types of communications that are permitted by the SEC post-launch falls into two categories:

  • Communications that don’t mention the “terms of the offering” (Non-Terms).
  • Communication that just contains “tombstone” information (Terms).

A term, or you’ll also hear it referred to as tombstone information, is communications regarding the share price of a particular equity. As stated earlier, Non-Terms are any communications that do not mention terms.

In addition, it’s also very important to mention that mixing terms and non-terms in your marketing communications is a no-no.

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.  

___________________

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.

Attracting Impact Investors

Posted on by Matt Foley Tags: , , , ,

Founders and executives of startup and early-stage healthcare companies seeking funding historically were limited to appeals to Venture Capital firms, Angels, and bootstrapping – struggling to survive by internal growth alone. In many cases, the founders resort to selling their businesses for values well below their potential. Fortunately, their options have increased due to

1. The Emergence of the Impact Investor

The economic devastation from the coronavirus and its evolving variants is a once-in-a-lifetime event that super-charged the nascent trend of individuals and institutions to invest in ventures intended to improve the quality of life. The dollar value of “impact investing” – experienced “remarkable growth over the past ten years, reaching $2.1 trillion in 2020, according to the International Finance Corporation (IFC).[i] Impact investments are investments made to generate positive, measurable social and environmental impact with a financial return. The bottom line is that impact investors look to help a business or organization complete a project, develop a new life-saving treatment, or do something positive to benefit society.

2. Exposure of Venture Capital Myths

For years, companies seeking funds avoided the tag of “social responsibility,” afraid that investors would avoid any company whose profit objective is compromised by non-financial returns. Nobel Prize-winning economist Milton Friedman ridiculed the idea that business has a “social conscience” and asserted that businessmen who believed such ideas were “unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” [ii] Consequently, company leaders and investors unwittingly accepted

  • Myth #1 that impact investing produces lower financial returns that take years to materialize. A report by McKinsey & Company in 2018 found that investments in socially beneficial organizations produced returns comparable or exceeding those dedicated to profits only. Furthermore, the median holding period before exit (IPO or M&A) was about the same as conventional VC investments.
  • Myth #2 – An article in the 1998 Harvard Business Review[iii] challenged the belief that VC funding is the underlying force of invention and innovation in economic systems, finding that only a tiny percentage of VC capital (6%) invested in startups or research and development. A VC’s investment focus is on companies that have proven success and need funds for scaling.

Doing Well by Doing Good

Healthcare — where success is measured in improvements in disease progression and quality of life – is the focus of my firm. We promote Impact investing because the strategy provides an avenue in which people can do well by doing good, i.e., buying the securities of companies that positively affect the health of themselves, their families, and others. From the discovery of bacteria to the first artificial organs, significant medical discoveries have extended the quality and length of humans’ lives. Take a look at some of my clients and how they’re positively impacting the world of health and medicine.       

  • EyeMarker: developer of non-invasive assessment and tracking devices for traumatic brain injury (TBI) improving the speed, accuracy, and consistency of concussion detection and diagnosis.  
  • Facible: developer of revolutionary biodiagnostics technology for infectious disease which simplifies the diagnostic testing process while increasing the accuracy of results, empowering patients to better understand their personal health and the quality of products treating their wellness.
  • HealthySole: disrupting the infection prevention market with ultraviolet shoe sanitizer technology clinically proven to kill 99.99% of infections, contaminations, and pathogens in only 8 seconds. 
  • Kurve Therapeutics: provider of compact liquid drug delivery devices significantly enhancing the efficacy and safety of formulations treating Alzheimer’s, Parkinson’s LBD, and ALS. 
  • McGinley Orthopedics: manufacturer of orthopedic surgical devices employing cutting-edge sensing and navigation technology reducing surgical time and cost while improving patient outcomes. 
  • Medical 21: reshaping the future of cardiac bypass surgery with an artificial graft which eliminates the harvesting of blood vessels, significantly decreasing procedure time and cost as well as the risk of infection, scarring, and pain for patients.

