Form C-AR filing time again!

Hi everyone; a reminder that we are just over a month away from the deadline to file Form C-AR by May 1.*

We wanted to flag some issues:

  • If you sold any securities under your Form C, even if you didn’t sell them until this year, and even if you didn’t sell them until April 30, a Form C-AR with 2022 financials is due by May 1.
  • Even if your current Form C already includes 2022 financial statements, a Form C-AR is due by May 1.
  • If you do not have an open offering or otherwise have audited or reviewed statements available, the financial statements do not have to be audited or reviewed, but they do need to be in US GAAP format. This means balance sheet (as at December 31, 2021 and 2022), P&L, cash flow and changes in equity (for 2021 and 2022) as well as footnotes.
  • QuickBooks is not US GAAP.
  • If you used a “crowdfunding special purpose vehicle, it is an “issuer” under Rule 202 (the rule that says you have to file annual reports) and must file its own financial statements too. (See General Instructions to Form C.)

As a reminder:  if with this filing you are eligible to exit the Regulation CF ongoing reporting regime, remember, you must file your Form C-TR within 5 business days of the due date to notify investors, otherwise you may get to do this all over again next year!

As always, this isn’t legal advice, but feel free to call us if you need advice.

*If you do not have a fiscal year ending on December 31, your Form C-AR is due 120 after the end of your fiscal year, and dates above should be adjusted accordingly.


This article was originally written by our KorePartners at CrowdCheck. You can view the original article here.

KorePartner Spotlight: Richard Johnson, CEO of Texture Capital

At Texture Capital, the mission is to revolutionize the two trillion-dollar market for private securities by leveraging blockchain technology and smart contracts. The company has received approval from FINRA to commence operations as a digital securities broker-dealer and operate an Alternative Trading System (ATS). This is an important milestone for Texture, enabling them to issue, tokenize, and trade digital securities. We recently spoke to Richard Johnson, the company’s CEO, to ask him about RegA+ and RegCF and their vision for the future of capital markets.

Q: Why did you become involved in the capital markets/digital securities/blockchain industry?

A: I have spent my whole career in capital markets. For most of that time, I was a trader working at different investment banks and broker-dealers in the electronic trading space. But then, in 2014, I discovered crypto… well really just Bitcoin back then. I came into the space with a trader’s mindset, thinking about how to build execution algorithms and electronic routers for the new asset class. However, I quickly went down the rabbit hole and realized there was something much more revolutionary about the technology. Since then I have been working in the space in one form or another – consultant, analyst, operator, and founder.

Q: What services does your company provide to companies looking to raise capital through the JOBS Act exemptions?

A: I started Texture Capital in 2019 as I recognized there was a strong need for regulated intermediaries to help companies compliantly issue tokens representing equity, debt, royalties, revenue share, or other investment contracts, and to provide a regulated venue for secondary trading. Texture Capital is a FINRA and SEC-regulated broker-dealer focused on digital securities. We help clients raise capital through exemptions such as Regulations, A, D, S, and CF and can also support certain registered offerings. We also operate one of the few Alternative Trading Systems for digital securities. Recently, we have been focusing on offering our digital securities market infrastructure on a ‘white label’ basis to fractional marketplaces. We are agnostic to the underlying asset class and work with clients across private equity, private credit, real estate, and alternatives.

Q: What are your unique areas of expertise?

A: The Texture team is steeped in fintech and traditional capital markets experience. We have built ATSs and marketplaces that have executed many billions of dollars of notional transaction value. 

Q: What excites you about this industry?

A: What excited me about this industry, and why I started Texture Capital, is that blockchain technology represents an entirely new (and better) way of recording financial transactions. Fundamentally, blockchain is about the transfer of value. And capital markets, particularly trading, are about the transfer of value. So what we have now is a once-in-a-lifetime opportunity to build a new market structure from scratch, using the best tech available, and improving how markets work throughout the economy.

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

A: We are big fans of KoreConX. KoreConX serves a different, but complementary, part of the ecosystem. You provide the technology to help issuers raise capital and transfer agency services to help them manage the cap table, while we provide all the broker-dealer services. Texture and KoreConX are great partners, and on top of that, we share a commitment to API-driven, technology solutions.

Q: Anything else you’d like to add about RegA+, RegCF, or any other topic that you feel is relevant to your company, our partnership, and the ecosystem you’re a part of?

A: Yes. As a final thought, I want to say how important RegA+ and RegCF are in the capital formation process right now. The current market environment makes it very difficult to raise capital through old-school VC channels. But through these exemptions, companies have a way to fundraise directly from their community, fans, friends, family, partners, suppliers, etc. I expect to see significant growth in the crowdfunding space going forward and tokenization will be the catalyst.

