Private Securities and Crowdfunding Surge is Forecast to Continue in 2022

This article was written by our KorePartners at Rialto Markets. View the original post here.

 

Crowdfunding had another record year in 2021 and is forecast to soar even higher in 2022.

According to Pitchbook data, global crowdfunding exploded from $8.61 billion in 2020 to $113.52 billion last year – a 1,021% increase. The US market alone doubled year on year through Regulation CF and A+, with much higher numbers being raised and over 32% oversubscribed, according to SEC (Securities & Exchange Commission) filings.

Recent analysis of key US private equity crowdfunding platforms such as Wefunder and Republic, showed their top 50 most invested Regulation CF (raises of up to $5 million) crowdfunding offerings raised more than $171 million in November alone from over 113,000 investors – an average of $1,315 per investor – while December tracked at similar levels going into the holiday season.

In the Regulation A+ category, where private companies can raise up to $75 million annually, SEC EDGAR filings for 2021 show 343 US-based high growth private issuers raised $8.6 billion in total.

The peak months for Regulation A+ capital raises were November and December, suggesting that 2022 will double the amount raised last year.

The market is also expected to expand significantly in 2022 and 2023 as regulated alternative secondary market trading platforms, known as ATSs, start to offer more potential liquidity in a private securities market set to grow from $7 trillion in 2021 to $30 trillion in 2030, according to Forbes.

Innovative US-based broker-dealer and a leading ATS provider specializing in private securities, Rialto Markets, predicts this trend will continue as more and more ambitious private companies in the US and worldwide apply this approach to their fundraising, leading to future secondary share trading.

Rialto Markets’ COO and Co-founder Joel Steinmetz said: “There were record months in the US crowdfunding sector during the first half of 2021 – with May being the highest – but there was a much steeper growth curve in the second half of the year, with record investment levels in the final quarter.

“We see Regulation CF and Regulation A+ public offerings complementing each other and while April was the lowest capital raising month, the sector surged in late summer, and November closed as the highest month.

“December in the US now looks like it may have matched or exceeded November, which sets the tone for a buoyant 2022, according to our research, and data coming from the major crowdfunding platforms and authorities like Pitchbook.

“We are seeing this pattern ourselves with over $730 million in signed contracts for Rialto Markets at the start of 2022 alone from high growth private companies in the primary market, using our broker-dealer infrastructure and technology.

“Additionally, in the secondary market, we are being swamped with requests from high growth private companies and marketplaces that offer fractionalized securities wishing to offer regulated trading to their investors through our SEC and FINRA regulated ATS secondary trading platform.”

Digital Twin pioneer Cityzenith, a company with three successful crowdfunding raises in three years, saw a big upsurge in investment during December and early January towards the 1st quarter 2022 close of its final $15 million crowdfunding raise.

It will then move onto funding from institutions that have followed the company’s rise during this process.

Cityzenith CEO and Founder Michael Jansen said: “Crowdfunding isn’t for the faint-hearted. You must have a strong strategy, a large following, and investors who are going to back the offerings from the outset.

“But it’s also about positioning the brand to win new partnerships and potential larger institutional investors due to the momentum you build through these Regulation CF and Regulation A+ investment offerings.”

The electric vehicle company Atlis Motors had one of the fastest and most over-subscribed Regulation CF raises of 2021, attracting its full $5 million in just a few weeks with 4,123 new investors, further illustrating the importance of building a community of investors and advocates for the future of your brand.

Shari Noonan, CEO and Co-founder of Rialto Markets – the broker-dealer for both Cityzenith and Atlis Motors – responded: “These are impressive and ambitious private companies who know what it takes to prepare and build a community for either a smaller Regulation CF raise or a much larger Regulation A+ offering.”

“2022 is going to be a massive year for the private securities market, especially Regulation CF and Regulation A+ capital raising campaigns for high growth private companies.

“We are especially excited about movement in secondary trading for private companies, and by providing a platform to potentially unlock value for investors much earlier through a regulated ATS such as our own Rialto Markets secondary trading platform.”

Is Email Still King for Reg A, Reg CF, and Reg D Marketing?

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

 

Email marketing has been around for a while. You might even be surprised to read that email has been around since the ’70s — over 50 years ago!

 

You’d think that as fast as the digital world moves, such a dinosaur of a marketing strategy would be nothing more than a relic or extinct.

But it’s not.

In fact, email marketing is somewhere in the ballpark of 40 times more of an effective marketing strategy than social media marketing, according to a study conducted by McKinsey & Company.

So why is that?

How is email marketing still king when we now have search engine optimization (SEO), social media marketing, mobile marketing, pay-per-click, content marketing, and influencer marketing all at our fingertips?

Here’s are 3 of the main reasons:

1. It’s Highly Customizable

The most crucial and effective way to have success with your email marketing strategy is to implement what’s known as “customer segmentation.” This means you can use customers’ recent and relevant searches & interests to your advantage and generate custom-made emails for them in a way that is MUCH more effective than other approaches. Customer segmentation also allows you to be much more tactful with your email timing, so you can avoid spamming their inboxes.

Even better, you can pivot your customer segmentation strategy quickly by reviewing click rates, bounce rates, and subscribe & unsubscribe rates.

2. It Provides Better Conversion Rates

It doesn’t matter if your focus is on Reg A email marketing, Reg CF email marketing, or Reg D email marketing, it will still have a better conversion rate than any other method.

Email has been traditionally regarded as the most transactional part of a company or business.

Think about it.

You can generate traffic to your business and/or convert a visitor to an investor with just a single click of a link. They can reply directly, sign-up for other newsletters, forward the email to other potential investors, and more.

According to a study done by Statista, over 93% of Americans between the ages of 22-44 used email regularly, and over 90% of Americans between the ages 45-64. Even 84% of people 65+ were regular email users.

3. It’s a Cinch to Automate

Once you get everything written out and running properly, you can launch a highly effective Reg A, Reg CF, or Reg D marketing campaign, with minimal effort compared to other methods.

With the right automation tools to go along with your campaign strategy, you can create and deliver automated emails that are not only relevant to your subscriber list but generate leads and new investors at the same time.

In Conclusion…

Email marketing really is still the best way to reach out to potential investors and remains the king of the digital marketing world. When utilized and implemented properly, it can build leads to potential investors, and strengthen brand trust and loyalty in a way that enables your fund to grow more than you would’ve thought possible.

PS: did you know that adding PS to your email marketing campaigns could increase click-through rates by an extra 2%?

What is Sustainable Investing?

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

OK, How Does Sustainable Investing Work?