The recently updated JOBS Act of 2017[iv] offers founders of healthcare companies an alternative channel for fundraising to running the gauntlet of impersonal VC managers focused solely on extraordinary growth as quickly as possible. Using a Regulation A+ offering in place of venture capital allows company management to target those investors who believe in the company’s objectives and want to support them. For healthcare companies, the potential investors include the

  • doctors who work in the company’s field and know first-hand the impact your solution could have,
  • patients who have been affected and their family members and friends, and
  • people who support the non-profit organizations around those you help diagnose/treat.

Founders of healthcare companies will find a wide variety of investors eager to help them reach their objectives, according to the Global Impact Investing Network 2020 Annual Impact Investor Survey.[v] Their research estimates the current market size at $715 billion, attracting a wide variety of individual and institutional investors:

  • Fund Managers
  • Development finance institutions
  • Diversified financial institutions/banks
  • Private foundations
  • Pension funds and insurance companies
  • Family Offices
  • Individual investors
  • NGOs
  • Religious institutions

Rather than having one or more VC shareholders anxious to make a profit and move on to the next deal, Regulation A+ offers access to thousands of potential advocates – a legitimate community of people with a shared sense of purpose — for your business.

A Reg A+ offering allows investors to contribute to life-saving research, clinical trials, or tools and technology to assist victims in returning to everyday life, possibly within their families. For example, small biotechs are more likely to invest in research, spending up to 60% of their revenue on R&D.[vi] They account for up to 80% of the total pharmaceutical development pipeline in 2018,[vii] making small companies the driving force behind innovative new therapies, and 64% of all new drugs approved by the FDA in 2018 originated from small pharma.

Final Thoughts

Founders seeking new funding should ask, “Do I want a group of shareholders that focus solely on my bottom lines or investors who care about our company’s objectives for the full community – patients as well as shareholders?” The question is especially pertinent since an alternative process is available with less hassle, cost, and time. We believe that Regulation A+ offerings should be in the toolbox of every founder, owner, CFO, and Treasurer in the United States. Their use provides excellent upside potential with little downside risk.

 

Resources:

[i] Gregory, N. and Volk, A. (2020) GROWING IMPACT New Insights into the Practice of Impact Investing. International Finance Corporation. (June 2020) Access through https://www.ifc.org/wps/wcm/connect/8b8a0e92-6a8d-4df5-9db4-c888888b464e/2020-Growing-Impact.pdf?MOD=AJPERES&CVID=naZESt9

[ii] Friedman, M. (1970) A Friedman doctrine‐- The Social Responsibility Of Business Is to Increase Its Profits. New York Times. (September 13, 1970) Accessed through https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html

[iii] Zider, B.(1998) How Venture Capital Works. Harvard Business Review. (November-December, 1998) Access through https://hbr.org/1998/11/how-venture-capital-works

[iv] Littman, N. (2021) Healthcare-Focused Impact Investing: Another Way To Invest For Change. Forbes Magazine. (April 28, 2020) Access through https://www.forbes.com/sites/forbesfinancecouncil/2021/04/28/healthcare-focused-impact-investing-another-way-to-invest-for-change/?sh=3f4c7f501e5c

[v] Staff. (2021) WHAT YOU NEED TO KNOW ABOUT IMPACT INVESTING. Global Impact Investing Network. (August 25, 2021) Access through https://thegiin.org/impact-investing/need-to-know/

[vi] Coskun, M. (2020) How is R&D spending affecting Biotech company growth? Data-Driven Investor. (May 11, 2020) Access through https://www.datadriveninvestor.com/2020/05/11/how-is-rd-spending-affecting-biotech-company-growth/#

[vii] Kurji, N. (2019) The Future of Pharma: The Role Of Biotech Companies. Forbes Magazine. (May 29, 2019) Access through https://www.forbes.com/sites/forbestechcouncil/2019/05/29/the-future-of-pharma-the-role-of-biotech-companies/?sh=43d88c5f6bb3

KoreConX and Medtech-Ecosystem Together at LSI Emerging Medtech Summit 2022

Posted on by Peter Daneyko

Experts in the life sciences sector will teach investors how to use Regulation A+ for successful capital raising

 

NEW YORK, February 23, 2022 – KoreConX is thrilled to announce its participation at LSI Emerging Medtech Summit – USA 2022. This event will be held on March 15-18, 2022, in Dana Point, California, USA. It is led by Life Science Intelligence (LSI) and will bring together an ecosystem of experts who support medtech and life science companies to raise capital.