The future of capital markets is bright, and Texture Capital is leading the way with innovative solutions. We look forward to seeing what’s next!

Partnership in the Private Markets: “Who Pays?”

Way back in March 2020, our values as a company were tested.  At the time, I began to write this blog post but with my schedule, I totally forgot to complete it. But, with recent events, I felt it was important to publish.

 

With companies in any sector, you are approached for partnership opportunities and in most cases, the partnership is a win-win when each company stays in its lanes.  When partnerships get really muddy is when there is a financial gain for one party at the expense of another or the clients they serve.

 

Our potential partner had a great service that we, as a company, were happy to send introductions to. After many meetings and demonstrations, the CEO reached out to discuss a partnership.  We provided an overview of our ecosystem, our governance standards, and our ethics, and explained that since its inception, our company has had no financial relationship with any of our KorePartners anywhere in the world. This did not stop this CEO from offering us an incentive to send their firm business, which we respectfully declined.  Our response was and remains: “We are happy that you provide this service, and we want you to provide the best service to our clients and all we ask in return is you take good care of them, and do your very best”.

 

The response was shocking:  “I can’t partner with a company that is not financially motivated to send me business”.  We respond, we understand that is how this business might have been done in the past but today it’s different for many reasons.

 

First, we are in a regulated sector. That means the securities regulators monitor all activities by Issuers (companies), Investors, Broker-Dealers, and Internediarities who are participating in a regulated offering for private companies.

 

As an example of how securities regulators monitor and catch those who try to circumvent the rules to get rich, on 30 September 2022 the SEC charged six individuals and two companies for a fraudulent scheme to promote securities in a RegA offering. Some of the charges were for failing to disclose precisely the kind of payment we declined to accept two years ago.

 

On 03 October 2022, the SEC charged influencer and celebrity Kim Kardashian for failing to disclose she was paid a fee to promote a cryptocurrency.  She was paid $250,000 USD to promote a company and the fine issued by the SEC was $1.26M and included a 3-year ban from promoting any crypto asset securities.  

 

You would think with these two SEC announcements, everyone would be reviewing their programs to make sure they are onside with regulators and more importantly, ethical and transparent to the clients we serve.

 

BUT NO!!!

 

On 07 October 2022, many of the Broker-Dealers and intermediaries were offered a carrot via email to be rewarded up to $13,000.00 USD by a provider if they brought them a client.  

 

So who actually pays these premiums?

 

The answer is very simple: the Client “Issuer (Company)”.  Make no mistake–it will be the client paying for this big incentive fee because it will ultimately come out of the proceeds of the raise. 

 

Will this fee be disclosed to the client?  Will both parties disclose their finders fee in this regulated transaction?

 

You may be thinking this is how it’s always been done, so why are we all spending so much time disrupting the current way things are?   

 

Because there is a better way.

 

We need to conduct ourselves the same way we are telling the current establishment that they should behave. Sometimes disruption of the old ways is good. New innovations (and the revival of some good old ones) are disrupting the world in so many areas, including banking, insurance, auto, and capital markets. The JOBS Act was aimed at democratizing capital, and a big part of this was making it safer for new investors

 

So let’s not stop with just how they operate; let’s also disrupt the way we conduct ourselves in operating our companies. Let’s strive always to conduct ourselves more ethically, more transparently, and always compliantly 

 

We at KoreConX never have and never will take any type of fees from anything, anyone, or any company for something we have not created.  We have many partnerships with companies that see how a relationship can be formed that becomes a win-win: the better they serve the clients we introduce to them, the better we look, and the more people will want to use our platform. Our clients need to know we’re serving their interests when we point them at a KorePartner, not sending them to the highest bidder for their business. 

 

Most of our KorePartners find this is actually to their own advantage; they know that when we recommend them to a client, it’s because they’re the best equipped to meet that particular client’s needs. 

Everyone wins when the client wins.

RegA and RegCF issuers: time to count your shareholders!

RegA and RegCF have been around for a few years now and we are finding that some of our clients, especially those that have made multiple offerings, are getting to the point where they need to consider the implications of Section 12(g) of the Securities Exchange Act, which requires companies to become registered with the SEC when they meet certain asset and investor number thresholds.

Let’s start with the requirements of Section 12(g). It says that if, on the last day of its fiscal year, an issuer has assets of $10 million and a class of equity securities held of record by either 2,000 persons or 500 persons who are not accredited investors, it has to register that class of securities with the SEC.