Some investors seek to make a positive social and environmental impact with their investments and thus, they don’t simply look at the companies who will make them the most money from the get-go. Rather, they seek those companies who are working tirelessly to address a vast array of societal problems. As a result, sustainable investing is also referred to as socially responsible investing (SRI) or ESG investing, as it encompasses the idea that the investor is strongly influenced by environmental, societal, or governmental factors, before contributing money to a particular company. With this type of investment, people are seeking not a short-term financial return, but a longer-term financial return in which their money is being used as a medium for societal progress, environmental impact, and corporate responsibility. In fact, financial return goes hand in hand with ESG progress, as companies with stronger ESG profiles may generate more sustainable profit and cash flow because they tend to be more competitive than their peers (“ESG factors and equity returns – a review of recent industry research,” 2021). Sustainable investing places increasing emphasis on how investments contribute to the good of society, irrespective of how much money was made in the short run.

Sustainable Investing Objectives

Sustainable investing, as a catalyst for societal change, has seen it’s popularity rise in recent years in the face of the climate crisis and compounding social issues. Impact investing serves as one of the catalysts, alongside millennial investors driven by principles, that is lighting a fire under investors to invest their money in companies whose “intrinsic values” drive positive change (“What is Sustainable Investing?,” HBS). Sustainable investing pushes companies to embrace sustainable principles, which can lead to more impactful social and financial returns later on. With respect to Raise Green, sustainable investing is particularly crucial, especially within the context of environmental factors that investors look for in companies to contribute to money. The realm of environmental factors focuses on the impact that a company will have on the environment, such as its carbon footprint, waste, water use and conservation, and clean technology.

Growing Investment Opportunities

Furthermore, this marketplace for sustainable investing is only growing. The United States’ Forum for Sustainable and Responsible Investment identified $17.1 trillion in total assets under management at the end of 2019 using one or more sustainable investing strategies, a 42 percent increase from the $12.0 trillion identified two years prior (“Sustainable Investing Basics,” USSIF). This type of investing has become more desirable because “investors do not have to pay more to align their investments with their values, or to avoid companies with poor environmental, social or governance practices” (“Sustainable Investing Basics,” USSIF). Therefore, with sustainable investing, investors can propagate social impact without losing money. As a whole, sustainable investing is important because it can help contribute to vast infrastructure changes needed in our society to tackle the challenges we face. It allows us to move towards a better and more sustainable future.

KorePartner Spotlight: Jonathan Stidd, Co-Founder and CEO of Ridge Growth Agency

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 raise is marketed to get an issuer’s message in the right place to get in front of the right eyes. 

Ridge Growth Agency is an expert in equity crowdfunding and direct-to-consumer marketing, dedicated to building the brands of tomorrow. The company positions brands to introduce them to new, high-value customers and investors. When the company started, it was first a digital marketing agency that helped eCommerce brands scale online. Jonathan Stidd said, “When we got introduced to equity crowdfunding, we quickly realized we could apply these same tactics to acquiring investors online.” Since introducing this service, the agency has helped its clients raise over $330 million through Regulation A+ offerings. 

Ridge Growth Agency provides a wide range of digital marketing services for its clients. These include website design and development; newsletter and sponsored content creation; paid media management; budgeting, planning, and forecasting; video production and editing; graphic design; copywriting; and email marketing. Jonathan feels this is what sets them apart from other firms offering similar services, saying, “nobody seems to offer [them all].”

After receiving his education in economics, Jonathan himself entered into this field and has since developed expertise in management consulting, venture capital, entrepreneurship, and the growth strategies to launch and scale brands. He feels passionate about this industry because of the ability to “help cutting-edge companies raise capital in a relatively new way!” Additionally, he feels that a partnership with KoreConX was just the right fit. He said: “as a technology provider for the pipe system of these raises, KoreConX is a crucial tool to move the investors through the funnel.”

Crowdfunding SAFE vs. Traditional SAFE – Key Differences

This blog was originally written for our KorePartner Bian Belley at Crowdwise. View the original article here

 

Since its creation in 2013, the use of the SAFE has proliferated as an early-stage financing instrument and is now used everywhere from Silicon Valley VC deals to online crowdfunding rounds. However, not all SAFEs are created equal.

The SAFEs used in VC rounds and in angel SPVs can be quite different from SAFEs on crowdfunding platforms. Even SAFEs between crowdfunding platforms (e.g. Republic vs. Wefunder) will have key differences that investors should be aware of.

In this article, we will review the basics of the SAFE and discuss key differences between crowdfunding SAFEs and traditional SAFEs.

What is a SAFE?

A Simple Agreement for Future Equity (SAFE) is a type of early-stage investment security that converts to equity at a specified conversion event in the future. It is roughly equivalent to a Convertible Note, only without a maturity date or interest rate.

History of the SAFE

The famed accelerator Y-Combinator originated the pre-money SAFE in 2013. Its use was adopted in Silicon Valley and quickly spread throughout the world. Today, SAFEs are used everywhere from Silicon Valley to online crowdfunding portals, though specific deal terms still vary.

In 2018, YC updated their boilerplate SAFE to be a “post-money” SAFE, which means that it now converts based on post-money valuation instead of pre-money valuation. Another notable update included adding in provisions that explicitly treat the SAFE as equity for purposes of taxes under IRC Section 1202.

The latest post-money YC SAFE templates can be found here; however, many SAFEs on crowdfunding portals still use the pre-money SAFE as of late 2021. Also, conversion triggers in crowdfunding SAFEs are usually different than those found in the standard YC SAFE used in accredited deals, as we will discuss below.

SAFE Deal Term Basics

The two most important deal terms associated with a SAFE are its discount rate and valuation cap.

Some examples of SAFE terms include:

  • SAFE with $5 million valuation cap and a 15% discount
  • Uncapped SAFE (i.e. no valuation cap) with a 25% discount
  • SAFE with a $15 million valuation cap and no discount

As you can see, both the discount rate and the valuation cap will vary between each SAFE. Furthermore, both terms are optional, so a SAFE may have both, or just one or the other (rarely will a SAFE have neither).

SAFE Conversion Examples

A SAFE will convert to equity at the better of either the valuation cap or the discount rate.

Let’s say you invest in a SAFE with a $5 million valuation cap and a 20% discount. Here are some different conversion examples.

  • If the startup raises a follow-on financing round at a $6 million post-money valuation:
    • The valuation cap would be $5 million.
    • The 20% discount would be at an effective $4.8 million valuation ($6M*0.8 = $4.8M).
    • Since the discount rate ($4.8 million) is better than the valuation cap ($5 million), your SAFE would convert under the 20% discount at an effective valuation of $4.8 million.
    • So if current investors in the $6 million post-money round were investing at $1 per share, SAFE investors would get a $4.8/$5*1 = $0.96 per share.
  • If the startup raises a follow-on financing round at a $10 million post-money valuation:
    • The 20% discount would be an effective $8 million valuation.
    • Since the $5 million valuation cap on the original SAFE is a better deal for investors, the SAFE would convert at the valuation cap of $5 million.
    • So if current investors in the $10 million post-money round were investing at $1 per share, SAFE investors would get a $5/$10*1 = $0.50 per share.