LSI is part of the Medtech ecosystem of KoreConX’s partners focused on Life Sciences companies. LSI offers insights to help investors and executives make decisions based on data provided by experts on their team. This vertical includes Medical Funding Professionals, a company that specializes in consulting to raise capital for pharmaceutical and medical businesses.

The group has built a value-added offering around Regulation A+ fundraising they call the Capital Planning Valuation Strategy™ (CPVS). The purpose of the CPVS approach, beyond a successful Reg A+ raise, is to help companies develop a strategic plan for their long-term capital needs that protects the interests of the founders and other early investors as these capital-intensive businesses go through R&D, clinical trials, FDA approval, and go-to-market execution.

Stephen Brock, CEO of Medical Professionals, highlights the impact of this sector: “One of the major trends in the financial world right now is impact investing. Life science—medtech, biotech, and pharma—is the ultimate impact investment. These companies are saving lives and limbs and brains—saving quality of life, as well. That’s why we do what we do.”

“In the many years I’ve been working with medtech innovators, I can’t count the number of great products I’ve seen that never make it to market for no other reason than lack of access to capital. That’s why I’m so excited about the possibility Reg A+ brings—with the new higher limits,” says Scott Pantel, CEO of LSI.

This vertical includes  FINRA Broker-Dealer (Rialto Markets), Offering Preparation (Regulation D Resources) and KoreConX, with its All-In-One Platform to support all stages of the offerings.

This team will be together at LSI Emerging Medtech Summit 2022 and attendees can participate in person or online. KoreConX will be represented by its Co-founder and CEO, Oscar A Jofre; its Chief Scientist & CTO, Dr. Kiran Garimella; and its CRO, Peter Daneyko. Visit their website for more information:  https://www.lifesciencemarketresearch.com/medtech-summit-2022

About KoreConX

Founded in 2016, KoreConX is the first secure, All-In-One platform that manages private companies’ capital market activity and stakeholder communications. With an innovative approach and to ensure compliance with securities regulations and corporate law, KoreConX offers a single environment to connect companies to the capital markets and now secondary markets. Additionally, investors, broker-dealers, law firms, accountants and investor acquisition firms, all leverage our eco-system solution.

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Media Contacts:
KoreConX
Carolina Casimiro
carolina@koreconx.com

Three Trends that We predict Will Shape Investment Crowdfunding in 2022

Posted on by Erin Holloway

This article was written by Erin Holloway, KorePartner from Prime Trust. It was originally published on Crowdfund Insider, view the original article here.

 

Investment crowdfunding took off when the JOBS Act regulation went into effect back in 2016 and has become a booming industry in short order. We saw some significant regulatory changes in March of this year, with the Securities and Exchange Commission (SEC) confirming capital formation increases for Reg A+ and Reg CF. These increases solidified just how impactful this type of crowdfunding can be.

Equity crowdfunding has garnered trust and legitimacy from issuers, investors, broker-dealers, transfer agents, and lawyers—and raised $239 million via Reg CF and $1.6 billion via Reg A+ in the first half of 2021. Today, there’s nearly $800 million invested across 64 FINRA-licensed Reg CF funding portals.

Equity crowdfunding has garnered trust and legitimacy from issuers, investors, broker-dealers, transfer agents, and lawyers—and raised $239 million via #RegCF and $1.6 billion via #RegA+ in the first half of 2021 Click to Tweet

As the new generation of investors is looking for high growth and quick yield, they are increasingly unwilling to wait for value stocks and dividends to slowly build. The diverse investment opportunities that crowdfunding offers are exactly what these investors are looking for as they develop their portfolios.

These numbers are impossible to ignore: equity crowdfunding is here to say. But what comes next for this exciting space?

Here are three key equity crowdfunding trends that we anticipate to thrive in 2022 based on our work helping crowdfunding platforms and portals raise game-changing capital online.

Significant, positive economic ripple effects from equity crowdfunding

When it comes down to it, what 2020 and 2021 have clearly shown us is that investors want to participate in and support small businesses.

At my firm, we’ve seen 4,000+ issuers to date, including startups, small businesses, and medium-sized businesses. These SMEs are choosing equity crowdfunding instead of traditional, bank-led financing because they can control their offering and financing needs. No longer beholden to the mercy of a single small business banker with specific credit appetites, or a venture capital firm with narrow funding parameters, these entrepreneurs are now in the driver’s seat and their customers and supporters are riding shotgun alongside them.