Drilling down on each of those elements:

  • Assets: This is gross, not net, and it will include any cash that a company has raised in an offering but not spent yet.
  • Class of equity securities: Issuers with multiple series of preferred stock or multiple series in a series LLC will need to talk to their lawyers about what constitutes a separate “class.”
  • Held of record: Brokers or custodians holding in “street name” count as a single holder of record. Crowdfunding SPVs created under the SEC’s new rules also count as one holder, and as discussed below, there are special, conditional, rules for counting Reg A and Reg CF investors.  But check with your lawyers whether you need to “look through” SPVs formed for the purpose of investing in Reg D offerings.
  • Accredited status: Issuers are probably going to have to make assumptions as to the accredited status of their investors unless they maintain that information separately, and assume investors in Reg D offerings are accredited, and investors in Reg A and Reg CF offerings are not.
  • Registering a class of securities in effect means filing a registration statement with all relevant information about the company and becoming a fully-reporting company. This includes PCAOB audits, quarterly filings, proxy statements, more extensive disclosure and all-round more expensive legal and accounting support.

Since becoming a fully-reporting company is not feasible for early-stage companies, both Reg A and Reg CF are covered by conditional exemptions from the requirements of Section 12(g). The conditions for each are different.

Issuers need not count the holders of securities originally issued in Reg A offerings (even if subsequently transferred) as “holders of record” if:

  • The company has made all the periodic filings required of a Reg A company (Forms 1-K, 1-SA and 1-U);
  • It has engaged a registered transfer agent; AND
  • It does not have a public float (equity securities held by non-affiliates multiplied by trading price) of $75m, or if no public trading, had revenues of less than $50m in the most recent year.

Issuers need not count the holders of securities issued in Reg CF offerings (even if subsequently transferred) as “holders of record” if:

  • The company is current in its annual filing (Form C-AR) requirements;
  • It has engaged a registered transfer agent; AND
  • It has total assets of less than $25m at the end of the most recent fiscal year.

It’s important that the issuer’s transfer agent keep accurate records of which exemption securities were issued under, even when they are transferred. As of March 15, 2021, Reg CF also allows the use of “crowdfunding vehicles”, a particular kind of SPV with specific requirements for control, fees, and rights of the SPV in order to put all of the investors in a Reg CF offering into one holder of record. This is not available for Reg A, and still comes with administrative requirements, which may make use of a transfer agent still practical.

If an issuer goes beyond the asset or public float requirements of its applicable conditional exemption, it will be eligible for a two-year transition period before it is required to register its securities with the SEC. However, if an issuer violates the conditional exemption by not being current in periodic reporting requirements, including filing a report late, then the transition period terminates immediately, requiring registration with the SEC within 120 days after the date on which the issuer’s late report was due to be filed.

It’s good discipline for companies who have made a few exempt offerings and had some success in their business to consider, on a regular basis, counting their assets and their shareholders and assess whether they may be about to lose one or both of the conditional exemptions and whether they need to plan for becoming a public reporting company.

 

This article was originally written by our KorePartners at CrowdCheck. You can view the original post here.

KorePartner Spotlight: Richard Heft, President of Ext. Marketing

Richard Heft is the President at Ext. Marketing, a full-service marketing firm that helps companies attract potential investors to apply their marketing strategy and achieve their communications objectives. Richard has over 20 years of experience in the marketing and communications industry, focusing on the financial services sector. In 2021, Richard and his co-author published The Ascendant Advisor, a book about marketing and content strategies for advisors to grow their businesses. 

 

We recently sat down with Richard to discuss his company, experience, and partnership with KoreConX.

 

Q: Why did you become involved in this industry?

A: Ext. has spent almost a decade and a half helping financial services firms translate their business objectives into cutting-edge marketing campaigns for the retail and institutional spaces. During this time, we also began to recognize that we would truly be a full-service marketing leader if we could help our clients reach a limitless number of online retail investors through various social channels. The power of these retail investors is that they not only have an almost unlimited appetite to consume information online, but they are also able to invest how they want, when they want, and where they want on the increasing number of self-managed platforms. We launched Ext. Digital to help companies in virtually all industries identify their target retail audience, create messaging that will resonate with that audience, and tailor their conversion funnel to ensure their brands and investment offerings stand out in a somewhat crowded marketplace.

 

Q: What services does your company provide for offerings?

A: We offer end-to-end digital marketing strategies, content creation, media activation, and ad buys. We also provide access to our proprietary financial influencer network to help amplify the audience for our client’s news and updates.

 

Q: What are your unique areas of expertise?

A: Beyond our unparalleled content creation and transparency regarding their ad spend, our clients benefit from our constant A/B testing & optimization approach to ensure their media dollars are continuously put to best use.

 

Q: What excites you about this industry?