Discount rates will give a better conversion price if the follow-on round is similar to the prior round (up to the amount of the discount). For rounds and exits that have much steeper increases in valuation, the valuation cap will give the more favorable terms.

When do SAFEs Convert to Equity?

A SAFE converts to equity at a specified conversion event in the future. Typical conversion scenarios may include an exit (e.g. acquisition, IPO, etc.) or a future financing round, such as a Series A round after an initial Seed round.

Especially on crowdfunding portals, conversion triggers will vary from SAFE to SAFE. Investors should always read the subscription agreement for each deal in its entirety.

The three types of conversion events typically specified in a SAFE include:

  1. Equity Financing Event (e.g. follow-on financing round – e.g. Series A, Series B, etc.)
  2. Liquidity Event (e.g. if there is a merger, acquisition, IPO, or other liquidity event prior to the conversion of the SAFE, that may trigger a conversion to equity)
  3. Dissolution Event (e.g. the company shuts down operations)

Converting into Common vs. Preferred Equity

While the standard Y-Combinator SAFE converts to Preferred Equity, crowdfunding SAFEs — such as those used on Republic and Wefunder — will vary in terms of whether they convert to Common Stock or Preferred Stock.

Common Stock is the type of equity held by founders and employees of a company, while Preferred Stock is the type of equity typically held by investors. Among other differences, Preferred Stock typically comes with a liquidation preference (e.g. 1X, 2X, etc.), meaning Preferred shareholders will be paid back prior to Common shareholders should the company be liquidated.

Both Common and Preferred shareholders are paid after debt-holders and creditors, and that’s only if there is anything left to be paid.

SAFEs that Convert to Shadow Series Shares

Some crowdfunding SAFEs, such as the Republic Crowd Safe, may convert to “Shadow Series” shares.

This essentially means that Crowd Safe holders will receive the same class of shares (e.g. Common or Preferred), only those shares will have limited voting and information rights.

What Happens When a SAFE Company Fails?

If a startup fails, investors will be paid out based on the “dissolution event” provisions of the SAFE terms and the “liquidation priority” order.

In general, investors should not expect to receive any capital back when a company fails, since the proceeds of the failure, if any, will first be paid to debt holders.

In the standard Y-Combinator post-money SAFE terms, a SAFE is paid out:

  • junior to payments of outstanding indebtedness and creditor claims,
  • on par with other SAFEs and Preferred Stock, and
  • senior to Common Stock.

This is typically found under the “Liquidation Priority” section of the SAFE terms.

Summary of Crowdfunding SAFE Differences

Now that we have a solid understanding of the deal terms and basics of the SAFE, we can review the most common differences between crowdfunding SAFEs and traditional SAFEs:

  1. Crowdfunding SAFEs may have optional conversions: in some crowdfunding SAFEs (such as Republic’s Crowd Safe), shares convert at the next equity financing round at the discretion of the issuer (i.e the startup). While most traditional SAFEs are forced to convert at the next qualified financing round, many crowdfunding SAFEs give the company the option to either convert to equity or defer conversion until a later time.
    1. While this may sound like a bad thing for investors at first, we’ll discuss in a future article why this can be a win-win for both the company and the investors.
  2. Crowdfunding SAFEs may convert to Shadow Series shares: in the Republic Crowd Safe, the SAFE may convert to shadow shares, which means the same class of shares (e.g. Common vs. Preferred) as other investors, but with limited voting and information rights.
  3. Crowdfunding SAFEs Investing via an SPV: When you invest in a SAFE on Wefunder, you’ll often be investing in a Special Purpose Vehicle (SPV). While this is typical for angel investors on sites like AngelList, this means you’ll actually be investing in the SPV (e.g. “Company X, a Series of Wefunder SPV LLC”), and not be directly investing in the company itself.
    1. Investing in an SPV may have potential tax implications (because the SPV is an LLC). Furthermore, investing in an SPV may have implications in terms of the potential future liquidity of that investment due to complications when listing SPV shares on a secondary market.
  4. Many Crowdfunding SAFEs are still Pre-Money: while the standard Y-Combinator SAFE was changed to convert based upon post-money valuation in 2018, many of the SAFEs used on crowdfunding sites today are still using pre-money valuation for the conversion price.
  5. Some Crowdfunding SAFEs may have repurchase rights: something that most VCs and angel SAFEs would never have is a “repurchase rights” or “redemptive clause”. These terms allow the company to buyback SAFE investors at the company’s discretion, which typically happens if a later-stage VC wants to “clean up” the cap table (i.e. get more control and ownership for themselves) or when the company is doing well and wants to buy out early investors. As we’ll discuss in a future article, investors should avoid SAFEs with these terms. These terms put the company’s best interests at odds with that of the investors’.
    1. The good news is that I have not seen any SAFEs recently with these repurchase terms (although I have seen some Common Stock offerings on some platforms with repurchase rights, so be careful!). It seems that crowdfunding portals have realized that these repurchase rights often end poorly for investors and are used by issuers who might not have their crowdfunding investors’ best interests at heart.

Why Digital Marketing is The Key to “Always Raising” Capital

In a recent webinar with StartEngine, Kevin O’Leary succinctly said, “great companies that are growing need money, and they should get it.”

 

With today’s unparalleled changes, raising capital in many ways is much easier said than done. Many great ideas are having a uniquely difficult time raising the money to fuel their vision.

 

Radical economic change due to COVID vastly disrupted the venture capital markets by 57%—a start-up’s traditional source of funding.

 

Rather than making new investments, Kevin summed, “venture capital firms are focused on making life and death decisions within their own portfolio.” Which means venture opportunity is sparse, and entrepreneurs are left wondering, “where can I turn for funding?”

 

The good news is there’s a silver lining and it’s called equity crowdfunding.

Traditional Venture Capital is Shifting Towards Online Equity Crowdfunding Platforms

 

Equity crowdfunding, or selling small shares of a company to the everyday (non-accredited) investor started not too long ago when the Title III section of the JOBS Act was passed in 2017.

 

Now, when venture capital is failing, more entrepreneurs are looking to the crowd of the everyday investors to fund their business in exchange for offerings like promissory notes, convertible notes, SAFE agreements, and revenue shares.