Currently, the top five industries for issuers are software, distilleries and breweries, restaurants, internet and e-commerce, and movies, according to research from Crowdfund Capital Advisors. Ironically, all industries are significantly impacted by COVID. But investors in these spaces are eager to participate in crowdfunding for their favorite businesses, and in 2020 venture capital was particularly difficult to come by. The world watched as so many of our favorite restaurants, venues, and small businesses closed because they didn’t have the financial ability to stay afloat. But equity crowdfunding presents a chance for those businesses to get back in the game.

As we forge ahead into 2022, the impact of equity crowdfunding for COVID-affected small businesses will play out with positive ramifications in local economies by creating not only capital for businesses, but creating jobs as well.

Many types of businesses are being served by equity crowdfunding, meaning there is innovation across industries and greater competition—which in turn means more options for consumers and new jobs being created.

Ultimately, 120,000 local jobs have been created so far in 2021 as a result of successful Reg CF offerings, reported Crowdfund Capital Advisors. These salaries support government taxes, consumer spending, savings, and more. They’re supporting our communities and keeping food on our neighbors’ tables.

The rise of ATS

ATSs, or alternative trading systems, aren’t new. These are broker-dealers that have filed under Reg ATS to provide an electronic marketplace that creates an order book and matches sellers with buyers. ATSs have been around for a while, but are getting a renewed sense of interest—one we anticipate will carry well into 2022 and beyond.

ATSs, like tZERO ATS and StartEngine Secondary, enable investors to continue supporting issuing companies by giving them opportunities for liquidity. They’re the logical next step and the future of the crowdfunding industry.

The idea that you can invest from your phone while wearing your pajamas through a six-step widget is compelling for investors. ATSs offer a way for investors to stay in the investment ecosystem, liquidate their assets at a reasonable point, and reinvest as they choose. They open up the opportunities traditionally reserved for institutional investors to everyone.

What we are seeing is a cycle that benefits all parties. The ability to liquidate private securities increases the appeal of buying private securities. ATSs provide the financial breathing room that investors want to more easily buy and sell non-listed securities. In the same manner that one does trades with a large exchange, the secondary market is providing easier than ever access to investors who want to move in and out of private equity.

The industry has more support than ever from regulators, and we’re seeing a huge influx of interest to facilitate the ATS process. This will absolutely be a space to watch in 2022.

Accessible crowdfunding for all

At this moment, we’re defining the financial future — and that future needs to include more accessibility.

As we move into 2022, the equity crowdfunding industry will continue to build a foundation for underserved people to gain access to the financial system in terms of meaningful investments. Anyone—regardless of social status or annual income—should be able to begin investing in companies that hold meaning for them. It’s about radical accessibility and execution. Looking to the future, we’re building a system that allows for more equal access for both the issuer and the investor.

Whereas only 1.2 percent of the venture capital invested in U.S. startups in H1 2021 went to Black founders, and just 2.3 percent to women in 2020, women and people of color make up 40 percent of issuers using Reg CF.

These numbers point to a gap of businesses not receiving capital and offer incredible insight into the power of crowdfunding and the hope it can provide. We hope to see that 40 percent figure grows in 2022.

Final Thoughts

As an industry, we have a duty to provide a service and product to an underserved market of people that may otherwise never gain access to these opportunities. We have great hope for the future and in 2022, we believe we’ll see equity crowdfunding have a positive impact on the economy and the job market. We’ll continue working to make the world of finance and crowdfunding more accessible to all. And ATSs will play a huge role.

Is it only ATSs? Absolutely not. ATSs are just one of the possibilities to keep growing and offering new solutions that benefit all the parties involved in equity crowdfunding. It’s so important that we continue to be innovative and pioneers in this space. Push boundaries. Knock on doors.

As members of this industry, the onus is on all of us to continue pushing into new frontiers so that we can be better and do better—for ourselves, for our industry, and for our communities.

Can I Use My IRA for Private Company Investments?