A: There is a lot that excites me about this industry! I strongly believe that, even when the global economy looks uncertain, there is a massive opportunity for companies looking to raise capital to reach the right people with their stories. And the people they are reaching have never been more motivated and able to invest in the opportunities that appeal to them.

 

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

A: KoreConX has always been an excellent, reliable partner to Ext. Digital. We have been thrilled to introduce our clients to KoreConX’s holistic platform, given the trust we have in Oscar, Peter, and the entire KoreConX team, and we have worked with many companies that we know are going to be leaders in their respective industries as a result of introductions made by KoreConX.

 

Q: Anything else you would like to add about RegA, RegCF, or any other topic you might find relevant for your company, our partnership, and the ecosystem you are part of?

A: I encourage any company exploring a capital raise through a Reg A, Reg D, or Reg CF issue to find partners they can trust over their entire journey. I firmly believe Ext. Digital is the ideal digital marketing partner for any company looking to take the next step in its journey.

 

A $30 Trillion Market in 8 Years: Shari Noonan Speaks with Crowdfund Insider

The private securities market is predicted to grow exponentially in the next decade, with a total value of $30 trillion by 2030. Recently, Shari Noonan, CEO of Rialto Markets spoke to Crowdfund Insider about this remarkable trajectory.

 

There are several reasons we can anticipate this tremendous growth. First, the JOBS Act introduced powerful exemptions to SEC registration, removing or easing many of the administrative barriers that had stood in the way of capital formation. As well, new tools have emerged to help companies seek capital in online capital markets.

 

Plus, these online tools mean that companies now have access to a wider pool of potential investors that had been traditionally unavailable to the private market. On this subject, Shari Noonan said, “Rialto Markets enables not only venture and institutional investing but also retail investing. This diversity can help private companies seeking capital find a wider range of investors, which might mitigate some of the shakiness in the economy.” With traditional forms of investment, reaching niche investors used to be nearly impossible. It’s a different story online because finding niches is a huge part of what the online world is all about. So whether a company is in real estate, ice cream, or electric vehicles, online platforms make it easier to find the right investors who support unique, innovative companies.

 

So far, the interest in investment through JOBS Act exemptions has not slowed down. “We saw a 1,021% increase in equity crowdfunding in 2021 to $113.52 billion, so that level of growth may be difficult to sustain, but it will still be a strong 2022 for the Reg CF and RegA+ investment markets,” added Shari.

 

So, what does this all mean for investors? Well, the private securities market is set to continue growing at a rapid pace, and with the help of companies like Rialto Markets, it’s easier than ever to get involved. And if it’s easier for investors to get involved, then it’s easier for companies to find investors.

 

For players in the private capital market, like Rialto, the mission is to create a fully democratized ecosystem. Shari believes that “​​this enables private companies looking to raise capital to expand their net and reach a much wider and more diverse investor base, providing investors with access to investments at an earlier stage than previously.” 

 

Continued growth will require a robust infrastructure. “We will continue to expand services to bring greater efficiency and scale to the private markets,” said Noonan when asked about Rialto’s plans for the future. This will also include support for new types of securities, and Rialto is already prepared for the expansion of digital securities. Shari points out that “many NFTs are securities that also live natively on a blockchain. The right way forward is to wrap NFTs into the regulatory framework by registering them as Reg CFs or Reg As, then approving and tracking ownership on a next-gen SEC-registered Transfer Agent.” This would allow the industry to test new technologies while adhering to securities laws that protect issuers and investors alike.

 

The private capital market is growing at an incredible rate as issuers increasingly turn to private capital sources for their funding needs and investors explore new types of investments. With so much growth potential ahead, the private capital market is poised to introduce new technologies, efficiencies, and opportunities to the financial world.

 

Partnership Strengthens Growing Industries Raising Private Capital

In another strategic move, KoreConX All-In-One Platform announces partnership with Fundopolis, an online investment bank specializing in exempt offerings and private placement capital allocation, as a way to keep creating more opportunities for entrepreneurs.

At first, Fundopolis was a KoreClient, attracted by its industry leading state of the art platform dedicated to processing and recordkeeping issuer and investor transactions in Exempt Capital-Raising Offerings, specifically RegCF and RegA+ offerings. Fundopolis uses KoreConX´s technology for their capital market activities.

As KorePartners, Fundopolis, a FINRA Broker-dealer registered in all 50 states, is eager to make their expertise available to the whole private capital ecosystem. With expertise in sectors such as real estate and cannabis, the online bank offers experience in these ever-expanding industries, guiding private companies as they navigate the complex regulatory space while introducing them to investors who share their vision for the future. Fundopolis is also part of the ecosystem for RegD, RegCF, and RegA+ offerings providing the FINRA broker dealer services to help companies raise capital.