 

Everyday investors can invest in businesses through one of many equity crowdfunding platforms such as Wefunder, StartEngine, and MicroVentures. Since the platforms and investors are solely online, it means that businesses must have a strong online presence and digital marketing plan to meet their raise goals.

 

It means a brand trying to disrupt the market with a game-changing idea, must have an equally innovative online marketing strategy. For instance, say you’re trying to raise the full Reg CF cap of one million dollars when on average an everyday investor invests a minimum of $150 into your company. You’ll need to be backed by 6,667 investors.

 

But the real question is how do I drive awareness and attract the number of investors in the first place?

 

That’s where digital marketing comes in.

 

Digital Marketing Lets You Tap Into the Growing Everyday Investor Community

 

Most entrepreneurs make the mistake of believing that if they post a raise video, write engaging copy, post an interesting graphic, and that the investors will flood in from the crowdfunding platform. Wrong.

 

As an expert in digital marketing for crowdfunding campaigns, I see this mindset often. When entrepreneurs ask why their equity crowdfunding campaign failed, the answer is always the same—the offering was not marketed enough and the brand did not have a strong enough presence online.

 

Digital marketing mitigates both and helps drive accredited and everyday investors to their raise page with proper testing, optimation, and scaling.

Because here’s the thing:

 

Equity crowdfunding platforms are digitally native, which means new everyday investors that are not a part of your existing network or family, must be found online. Thus, failing to target and nurture an online audience with a closely managed digital marketing strategy is not only failing to plan, but it’s also planning to fail.

 

Accredited Investors Want to See a Strong Digital Marketing Strategy

 

The beauty of equity crowdfunding is that any campaign can still pique the interest of accredited investors and inspire them to fund you. We all know that a single large investment can take your campaign to the next level, thus it’s paramount to make your campaign as attractive as possible to them.

 

One of the best ways to do so is to show a strong digital marketing strategy that drives investor interest and audience growth. Your marketing strategy not only shows investors why you’ll succeed, but also highlights your ability to find, capture, and convert your target audience.

 
 

Digital Marketing Can Turn $1K into $1M During an Equity Crowdfunding Campaign

 

As more of the world log online to cope with the new norm and as venture capital slowly recovers, private investing is dramatically shifting

 

Equity crowdfunding is in the spotlight, giving everyday people the power to invest in potentially the next Uber or Instagram but also back the problems they’re passionate about—all while helping entrepreneurs keep their business growing and their dreams alive.

 
 

If equity crowdfunding is the door to always raising capital through and beyond this pandemic, then digital marketing is the key.

 

With its native abilities to connect people, build trust, and tell stories, digital marketing is uniquely positioned to help any start-up looking to scale, find new users and investors from around the world.

 

Thus, digital marketing is an essential part of your campaign, and it’s important to work with the right professionals who know how to create the right strategy, target the right investors, and find the right message.

 

Remember, turning on some ads and writing a few blog posts won’t cut it. Scaling your business with digital marketing takes time, constant testing, monitoring, and creativity. From experience we can’t emphasize enough that you start early in your campaign, don’t give up, and always be raising

Crowdfunding with IRAs

This blog is was written by our KorePartners at New Direction Trust Co. View the original article here

 

It would be an understatement to say the financial landscape has changed in the past decade. Businesses accept payments with Square, investors buy stocks through apps while listening to podcasts, and cryptocurrency went from geek niche to cultural phenomena overnight. Alongside these is another monumental shift: crowdfunding.

What is crowdfunding?

Crowdfunding is a type of investment in a business or venture. However, unlike angel investing or stock purchases, crowdfunding typically involves smaller sums from a large group.

There are multiple types of crowdfunding, each with a slightly different purpose:

  • Rewards-based crowdfunding: This type of crowdfunding is the most well-known, thanks to Kickstarter. In rewards-based crowdfunding, people invest in a company in exchange for a reward, typically a discounted final product or service.
  • Donation-based crowdfunding: This is charitable crowdfunding, in which people donate their money expecting nothing in return. Donation-based crowdfunding is typically used by charities looking to fund a project or to help with medical bills or recovery expenses via sites like GoFundMe.
  • Debt-based crowdfunding: This type of crowdfunding is used when a company needs a large sum of money to cover some kind of expense or acquisition. In exchange for donations, the recipient typically promises some kind of repayment to those donating.
  • Equity-based crowdfunding: In equity-based crowdfunding, investors put their money into a company in exchange for shares. This type of crowdfunding gives startups the chance to grow through funding, and investors the opportunity for a potential return on their investment.
  • Real estate crowdfunding: This type of crowdfunding involves multiple people pooling their money together to fund any kind of real estate project. Real estate crowdfunding can be as simple as buying a rental property with multiple people or funding a new building entirely.

Beyond the above-listed types, there are other types of crowdfunding that offer different returns and possibly perks for investors.

How does crowdfunding with an IRA work?

Crowdfunding with a self-directed account is surprisingly straightforward, thanks largely to the 2011 JOBS Act. Crowdfunding with a self-directed account involves only a few simple steps.

  • Verify you have the right kind of tax-advantaged account. Crowdfunding through your IRA or Solo 401k requires a self-directed IRA or Solo 401k.
  • Choose a trust company specializing in self-directed IRAs or Solo 401ks to custody the asset you’re interested in. This company will handle the details of ensuring your assets are used to crowdfund the asset of your choice.
  • Open and fund your account. This is typically done via a transfer or rollover of existing funds from an IRA or Solo 401k, or you can choose to contribute new funds subject to contribution limits.
  • Select what kind of investments you’d like to make, real estate crowdfunding or another type of crowdfunding.
  • Complete the investment process and monitor your account for performance.

If the above process sounds simple, good, it should be. The right trust company will take care of the transactions while leaving you in the driver’s seat.

Four Red Flags When Crowdfunding

Crowdfunding can make for great investment opportunities and generate excellent returns. But, like all investing, crowdfunding involves risks.

  • The company has no online footprint. If you Google the company or founders and find nothing, this is a big red flag. Any enterprise trying to raise money should have some level of awareness around their product or opportunity. And if nothing else, the founders should have some kind of presence online. If you’re unable to find any history about the opportunity or those behind it, proceed with caution and look for other opinions.
  • The opportunity guarantees returns. Some opportunities really are too good to be true. Language like “guaranteed returns” or “double your investment” and so on is a sign the company is trying to mislead you. There are few guarantees in life, and investments are far from them. While some investments, like government-backed certificates of deposit, are safer than others, you won’t find a guarantee on a crowdfunding opportunity.
  • The math is funky. This point is especially relevant when you’re dealing with real estate crowdfunding. Closely examine the numbers when looking at investment properties. If the account holder claims you’ll make a certain amount but you’re not arriving at the same number after expenses, taxes, and other costs are factored in, double check the math. You may need to move on.
  • The valuation is inflated. When you’re looking at crowdfunding a startup, pay close attention to the valuation. It’s not unheard of for companies or crowdfunding platforms to inflate the valuation of a startup to draw more investors. If a company is brand new with no backing, it’s unlikely they’re worth $600 million. If the deal feels too good to be true, it might be.