Posted on by Oscar Jofre Tags: , ,

Individual retirement accounts (commonly shortened to IRAs) allow flexibility and diversity when making investments. Whether investing in stocks, bonds, real estate, private companies, or other types of investments, IRAs can be useful tools when saving for retirement. While traditional IRAs limit investments to more standard options, such as stocks and bonds, a self-directed IRA allows for investments in things less standard, such as private companies and real estate. 

 

Like a traditional IRA, to open a self-directed IRA you must find a custodian to hold the account. Banks and brokerage firms can often act as custodians, but careful research must be done to ensure that they will handle the types of investments you’re planning on making. Since custodians simply hold the account for you, and often cannot advise you on investments, finding a financial advisor that specializes in IRA investments can help ensure due diligence. 

 

With IRA investments, investors need to be extremely careful that it follows regulations enforced by the SEC. If regulations are not adhered to, the IRA owner can face severe tax penalties. For example, you cannot use your IRA to invest in companies that either pay you a salary or that you’ve lent money to, as it is viewed by the SEC as a prohibited transaction. Additionally, you cannot use your IRA to invest in a company belonging to either yourself or a direct family member. If the IRA’s funds are used in these ways, there could be an early withdrawal penalty of 10% plus regular income tax on the funds if the owner is younger than 59.5 years old. 

 

Since the IRA’s custodian cannot validate the legitimacy of a potential investment, investors need to be responsible for proper due diligence. However, since some investors are not aware of this, it is a common tactic for those looking to commit fraud to say that the investment opportunity has been approved by the custodian. The SEC warns that high-reward investments are typically high-risk, so the investor should be sure they fully understand the investment and are in the position to take a potential loss. The SEC also recommends that investors ask questions to see if the issuer or investment has been registered. Either the SEC itself or state securities regulators should be considered trusted, unbiased sources for investors.

 

If all requirements are met, the investor can freely invest in private companies using their IRAs. However, once investments have been made, the investor will need to keep track of them, since it is not up to their custodian. To keep all records of investments in a central location, investors can use KoreConX’s Portfolio Management, as part of its all-in-one platform. The portfolio management tool allows investors to utilize a single dashboard for all of their investments, easily accessing all resources provided by their companies. Information including key reports, news, and other documents are readily available to help investors make smarter, more informed investments. 

 

Once investors have done their due diligence and have been careful to avoid instances that could result in penalties and taxes, investments with IRAs can be beneficial. Since it allows for a diverse investment portfolio, those who choose to invest in multiple different ways are, in general, safer. Additionally, IRAs are tax-deferred, and contributions can be deducted from the owner’s taxable income. 

KoreClient Spotlight: Manny Villafaña, CEO and Founder of Medical21

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

Manny Villafaña has a long track record of innovation in the medtech space, delivering solutions to improve cardiac care and surgical procedures. In his latest venture, Manny is creating a product that will change the way cardiac bypass surgeries are performed, improving patient outcomes.

 

We sat down with Manny to discuss his company, the medtech space, and how Reg A+ is helping Medical 21 raise money.

 

Q: Can you tell me a little about your company and how it impacts customers and the industry as a whole?

 

A: Medical 21 is the 8th company in a series of companies that I have formed since 1972. The first company I started was a company that made the first long-life pacemakers and was called CPI/Guidant, which was eventually sold to Boston Scientific. Each company has been focused on improving the technologies used in caring for cardiac patients.

 

Medical 21 has developed a small diameter coronary artery graft to be used in heart bypass surgery. Instead of harvesting blood vessels from a patient’s legs, arms, and chest, we developed this synthetic graft. Rather than pulling the needed vessel from elsewhere in the body, surgeons can pull it out of a package. This is an enormous market, larger than all the pacemakers, heart valves, and defibrillators combined. We are at the stage where we are seeking regulatory approvals to begin clinical trials domestically and internationally. 

 

Q: Besides not having to harvest blood vessels, what is the benefit of this synthetic graft?

 

A: Medical 21’s technology helps doctors not need to open up a patient’s body to take vessels out of the legs or arms during bypass surgery. For the patients, this can reduce pain while decreasing infections, and saving the hospital time and money. As a result, more patients can be safely treated in less time.

 

Q: How did you get into creating products for the cardiology field?