“Beyond that, we understand that the investment landscape is constantly changing, and we pride ourselves on approaching the entire process with an eye on what is possible. As a recordkeeping transfer agent and escrow platform, we believe KoreConX is the perfect partner for Fundopolis, providing access to a vast ecosystem of investors and issuers,” says Bert Pearsall, CEO & Managing Principal at Fundopolis.

Co-founder and CEO at KoreConX, Oscar A. Jofre, acknowledges Fundopolis as a highly rated KorePartner. “When we first met, as a KoreClient, we saw a great potential and a lot of opportunities ahead of us. Since our solution unites tools to securely and efficiently manage business data and facilitate compliance during all the capital raising process regardless of where they are in this cycle, it was only natural to add them to our valuable team of KorePartners.”

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. For investor relations and fundraising, the platform enables private companies to share and manage corporate records and investments: it assists with portfolio management, capitalization table and shareholder management, virtual minute book, security registration, transfer agent services, and virtual deal rooms for raising capital.

KoreConX All-In-One Platform announces partnership with Fundopolis. Read more in our blog.

Recapping Our All-Star June Podcast Guests

Throughout June, we were happy to host another set of excellent speakers to add to our KoreTalkX series, covering timely topics like digital securities, RegA+ for cannabis, and the potential RegA+ unlocks for companies in the Medtech space. Keep reading to explore each episode in more depth. 

 

KoreTalkX #5: Digital securities matter; tokens, coins, and regulations.

 

The June lineup of KoreTalks kicked off with episode #5, during which Andrew Bull discussed the future of digital assets and their impact on the financial industry. As digital securities enter the mainstream, their potential to protect issuers and create opportunities for investors grows with the transparency they can offer. However, education will continue to be an important factor in driving the expansion of the digital asset space. This conversation is helpful for anyone interested in learning more about digital assets and their impact on the financial industry. With their experience in traditional finance and digital assets, Andrew Bull and Dr. Garimella provide valuable insights into this growing industry based on their observations of the industry’s development. 

 

KoreTalkX #6: Cannabis businesses need capital. Let’s raise it.

 

Reg A+ is a powerful tool for companies in the private sector, and it is no different for those in the cannabis industry. In KoreTalkX #6, Brianna Martyn of Big Stock Tips discussed the importance of due diligence when investing in the cannabis industry, advising investors to research and understand each company’s fundamentals before investing. Brianna spoke with Jessica Trapani of KoreConX about our role in helping private companies raise up to $75 million from brand advocates and customers without going public. 

 

KoreTalk #7: The MedTech ecosystem is booming.

 

The JOBS Act was signed into law two decades ago, yet we are just beginning to see more Medtech companies utilize the RegA+ exemption to raise capital. In the last KoreTalkX episode for June, Stephen Brock and Peter Daneyko discussed the benefits of the Jobs Act and how it will help businesses grow and create jobs. Especially in the Medtech space, which is traditionally capital-intensive, RegA+ provides a tremendous opportunity for companies to raise needed capital while retaining more ownership of their company. Additionally, the speakers also discuss new, game-changing opportunities for investors, who are now able to invest in companies that align with deeply personal values. 

 

If you’d like to watch any of these episodes in full, you can catch them on your favorite podcast platform. Click here to view episodes on Spotify, Amazon, or iTunes.

The Medtech A+ Team: An Upcoming KoreSummit Event

KoreConX is excited for the upcoming KoreSummit event on Thursday, June 23rd. Our second event focused on the Medtech vertical, Thursday is a half-day event that dives into how Medtech companies can conduct a successful RegA+ offering. Kicking off at 1 PM EST, we’re excited for our KorePartners to join us in covering this exciting topic. Let’s dive into the schedule more below.

 

At 1 PM EST, KoreConX CEO Oscar Jofre will introduce the event with a warm welcome. The first panel at 1:10 PM will begin with an introduction to Reg A+ for a MedTech company. This opening panel features Oscar Jofre, Scot Pantel, and Stephen Brock.

 

Up next at 1:40 PM, five experts will take the virtual stage to talk about the preparation phase including what a Form 1A is and the regulatory requirements you need to complete the filing. Douglas Rurak, Matthew McNamara, Peter Danyeko, Nick Antaki, and Shari Noonan will be speaking on this panel. 

 

At 2:15 PM, the third panel kicks off with a discussion about going live. This panel will cover everything you need to know when preparing your live offering to ensure it is a success and will feature Kiran Gramiella, Shari Noonan, John Hayes, and broker-dealer Amanda Grange. From investor acquisition and issuance tech to broker-dealers, this panel will ensure participants will be prepared for their next capital raise.