KorePartner Spotlight: Paul Karrlsson-Willis, CEO of JUSTLY

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

 

Paul Karrlsson-Willis is the CEO of JUSTLY, a registered broker-dealer designed for companies to promote their ESG profiles as the demand for socially conscious businesses continues to skyrocket. Nearly a quarter of the $400 billion investments ESG-focused private capital between 2015 and 2020 was invested last year alone. Paul has over 30 years of experience in financial services businesses and has expertise in building out a company’s global footprint.

 

We took some time to speak with Paul to learn more about himself and his firm. Here’s what he had to say. 

 

Why did you become involved in this industry?  

 

When I left school there was major unemployment in the UK so the government came up with the “youth opportunity scheme” which was an intern program at various companies which the government-funded. I was fortunate to be accepted into this program by the London Stock Exchange who placed me with a broker-dealer, Capel-Cure Myers, and never looked back.

 

What services does your company provide for RegA+ offerings? 

 

We can offer everything from front to back for Reg A+, Reg CF, and Reg. D as a result of having great partners such as KoreConX. Our true value is in our ability to work with the issuers and understand their businesses and needs. Our parent company–Ideanomics (NASDAQ: IDEX)–started no different from the issuers we support and still invests in private equity companies. It’s in our DNA.  

 

What are your unique areas of expertise? 

 

Over my 30+ career, I have continually been given various businesses, products, and groups to build or rejuvenate, many have gone on to be leaders in their space. A good example was when Fidelity hired me in the UK to build a global trading product for their retail clients base, knowing I had no experience in foreign equities and this was after 3 previous attempts had failed. We were up and running in 3 months and when they asked me to come to the US to do the same, the UK business was profitable. At Fidelity Capital Markets (US) we went from being only able to do everything in USD, to being fully multi-currency, able to trade in over 47 countries in real-time. As a result, Fidelity retail was the first retail US broker-dealer to offer global trading in real-time. I’ve been very fortunate to have worked my way up through the business and therefore know how things get from A to Z and the issues you will come across.  I love to learn; I hate being the smartest person in the room, which is why I try to make sure I have a team that is knowledgeable and feels empowered. I’m very passionate and treat everything I build as part of me, as I believe it reflects on me personally.

 

What excites you about this industry? 

 

Up until now, not very much. It’s been a job I have always put more than 100% into to support my wonderful family. JUSTLY has given me the ability to build something that can genuinely make an impact and help others. Every day, I think about making a difference and not feeding the machine or massaging someone’s ego. Don’t get me wrong, my job is to generate revenue and make JUSTLY profitable, but by making that difference, we will as they go hand-in-hand.

 

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

 

KoreConX has the complete platform, amazing expertise and therefore enables JUSTLY to focus on making an IMPACT! True success is never achieved on your own; you need a team and great partners. There is no better partner in this space than KoreConX.

 

Things to Consider When Choosing Your Equity Crowdfunding Portal

Written by KorePartner Jason Fishman at DNA. See the original post here.

 

Before the new SEC regulations, about 20% of Reg CF campaigns hit the seven-figure level. In other words, most campaigns simply do not achieve their full cap.

They’re are many reasons why campaigns don’t hit the max, and many would sum it up to lack of marketing and business development.

However, many people don’t consider the portal themselves. Sometimes a portal and issuer don’t fit, and I’ve seen campaigns that were underperforming on one portal, achieve high success on another.

 

Thus, picking the right portal for your campaign is an extremely important component of your raise. While DNA can not advise you which portal will best suit your needs, we can give you some tips and our top five things to consider when choosing your equity crowdfunding portal.

 

So, we should explore anything you can do to set yourself up for a win and within the desired period. This is a critical component of your round.

Investor Audience Size

One benefit of using a filing with a portal is to leverage their existing investor audience. Typically as campaigns raise more, the portal’s audience takes more notice, and are more are likely to invest.

From firsthand experience, I can say that as portal technology and user experience improves, the larger these investor communities are growing. Pick a portal with a large, engaged, and active audience. Don’t forget to ask the portal how they leverage their audience during the course of your campaign for more success.

Vertical Focuses

As equity crowdfunding grows in popularity, more and more portals are emerging, dedicated to a specific focus. For example, Bioverge, is specifically tailored to healthcare startups, while Waterworks, is geared towards technologies advancing water solutions.

Not only do these platforms attract a very specific and engaged industry audience in that industry, but they typically have an experienced team that has a strong portfolio of niche-specific deals, and understands the nuances around their specific area of focus. If a platform can show a list of campaigns they have done successfully in that industry and have a high volume of investors attached to it, they will be valuable resources for an issuer.

A niche-specific could be a great option for your campaign, however take into consideration many are still in development and growing compared to the more-established and well known portals.

Success Rates

The data you need is out there.

I highly recommend starting at KingsCrowd, as most of their information is available for free or a very light subscription fee. On KingsCrowd you can do due diligence on each portal and their success rates.

You can also look at their analyst reports to see top deals, deals for an industry, deals per portal, and how much they have raised. Set a benchmark for yourself, and note which campaigns and platforms hit your benchmarks.

You may find that the volume of campaigns these portals have taken on has dropped in the past months, especially when you are looking at entry-level or mid-tier portals. You may find that it has skyrocketed. How many campaigns are below or above a milestone level may also stand out to you.

The numbers don’t lie. Take in as much data as you can to see how successful campaigns are currently doing on their platform.

Customer Service

Equity crowdfunding campaigns have a lot of ups and downs, and when your campaign isn’t performing you have to rely on your portals team to support and provide white-glove customer service..

You can get a sense of what the experience will be during your meet and greet. I recommend asking the following questions and paying attention to the working experience:

  • Who will be your day-to-day point of contact is?

  • What does the working process together look like during the pre-stages of your live campaign?

  • How do you optimize when things are not going according to plan?

  • Is the portal going to disappear and be afraid to talk to you?

  • Are they going to come to the table with constructive recommendations?

  • Is there anything they can do to go the extra mile among promotions to their existing audience?

  • When the campaign is going according to plan and ramping up at speed, how can you scale and get there quicker?

  • What will their partnership with you look like at those stages?

 

I would also recommend speaking to three or more portals, and look to intuition about who is committed to your deal and confident in the success of it among their investor audience on their platform.