 

A: I answered an ad in the papers in the early ’60s for medical sales put out by the world’s largest x-ray company, Picker X-Ray. Their subsidiary, Picker International, was an export agent for small American companies exporting pulmonary, cardiac, and x-ray products. One of the products I was involved with was pacemakers made by Medtronic. Three years later, Medtronic’s CEO flew to New York and hired me.  I began to learn more and more about the heart through the transfer. With a history of heart attacks in my family, I’ve always been interested in the heart and was personally motivated since my father and brothers died from heart attacks. I am also self-taught. When I see a problem, I go after it. I am always aiming to create a product that can help others.

 

Q: What excites you most about this space you are in?

 

A: This is the most exciting work we’ve ever done because it covers so many people, surgeons, and types of surgeries. Our present work is focused on cardiac bypass, but the graft has the potential to be used throughout the body for a variety of applications. With about 800,000 to 1 million bypass surgeries on the heart each year and each patient receiving 3 to 4 grafts, there is a huge market where we can take care of so many patients globally. We are fortunate; because of our track record in the cardiac space, surgeons across the globe are excited to help us. We’re developing a product that’s incredibly needed.

 

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

 

A: We were honored to be invited to the conference by Scott Pantel and his team. At the conference, there will be the best selection of financial people and young entrepreneurs looking to learn what the next step is. We are also bringing in one of our advisors, formerly with the Mayo Clinic, to talk about what is happening in the medtech field and what we are doing at Medical21. It’s an excellent opportunity for our company.

 

Q: Why do you think education on the topic of Regulation A+ plays such a vital role in expanding access to capital for MedTech companies?

 

A: In the environment of the 21st century, we must see how we can reach a wider audience for both financial needs and tap into the market of people who want to participate but are excluded by traditional private funding routes. Historically, these people could not invest until the company went public, leaving them unable to get in at an earlier stage. This provides everyday people the ability to invest in technology in the medtech space that will impact many people globally, especially when health is such a personal matter. The government gave these investors the ability to participate from the beginning, whether they were accredited or non-accredited individuals.

 

Q: Now that your company is using Regulation A+, how do you see that helping your company, and what impact do you think Reg A+ will have on other medtech companies?

 

A: We need capital, and it’s not easy to initially jump to IPO’s, even though I’ve done seven previous IPOs. Reg A+ can allow us to raise enough money to begin clinical trials. Reg A+ is a step in a company’s financing as it grows, and a successful offering shows that your company can get it done and raise a large sum of money by reaching a large audience. RegA+ is essential for the future of the medical device industry because medical companies need financing for an extended period of time before the product is approved and sold. Before it can get to the point of sales, medtech relies on private investors for development and clinical trials of life-saving products. 

 

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

 

A: I often give a talk entitled “The Trials and Tribulations of the Entrepreneur.” I offer many bits of advice, and one of those is that before you even begin, you need to overcome simple life challenges to become an entrepreneur. In the medtech space, you have to be a “superman or superwoman” because, in addition to developing new technology, you need to do clinical trials in a risk-averse regulatory environment that makes things difficult. However, at the same time, risk must be taken. The greatest hazard in life is not taking risks; you cannot achieve anything if you don’t take risks!  Thank you! Manny

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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.

 

Why is Your Community of Investors Important?

Posted on by Oscar Jofre

When companies begin the capital raising journey, it is no longer about going public or simply getting a company’s product in front of venture capitalists. To be successful in our current capital raising landscape with Regulations A+ and CF, organizations must build a community of investors. This not only brings life to your business, but companies are also now able to leverage this network to find success in capital raising activities. 

 

A Different Spin on Community

 

One of the most valuable parts of Regulation Crowdfunding and capital raising with Regulation A+ is that you can talk about your offering everywhere instead of keeping information confidential. This one fact has made building a community of investors vital to all companies looking to raise capital. RegCF platforms like WeFunder allows companies to raise millions of dollars by getting the investment opportunity in front of potential investors. Because of the many investors that can be brought and board and told about your investment opportunities, investment crowdfunding is not just an excellent way to raise capital but a way to build an army of brand ambassadors and customers.

 

Instead of just offering a means for investment, JOBS Act crowdfunding regulations create a new way to take investors on the journey of building your company. Regulations like A and CF provide a way to tap into customers who already care about your brand and bring them on the capital raising journey by making them part of your team as investors. Fostering this relationship with customers and investors is perhaps one of the most important things a company can do.