 

The fourth panel takes place at 3:00 PM and is about how, when raising capital, it is vital to sell your company’s story, not just the stock. By learning how to tell a story, MedTech companies looking to raise capital will be able to connect with investors on a personal level and have a much better chance of success. Panelists will include Scott Pantel, Andy Angelos, John Hayes, Andrew Corn, and Dawson Russell sharing their wealth of experience on this topic.

 

At 3:40 PM, the 5th panel discusses the importance of a secondary ATS, what it is, and how to pick one that will best suit your needs. Lee Saba, Kiran Garimella, and Peter Danyeko will discuss their experience with ATSs and help you understand why having one is so important. 

 

The event concludes with the final panel at 4:00 PM with a short panel that covers takeaways from the event as well as allows for networking. With this panel, we hope to give event attendees the chance to meet and greet the KoreConX ecosystem of partners, members, and service providers that work with Reg A+ daily. This will include Oscar Jofre, Scot Pantel, Joel Steinmetz, Matthew McNamara, Douglas Ruark, and Stephen Brock.

 

Join us for MedTech A+ Team: How to do a successful Reg A+ for a MedTech company on Thursday, June 23rd, 2022. This event is online and free to attend, which you can register for here. This event is perfect for all MedTech companies that are new or unfamiliar with Reg A+ and those that have completed Reg A+ raises in the past.

5 Key Players To Know For Your 401k Audit

This blog was originally written by our KorePartners at Assurance Dimensions. View the original post here.

 

Your 401k audit requires the work of multiple key players with different roles and responsibilities. It’s a team effort to ensure your benefit plan audit is seamless, timely, and accurate. Let’s outline the service providers and how you will work with them for your next 401k audit.

 

Custodian

The custodian of a 401k plan has the legal obligation to act in the sole interest of the plan participants. The custodian will make fund decisions in the best interest of the plan participants, without regard to the interests of the employer or plan sponsor.

 

Third-Party Administrator (TPA)

The 401k plan sponsor hires a TPA to run the day-to-day operations of the retirement plan. The TPA is responsible for calculating vested returns and filing reports to the DOL, IRS, and other government agencies. Overall, the TPA plays a critical role in a 401k audit, as they prepare the annual Form 5500 and have access to the required financial documents necessary for the audit.

 

Financial or Investment Advisor

Due to the complex nature of 401k plans, many companies employ a 401k advisor or financial advisor to help employers develop and maintain a 401k plan. Their role can involve several responsibilities, including:

  • Retirement plan design
  • Plan implementation and management
  • Oversee quarterly investment meetings
  • Provide 401k advice to plan participants
  • Assist with the annual 401k audit
  • Administrative support related to finances
  • Track regulatory and legislative updates that may affect the 401k audit

 

Recordkeeper

The recordkeeper is the most visible to provider participants. This role is primarily associated with enrolling participants and providing them access to their retirement assets. The role of the recordkeeper is to track the data required for the 401k audit (including contributions and earnings.) The recordkeeper also communicates data to the required parties.

 

Auditor

The Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code require employers and plan administrators to hire an outside audit firm for an independent 401k plan audit. The auditor will be in charge of administering your 401k audit and preparing audited financial statements of your plan. They should be experienced CPAs who have detailed processes to ensure your benefit plan audit is completed correctly and promptly.

 

Coordinate and Communicate During Your 401k Audit

Once you have established that your benefit plan needs a 401k audit, the audit team will need to work in sync with all key players of the 401k plan. Since the auditor must collect information from the plan’s service providers and ensure that it is accurate and detailed, this requires coordination and clear communication across all roles in the 401k plan audit. Failure to coordinate could lead to missed 401k plan audit deadlines and compliance penalties.

 

Hire A Trusted Audit Team For Your 401k Audit

A 401k audit is time-sensitive and has extensive requirements. Hire qualified, certified public accountants to help your benefit plan maintain compliance.

What are the Benefits of Having a Diverse Investment Portfolio?

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.

How Liquidity Impacts Investing

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

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

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

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

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.

 

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

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

 

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

KoreConX Partners With LSI Emerging Medtech Summit 2022


Medtech and Life Sciences main event will be held next March in California. KoreConX is one of the supporting sponsors.

KoreConX is pleased to announce its partnership with LSI Emerging Medtech Summit 2022, which will be held March 15-18, 2022, in Dana Point, California, USA. This is a major event managed by Life Science Intelligence (LSI) in the Medtech environment and will bring together investors, strategic partners, and experts within the Medtech, Life Sciences ecosystem.