Added Value

This is a bit of a controversial topic because the SEC requires portals to treat each issuer the same. But they have different benchmarks that once you hit the increments of capital funding, they promote you to their email audience.

But if any groups show so much confidence in your deal that they will bring more to the table, I would note that in the review process. Some of these things include:

  • Private investor groups

  • Special placement on the site

  • Additional promotions

  • Introductions to different accelerators or different VC groups that back the deal beforehand

  • Introductions to various types of angel investors, strategic partners, industry experts, and more

 

However, I would not shape my selection merely on this factor, but be cognizant of it. Crowdfunding is essentially a team sport that occurs within a small window of time. The more resources you bring to the table, the better.

So, if there is any portal giving you additional value beyond their standard package because of how they envision it equating to your success, it could be a factor in your decision-making process.

Pick Your Portal Carefully!

Listing your deal will not ensure ANY results.

Setting up and managing a successful campaign takes careful planning and forethought, especially when it comes to picking your portal. Having a strong understanding of the top portals available is going to be an educational and helpful process across the board.

Here are some of the top portals available for you to consider:

 

 

You may get tips from one portal that you apply to another, and it is important to become part of the entire equity crowdfunding ecosystem rather than selecting a partner and move on. These relationships continue, so I encourage you to map out what a relationship could look like with each portal, and nurture it.

Meet the KorePartners: Adrian Alvarez, CEO and Co-Founder of InvestReady

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

For the last seven years, Adrian Alvarez has been involved in the securities space, coming to know it like the back of his hand. He has received both his law degree and a Master’s in Business Administration.

Before InvestReady, Adrian Alvarez was the Assistant Director at the University of Miami’s launchpad program, consulting early-stage businesses and entrepreneurs. During this time, he grew very attuned to crowdfunding as became incorporated into the JOBS Act. As crowdfunding platforms emerged, Adrian noticed both potential problems and opportunities in the space. Being an attorney, he felt like he could solve some of these challenges, which lead to InvestReady.

As investments have become increasingly digitals, issuers needed a verification tool to match. With InvestReady, investors can securely and confidentially verify their identity so they can invest in crowdfunding offerings. Issuers and funding platforms are empowered by a tool that makes this processes secure and seamless. The result is SEC-compliant crowdfunding investors.

Ensuring investors meet requirements as crowdfunding continues to evolve. Just this year, the SEC increased investment limits for Regulation A+ and Regulation CF, allowing even more investors to participate in each offering. Plus, as RegCF removes accredited investor limits, ensuring these investors meet the requirements of accredited investors is essential.

Adrian has felt that working with KoreConX has been a great partnership, as it helps to bridge to other service providers like broker-dealers.

Meet the KorePartners: Eric Fischgrund of FischTank PR

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

 

For nearly 15 years, Eric Fischgrund has been involved in the communications and marketing industry. He says: “ I have a degree in Communications Journalism and have always been a writer at heart, so public relations was a natural career match for me.” Continuing to learn every day from his clients has always enticed him to continue in his career path, as “constantly learning client subject matter and determining how to deliver their message to the market, provides me with an ongoing (and free!) education.” He prides himself on his ability to understand his clients’ businesses and apply a unique skill set to achieve results.

 

Passionate about both the public relations industry and investment space, Eric is excited about the future and the opportunities it will bring for both companies and investors. He says: “Entrepreneurs need capital and main street investors deserve high growth opportunities, so this is two birds and one stone. I also enjoy working in emerging industries, such as sustainability, renewables, cleantech, IIoT and IoT, healthcare tech, cannabis, and others. So many innovators in these sectors are utilizing equity crowdfunding to grow their business.” 

 

Through the introduction of RegA+, companies have access to a fundraising route that is favorable to small startups as well and allows a wider pool of investors access to high-growth investment opportunities. Eric says: “Historically, it’s taken significant capital, legal costs, marketing and communications requirements, and more to raise capital. Similarly, the venture capitalists, private equity firms and individual high net worth investors are the ones presented with the highest growth investment opportunities.” RegA+ levels the playing field, eliminating these problems. “It enables entrepreneurs to raise capital online, grow their brand simultaneously,” while allowing main street investors to make investments for as low as a few hundred or thousand dollars. 

 

Despite the incredible opportunity RegA+ presents, Eric feels that there is much misinformation circulating about how to raise capital. He says: “Professionals that don’t understand the nuances of the regulation can too easily take advantage of entrepreneurs, innovators, and investors, which hurts all of us. This is why I’m encouraged by the KoreConX platform bringing the experts together.” Establishing a partnership with KoreConX was a perfect fit, as FischTank works to partner with strong businesses and companies. “We also strive to make the world a better place, and many of the innovators and companies we work with are developing technologies and services that do just that,” Eric said.

 

For companies that are looking to raise capital, working with a PR agency is important for their success. When potential investors are looking to learn more about a company they have an interest in investing in, one of the first things they will do is Google it. “If there is plenty of editorial search results, especially on the first page, and constant news, the company is going to appear credible and appealing,” Eric said. Additionally, effective PR can also be utilized from a marketing perspective. “Press coverage not only attracts attention but it can be used as sales/marketing tools for investor outreach and relations functions.” At FischTank, they provide a wide variety of public relations and marketing services to their clients. They take care of media and press coverage, email marketing, social media, and content writing so that you can raise capital effectively and successfully. 

 

KorePartner Spotlight: Bill Humphrey, CEO and Co-Founder of New Direction Trust Company

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

 

Bill Humphrey has over 20 years of experience as a CPA, focusing his career on income tax, auditing, tax-related real estate issues, and forensic accounting. In 2003, Bill and Catherine Wynne began New Direction IRA to offer a service-based solution for self-directed investors to diversify their retirement portfolios. Fifteen years later, New Direction IRA became New Direction Trust Company.

 

Under traditional securities firms, Bill noticed that investors could only make investments on Wall Street but didn’t agree with that idea. Instead, he believed that people should have the opportunity to invest in something they understand, they just needed a custodian. Bill has a passion for education and empowering his clients to invest in what they want. He is driven to make self-direction intuitive, modern, and digitally powered.

 

At New Direction Trust Company, the firm acts as a custodian for IRAs, HSAs, and 401K accounts. These types of plans are uniquely suited for investments; there is more money in an IRA than in the pockets of the account holders. Through Regulation A+, investors can use IRAs to make investments in private offerings, creating more opportunities for people to invest. Such opportunities allow investments in companies that may evolve into large companies. Traditionally, these opportunities were only available to accredited investors, leaving the retail investors out of the significant return of an IPO.