 

Creating a Crowd of Investors

 

While creating a crowd of investors can seem daunting, especially for smaller, less-established businesses, the crowdfunding journey starts from within. Start with your personal network and try to gain momentum there. Not only are you gaining investors, but if your offering doesn’t stick with your inner circle, then it probably needs some refinement before a larger community of potential investors accepts it. Many crowdfunding offerings have a lead investor who helps negotiate the terms of the offering and put their own money in the deal to ensure your valuation is in a place that will attract investors, not deter them. 

 

By offering a compelling opportunity and being open and honest with the customer and potential investors, you can begin building the community that will help you reach your capital-raising goals. While your inner circle is a great place to start with your capital raising effort, you also need to have a balanced mix of investors for potential success.

 

Channeling Investors 

 

There are a variety of different capital-raising regulations which utilize community building in various ways. Regulation CF offers lots of capital raising upside for those who leverage communities with the ability to publicly promote and get the word out about your investment to attract a larger community of potential investors. With Reg A+, issuers can raise up to $75 million through a similar crowd of accredited and nonaccredited investors. However, this comes with a lot of responsibility. Issuers must know how to nurture these relationships beyond just investing money. It is a privilege to allow these investors to invest in a company, something which must be remembered when building communities.

 

This need for the community makes things like media attention less of a metric to measure success on. You can put a campaign in front of a large audience, but without the support of a community and the drive of a fascinating company, it will not necessarily succeed. By building your community of investors, you can better capitalize on capital raising and brand awareness opportunities.

How to be Ready for Raising Capital

Posted on by Oscar Jofre

Whether you’ve raised capital in the past or are preparing for your first round, being properly prepared will help your company secure the funding it needs. Proper preparation will make investors confident that you are ready for their investments and have a foundation in place for the growth and development of your company. So if you’re looking to raise money, what must you do to be ready for raising capital?

From the start, any company should keep track of shareholders in its capitalization table (commonly referred to as the cap table). Even if you have not yet raised any funds, equity distributed amongst founders and key team members should be accurately recorded. With this information kept up-to-date and readily available, negotiations with investors will be smoother, as it will be clear how much equity can be given to potential shareholders. If this information is unclear, deals will likely come with frustrations and delays.

Researching and having knowledge of each investor type will also help prepare your company to raise money. Will an angel investor, venture capital firm, crowdfunding, or other investment method be suited best for the money that is being raised? Having a clear answer to this question will help you better understand the investors you’re trying to reach and will help you prepare a backup option if needed.

Once your target investors have been decided and you have a firm grasp on the equity you’re able to offer, preparing to pitch your company to them will be a key step. Having a pitch deck containing information relevant to your company and its industry will allow you to convince investors why your business is worth investing in. Additionally, preparing for any questions that they may ask will ensure investors that you are knowledgeable and have done the research to tackle difficult problems.

Before committing to raising capital, you should make sure that your company has an established business model. Investors want to see that you have a market for your product and are progressing. If investors are not confident that the product you’re marketing has a demand, it will be less likely they will invest. Investors will also want proof that the company is heading in the right direction and the money they invest will help it get there faster.

Once you have determined that your company is ready for investors, managing the investments and issuing securities will be essential. To streamline the process and keep all necessary documents in one location, KoreConX’s all-in-one platform allows companies to manage the investment process and give investors access to their securities and a secondary market after the funding is completed. With cap table management, the all-in-one platform will help companies keep track of shareholders and is updated in real-time, ensuring accuracy as securities are sold.

Ensuring that your company has prepared before raising capital will help the process go smoothly, with fewer headaches and frustrations than if you went into it unprepared. Investors want to know that their money is going to the right place, so allowing them to be confident in their investments will ensure your company gets the funding that it needs to be a success.

What is Rule 12(g)?

Posted on by Oscar Jofre

Rule 12(g) is a crucial rule that affects all issuers, but many issuers don’t start with it in mind. The rule began with the 1934 Exchange Act, and it states the threshold at when an issuer must register securities with the SEC. Read further to learn what rule 12(g) does and why it’s essential.

 

What is Rule 12(g)?