Oscar A Jofre, Co-founder and CEO of KoreConX, highlights the importance of this partnership and event to the sector: “We at KoreConX are delighted to be part of this huge event focused on an industry that is flourishing like Medtech. This sector is critical to saving lives with its innovative solutions and healthcare impact. We are confident that this particular segment will reap the biggest benefits from Regulation A+, and we are honored to sponsor this summit. Also, we will be there in-person for the first time after two years, so we are more than excited to join LSI and our partners to be part of this.”

“A major current trend in the medtech industry is the democratization of capital through programs like Reg A+. We are embarking during a monumental time where we can finally achieve this grand goal and bring companies to market that have a fundamental impact in our lives,” says Scott Pantel, CEO of Life Science Intelligence.

This event will also feature the participation of an icon of the JOBS Act movement, David Weild IV, considered the “Father of the JOBS Act”. He will be giving a keynote address to stimulate and encourage everyone in this industry who wants to raise money using Regulation A+.

LSI is part of the Medtech ecosystem of KoreConX’s partners focused on Life Sciences companies. They are an essential part of this vertical, as they offer valuable insights to help investors and executives make decisions based on data provided by their team of market researchers, economists, and analysts.

LSI Emerging Medtech Summit 2022 will take place March 15-18, 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

Investing in Startups 101

This article was originally written by our KorePartners at StartEngine. You can view the post here

The high-speed world of startups, and the risks of investing in them, are well documented, but startup investing can be complicated and there is a lot of information you should know before making your first investment.

This article will try to answer the question “why should you invest in a startup?” by giving you information about the process and what to expect from investing in an early-stage business.

Why invest in startups?

Through equity crowdfunding, you can support and invest in startups that you are passionate about. This is different than helping a company raise capital via Kickstarter. You aren’t just buying their product or merch. You are buying a piece of that company. When you invest on StartEngine, you own part of that company, whether it’s one you are a loyal customer of, a local business you want to support, or an idea you believe in.

Investing in startups means that you get to support entrepreneurs and be a part of the entrepreneurial community, which can provide its own level of excitement. You also support the economy and job creation: in fact, startups and small businesses account for 64% of new job creation in the US.

In other words, you are funding the future. And by doing so, you may make money on your investment.

But here’s the bad news: 90% of startups fail. With those odds, you’re more than likely to lose the money you invest in a startup.

However, the 10% of startups that do succeed can provide an outsized return on the initial investment. In fact, when VCs invest, they are looking for only a few “home run” investments to make up for the losses that will compose the majority of their portfolio. Even the pros expect a low batting average when investing in startups.

This is why the concept of diversifying your portfolio is important in the context of startup investing. Statistically, the more startup investments you make, the more likely you are to see better returns through your portfolio. Data collected across 10,000 Angellist portfolios supports this idea. In other words, the old piece of advice “don’t put all your eggs in one basket” holds true when investing in startups.

Who can invest in startups?

Traditionally, startup investing was not available to the general public. Only accredited investors had access to startup investment opportunities. Accredited investors are those who:

  • Have made over $200,000 in annual salary for the past two years ($300,000 if combined with a spouse), or
  • Have over $1M in net worth, excluding their primary residence

That meant only an estimated 10% of US households had access to these opportunities. Equity crowdfunding changes all of that and levels the playing field. On platforms like StartEngine, anyone over the age of 18 can invest in early-stage companies.

What are you buying?

The Breakdown of Securities Offered via Reg CF as of December 31, 2020

When you invest in startups, you can invest through different types of securities. Those include:

  • Common stock, the simplest form of equity. Common stock, or shares, give you ownership in a company. The more you buy, the greater the percentage of the company you own. If the company grows in value, what you own is worth more, and if it shrinks, what you own is worth less.
  • Debt, essentially a loan. You, the investor, purchase promissory notes and become the lender. The company then has to pay back your loan within a predetermined time window with interest.
  • Convertible notes, debt that converts into equity. You buy debt from the company and earn interest on that debt until an established maturity date, at which point the debt either converts into equity or is paid back to you in cash.
  • SAFEs, a variation of convertible note. SAFEs offer less protection for investors (in fact, we don’t allow them on StartEngine) and include no provisions about cash payout, so you as an investor are dependent upon the SAFE converting into equity, which may or may not occur at some point in the future.

Most of the companies on StartEngine sell a form of equity, so the rest of this article will largely focus on equity investments.

How can a company become successful if they only raise $X?

Startup funding generally works in funding rounds, meaning that a company raises capital several times over the course of their life span. A company just starting out won’t raise $10M because there’s no indication that it would be a good investment. Why would someone invest $10M in something totally unproven?

Instead, that new company may raise a few hundred thousand dollars in order to develop proof-of-concept, make a few initial hires, acquire their first users, or reach any other significant business developments in order to “unlock” the next round of capital.