 

The firm places a large emphasis on automating the processes of making these investments. Historically, paperwork has been slow and unattractive to investors. Instead, the experience should be similar to investing on Wall Street. This is one of the reasons a partnership with KoreConX makes sense; both companies are aimed at many of the same things. KoreConX and New Direction Trust Company are committed to making private investment transact smoothly and through automated processes.

KorePartner Spotlight: Scott Allen, CEO of InvestAcq

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

Scott Allen is the CEO of InvestAcq, a firm of investor acquisition specialists. For companies looking to raise capital in the private markets, InvestAcq identifies the best potential investors for RegA+, RegCF, and RegD 506(c) raises to effectively target investors and attract them to the offering. The firm’s specialty is working with companies in the medical industry, such as biotech, medtech, pharma, and life sciences, or those who intend to use RegA+. 

We took some time to speak with Scott to learn more about himself and his firm. Here’s what he had to say. 

 

Q: Why did you become involved in this industry?

 

A: I’ve worked in and with startups and entrepreneurs most of my career. I believe in entrepreneurship—it’s the lifeblood of our economy. And I know startups need access to capital. I’ve seen the downsides of the whole cycle: insufficient capital, insurmountable debt, VCs taking control of companies, spectacular IPOs that went bust within a year.

So when my long-time friend, client, and collaborator Stephen Brock, founder of Medical Funding Professionals, told me about Regulation A+ and his vision for bringing it to the medical innovation sector, I was in. It addresses perhaps the biggest need, in probably the highest impact industry. What could be better than helping put money to good use saving lives and improving quality of life?

 

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

 

A: We are investor acquisition specialists. We use the latest marketing techniques to help companies find the best potential investors for your offering, effectively tell them your story, and make it as easy as possible for them to invest.

Our company offers a complete multi-channel integrated marketing solution, including marketing strategy, web design, email marketing, content marketing, social media, digital advertising, public relations, and investor relations. We particularly focus on the idea of “Sell the story, not the stock” — we see strong brand marketing as the foundation of everything else. Research shows that strong brands achieve a higher return on ad spend and ultimately higher market caps. In a Regulation A+ offering, telling the company’s story well attracts the investors you want—impact investors who believe in your vision and will become advocates for your business.

 

Q: What are your unique areas of expertise?

 

A: One thing that’s unique to our firm is our experience in the healthcare sector. In addition to the SEC and other regulatory compliance issues, we also have to deal with FDA regulations and guidelines. While compliance is still ultimately up to the issuer and their attorneys, having a communications team that’s experienced in those issues reduces a lot of back-and-forths, and really speeds up the process. We even occasionally catch things that the attorneys miss, so having another set of experienced eyes on that content adds an extra layer of protection.

Personally, I have over 25 years of experience in digital marketing and several more in traditional marketing before that. While I have a broad range of experience, my unique area of expertise is social media, and more broadly, virtual business relationships. I got into social media in 2002, before it was even called social media. I co-authored the first book on social media marketing, The Virtual Handshake: Opening Doors and Closing Deals Online, and have trained or consulted with hundreds of clients over the past 19 years.

 

Q: What excites you about this industry?

 

A: Five things:

1. Getting capital in the hands of people with products that can impact people’s lives and change the world. They can only have that big impact if they can get the money they need to complete their research and development, go to market, and scale.

2. Helping those innovators stay in control of their company so they can execute their vision.

3. Making sure those founders, early investors, and early hires reap fair rewards for their vision and efforts. To me, late money should never be as valuable as early sweat.

4. Helping CEOs stay focused on executing their business plan. With traditional angel / VC / private equity, the CEO basically has to take 6 months to a year away from their company to focus on fundraising. “Run your raise, or run your company. You can’t do both.” A typical VC round requires 100+ investor meetings, on average, plus countless hours of due diligence, emails, and other support. With Reg A+, much of the activity is shifted to an investor acquisition firm like us. And much of the time the CEO spends is leveraged — one webinar to hundreds of potential investors, one video that lasts for months and every potential investor will see — not hundreds of one-on-one meetings.

5. Reg A+ is good for investors. GREAT for investors. We believe everyone should be able to invest in early-stage and growth-stage companies. Until recently, most people could only invest in companies listed on the public stock exchanges. Main Street investors couldn’t get in on IPOs. Now nearly any investor can get in on innovative companies before they go public. It’s your money—you should be able to invest it where and how you want—have an impact on the world with how you choose to invest.

 

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

 

A: KoreConX is the industry leader for private market fintech. It’s been years in development and has more real-world testing than any other solution.

Also, as a marketer, I love the fact that KoreConX allows us to control the investor relationship from start to finish. We have visibility into every step of the process that you don’t get on the equity crowdfunding platforms.

Most of all, though, KoreConX has been an enthusiastically proactive partner; joining us for sales calls, building custom branded demos for our prospects, promoting us through the partner program, and even working with us to put on a KoreSummit focused on our industry niche.

 

Watch Scott’s KoreSummit panel on Investor Acquisition in Medtech and Life Sciences here.

 

KorePartner Spotlight: Stephen Brock, CEO of Medical Funding Professionals

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

 

There are two things that Stephen Brock is incredibly passionate about in the business world; gaining access to capital for innovative companies to make their products for the benefit of patients in the world and making sure that those company’s founders, early employees, and investors retain control. If that seems like a tough challenge, you have not met Stephen. What he said in an interview with Yahoo News was that “if we truly want to support innovation, let’s make sure the innovators see the just rewards for their efforts.”

 

Stephen does this by introducing companies that may not have heard of the tremendous amount of opportunity there is in the healthcare field for innovative companies using the Regulation A+ exemption under the JOBS Act. Now, companies can raise up to $75 million per year outside of the usual avenue of bank and accredited investors through Reg A+. While those in the private capital space understand this opportunity, Stephen brought something shocking to light, “80% of the people I talk to have never heard of Reg A+. And of those that have, only one or two have actually known anything about it. So, it’s on us to educate them, and that’s what we do—show them exactly what it could do for their company.”

 

This change is huge for those in the fields that require high costs to get their products to market. This, in combination with the stricter lending from the usual channels during the pandemic, makes what Stephen and his company, Medical Funding Professionals, are doing so important. They are helping innovators in the medical field bring new and life-changing technology to patients while retaining control for their technology.

 

As a registered investment advisor with over 20 years of experience in securities and finance, Stephen knows the field and is excited about the partnership with KoreConX, which has also been educating people on this powerful new financial tool.

KorePartner Spotlight: Steve Distante, Founder and Chairman of Vanderbilt Financial Group

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

 

Steve Distante is an entrepreneur and has been his entire life. As a graduate of St. Johns University with a degree in accounting and finance, he intimately knows their struggles and success. Before starting his own business, Steve ran an Office of Supervisory Jurisdiction (OSJ), where he learned the experience from the regulatory side. It was a great use of his degree and his intrinsic skill for planning. 