 

Section 12(g) of the 1934 Securities Exchange Act was updated alongside the JOBS Act. These amendments, including 12(g)-1 through 12(g)-4 and 12h-3, govern registration and reporting by private companies that have issued equity securities. 

 

These JOBS Act amendments resulted in issuers that are not a bank, bank holding, or savings and loan companies no longer needing to register if they did not exceed certain investor threshold rules. This includes:

  • Companies with less than $10 million in assets; and
  • when securities are ‘held of record’ by less than 2,000 individuals or 500 non-accredited investors

 

However, for companies using Regulation A+ and complying with ongoing reporting requirements, issuers under RegA+ don’t count towards the shareholder limits imposed by rule 12(g).

 

Why is this Important to issuers?

 

Before the JOBS Act, the private capital market was a different landscape. With Reg A+ and Reg CF, securities have become available to a larger audience of investors than ever without an IPO. With vast improvements to the potential for raising capital, private companies sought a way to circumvent 12(g) to remain unregistered with the SEC, based on the number of investors. JOBS Act exemptions like Reg D don’t fall under this exemption from registration. However, since Reg D primarily attracts larger investors, this is typically of less concern to issuers.

 

Understanding rule 12(g) and exemption from shareholder thresholds are essential for issuers to avoid registering their securities with the SEC. Especially as RegA+ allows companies to attract increasing numbers of private investors, these limits are not conducive to raising capital in this fashion. 

KoreConX and David Weild IV at LSI Emerging Medtech Summit 22

Posted on by Peter Daneyko

‘Father of the JOBS Act,’ Mr. Weild will join KoreConX to address a keynote on how Medtech is the new frontier to a successful capital raising

NEW YORK, February 8, 2022 – KoreConX and its partner, Life Science Intelligence, are bringing together top thought leaders in the private capital markets environment to the Emerging Medtech Summit 2022. This summit will be held on March 15-18, 2022, in Dana Point, California, USA. It is led by Life Science Intelligence (LSI) and will host one of the most important personalities of the JOBS Act scene, David Weild IV.

Mr. Weild, a former Vice Chairman of NASDAQ, is known as one of the key players in revolutionizing the democratization of capital in the United States. His work with the U.S. Congress and his testimonial to the U.S. House of Representatives Financial Services Committee on Capital Markets resulted in the signing of the JOBS Act into law by President Barack Obama in April 2012. Since the SEC introduced the framework for Regulation A+ and its subsequent amendments, companies are able to raise up to $75 million from both accredited and non-accredited investors.

“We understand the importance of the democratization of capital through Regulation A+. David Weild, in addition to being a game-changer in the JOBS Act, is also part of our advisory board. We are absolutely thrilled to be joining him in empowering the Medtech industry to benefit from the Reg A+ exemption,” says Oscar A. Jofre, Co-founder and CEO of KoreConX.

David Weild IV also highlights how the JOBS Act is changing the healthtech and pharmaceutical industry. “It’s gratifying to see so many Medtech companies using the JOBS Act since we created it in large part to fund innovative growth companies and social impact.”

Another seasoned speaker who will be present at the event is Manny Villafaña, who is Founder, Chairman, and CEO of Medical 21. He reinforces how this exemption is a change-maker to this sector. “Regulation A+ is the 21st Century way to raise capital.” Mr. Villafaña will be sharing his experience in using Regulation A+ for pharma and Medtech companies.

LSI Emerging Medtech Summit 2022 will take place on March 15-18, 2022, at Dana Point, California, USA.  Attendees can participate in person or online. KoreConX will be represented by its Co-founder and CEO, Oscar A Jofre, its Chief Scientist & CTO, Dr. Kiran Garimella, and its CRO, Peter Daneyko. Visit their website for more information:

https://www.lifesciencemarketresearch.com/medtech-summit-2022

About KoreConX

Founded in 2016, KoreConX is the first secure, All-In-One platform that manages private companies’ capital market activity and stakeholder communications. With an innovative approach and to ensure compliance with securities regulations and corporate law, KoreConX offers a single environment to connect companies to the capital markets and now secondary markets. Additionally, investors, broker-dealers, law firms, accountants and investor acquisition firms, all leverage our eco-system solution.

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Media Contacts:
KoreConX
Carolina Casimiro
carolina@koreconx.com

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