In essence, with each growth benchmark a company is able to clear, they are able to raise more money to sustain their growth trajectory. In general, each funding round is bigger than the previous round to meet those goals.

When do companies stop raising money? When their revenue reaches a point where the company becomes profitable enough that they no longer need to raise capital to grow at the speed they want to.

What happens to my equity investment if a company raises more money later?

If you invest in an early funding round of a startup and a year or two later that same company is raising more money, what happens to your investment? If things are going well, you will experience what is known as “dilution.” This is a normal process as long as the company is growing.

The shares you own are still yours, but new shares are issued to new buyers in the next funding round. This means that the number of shares you own is now a smaller percentage of the whole, and this is true for everyone who already holds shares, including the company’s founders.

However, this isn’t a problem in itself. If the company is doing well, in the next funding round, the company will have a higher valuation and possibly a different price per share. This means that while you now own a smaller slice of the total pie, the pie is bigger than what it was before, so your shares are worth more than they were previously too. Everybody wins.

If the company isn’t growing though, it leads to what is known as a down round. A down round is when a company raises more capital but at a lower valuation, which can increase the rate of dilution as well as reduce the value of investors’ holdings

How can I make money off a startup investment?

Traditionally, there are two ways investors can “exit” their investment. The first is through a merger/acquisition. If another company acquires the one you invested in, they will often offer a premium to buy your shares and so secure a controlling ownership percentage in the company. Sometimes your shares will be exchanged at dollar value for shares in the acquiring company.

The other traditional form of an exit is if a company does an initial public offering and becomes one of the ~4,000 publicly trading companies in the US. Then an investor can sell their shares on a national exchange.

Those events can take anywhere from 5-10 years to occur. This creates an important difference between startup investing and investing in companies on the public market: the time horizon is different.

When investing in a public company, you can choose to sell that investment at any time. However, startup investments are illiquid, and you may not be able to exit that investment for years.

However, equity crowdfunding can provide an alternative to both of these options: the shares sold through equity crowdfunding are tradable immediately (for Regulation A+) and after one year (for Regulation Crowdfunding) on alternative trading systems (ATS), if the company chooses to quote its shares on an ATS. This theoretically reduces the risk of that investment as well because the longer an investment is locked up, the greater the chance something unpredictable can happen.

Conclusion

Investing in startups is risky, but it is an exciting way to diversify your portfolio and join an entrepreneur’s journey.

KorePartner Spotlight: Andrew Bull, Founding Partner Bull Blockchain Law  

With the recent launch of the KoreConX all-in-one platform, KoreConX is happy to feature the partners contributing to its ecosystem. 

 

During the capital raising journey, many components must be in place to increase the potential for success. One of these critical factors is ensuring that a capital raise meets regulatory compliance requirements. This means that having a knowledgeable securities lawyer on your team is vital to your capital raise.

 

Andrew Bull knows this as a founding partner of Bull Blockchain Law. He and the company assist investors and businesses by providing regulatory clarity across jurisdictions to ensure raises are compliant and efficient. Bull Blockchain Law is a blockchain and cryptocurrency law firm specializing in digital assets, broker-dealer services, FinTech, advising, and more, and is one of the few law firms entirely focused on this subject. 

 

Since discovering Bitcoin in 2011, Andrew has become an industry thought leader and ran one of the first cryptocurrency mining companies in the US. He began his firm in direct response to a lack of clarity around laws in the blockchain industry.

 

We took some time to speak with Andrew and learn more about himself, his firm, and his thoughts on cryptocurrency’s future.

 

Why did you become involved in this industry?

To provide legal clarity regarding the regulatory compliance requirements for accessing capital from all types of investors. The emerging world of Bitcoin and Cryptocurrency gives a new way to supply these things to the industry and assist a new style of investor.

 

What services does your company provide for RegA offerings?

Bull Blockchain Law provides legal guidance, document drafting, and regulatory filings to ensure our clients have the best possible chance to have their Reg A Offering approved by the SEC.

 

What are your unique areas of expertise?

Blockchain, tokenization of assets, NFTs, tokens, and any economic representation facilitated through digital issuances. My background in Blockchain includes extensive legal and academic experience, including running one of the first Cryptocurrency mining companies in the United States, which helps in the scope of legal expertise I can provide.

 

What excites you about this industry?

With the recent expansion of the fundraising thresholds in the U.S. and Canada, I’m excited to see the large influx of new projects access capital and provide more opportunities to retail investors.

 

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

KoreConX leads the industry in practical compliant fundraising solutions. As a law firm, we emphasize compliance and regulatory compliant digital solutions that facilitate the most efficient path for our clients. Having this partnership undoubtedly benefits us as well as our clients.