 

Steve’s journey began when his father told him to look at financial services as a career path. What he found was the rewarding business of empowering entrepreneurs to create impactful products and services for good. That is at the core of the business he founded and is the CEO, Vanderbilt Financial Group, “an investment firm disrupting traditional finance by focusing on socially and environmentally responsible, ethical, and impactful investments.” With Steve at the helm, the ship is set up to ensure that entrepreneurs do not have to go through the same struggles he did as he grew his business. 

 

As if it was not already clear that helping entrepreneurs is a driving factor in his life, Steve is also the CDO for Impact U, an educational community for students, investors, and financial advisors on impact investing. He has made two documentary films for it and is currently writing a book about Impact Investing. In addition, Steve is a former president of the Entrepreneurs’ Organization and served as the UN Ambassador for EO for nearly three years. He is very passionate about helping entrepreneurs building impactful companies with missions to better the world. 

 

Steve is thrilled about the partnership with KoreConX to streamline business processes so he can continue his excellent work for the community of entrepreneurs around the world. 

KorePartner Spotlight: Jake Gallagher, Director of Business Development at North Capital

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

 

Jake Gallagher has always been interested in business. He wanted to know how they worked and why some were sustainable while others were not. On top of that, the private market for company offerings has presented challenges to businesses entirely separate from those faced by public offerings.

 

This has no doubt been part of the reason he works with North Capital Private Securities as the Director, Business Development. There, he works directly with issuers and helps with transactional compliance, but beyond that is the use of RegTech to streamline broker-dealer processes like KYC (Know Your Client) and accredited investor verification. 

 

The difference that makes North Capital Private Securities and Jake unique is their work in both primary issuance and the secondary market for private market shares. Jake is well versed in both, having worked with many sectors and exemptions including, Reg A and D, VC, and hedge funds. In addition, PPEX, the ATS platform that North Capital Private Securities operates, makes trading on the secondary market easier for investors and provides options for liquidity in the private capital market.

 

The most exciting thing about the current climate of the private sector is that these options have provided for extreme growth, as more investors are ready and able to participate in the offerings of private companies. While it is a small ecosystem, the changes that have come in the last few years for who can participate in private market offerings are fueling the growth of many companies that would have otherwise been on the public market before they were ready. 

 

Jake is thrilled about the partnership with KoreConX. He anticipates they will work together on primary offerings and secondary trading, bringing together a significant experience that can only benefit all involved. 

KorePartner Spotlight: Dean DeLisle, Founder and CEO of Forward Progress

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

Dean DeLisle has been raising capital for the past 35 years both for himself and for other companies. He has made the transition from roadshows and bound pitch decks to sophisticated online marketing funnels. Dean’s experience has resulted in a unique approach to Investor Acquisition Marketing with his firm Forward Progress.

“People know they want to invest but need to understand more, so we place a high priority on education throughout our Investor Acquisition campaigns,” says Dean. Forward Progress helps clients build the necessary digital footprint to educate prospective investors in Regulation CF, Regulation A+, and Regulation D offerings. The building of the footprint requires many of the same strategic elements you would see in a revenue-focused campaign–content, thought leadership, advertising, and marketing automation.

The Forward Progress team stays at the forefront of digital marketing trends by participating as speakers on capital raising, marketing automation, and marketing strategy. The company boasts certifications with leading platforms like Hubspot CRM, Facebook Ads, Google Analytics, and more to make sure the issuers they support are at the bleeding edge.

The partnership with KoreConX makes sense for Dean, as both companies are dedicated to investor education and businesses alike. It fits with the DNA of both companies.

KorePartner Spotlight: Douglas Ruark, Founder and President of Regulation D Resources

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

 

Douglas Ruark, the Founder and President of Regulation D Resources, has always been fascinated by the mechanisms and document structure used to syndicate capital. Starting his career nearly 30 years ago in corporate finance when he co-founded Heritage Finance, Inc. in 1992. Seven years later, he served as a primary founder of Regulation D Resources. The firm works primarily within the real estate, energy, tech, and manufacturing industries.

 

With Regulation D Resources, Ruark uses his expertise to help raise money for those industries through the Reg D and Reg A+ exemptions. This experience makes a difference when crafting SEC-required disclosures, evaluating proper exposure on the market, and analyzing clients’ business positions.

 

The fun part for Ruark is the deals with entrepreneurs that have developed technology that can have a significant impact and be a game-changer. He said: “I love seeing what entrepreneurs have developed.” That is why his company focuses on Reg D and Reg A+, helping companies structure their securities offering, and drafting offering documents. The company is determined to help entrepreneurs cross the line into the market so they can grow and succeed.

 

What Ruark enjoys about his partnership with KoreConX is the responsiveness of the staff. He said: “Oscar immediately reached out and set up a call to introduce services.” KoreConX has the same drive and vision that Ruark sees in other entrepreneurs. Plus, KoreConX’s application of tech to streamline compliance aligns with the goal he set out when developing Regulation D Resources’ Investor Portal Compliance Management application.

Reg A and Reg CF Issuers: Time to Count Your Shareholders!

Reg A and Reg CF 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.

Meet the KorePartners: Louis Bevilacqua of Bevilacqua PLLC

With the recent launch of the KoreConX all-in-one RegA+ platform, KoreConX is happy to feature the partners that contribute to the ecosystem. 

 

For the past 25 years, Louis Bevilacqua has served as a corporate and securities lawyer. After spending the majority of his time at large, international law firms, Louis discovered his passion for “representing entrepreneurs and helping them accomplish their goals.” Noticing that it was often more difficult to help small or microcap companies, Louis began his firm to eliminate the prohibitive costs typically associated with large law firms. 

 

Utilizing technology to allow lawyers to work virtually, Bevilacqua’s savings are passed onto its clients. Now, small companies can access the same top-tier resources that previously only large ones may have been able to afford. “Since most of our attorneys, like me, have decades of experience at big firms, we know how deals are supposed to be done and can provide excellent representation at lower price points,” Louis said. 

 

Not only is Bevilacqua’s team comprised of experienced lawyers, but many are also entrepreneurs. Understanding first-hand the challenges that small companies face, they are experienced problem solvers that are both flexible and proactive. Also, Louis says that “we also have a vast network of contacts with investors, broker-dealers, transfer agents, Edgar printers, audit firms and other service providers in the industry and can easily make the right referrals to anyone that the company needs.”

 

Through the JOBS Act and RegA+, investors have access to investments that they may not have had previously. Since the SEC requires substantial disclosure for RegA+ offerings, investors are provided more detailed disclosures than other private offerings. Companies also benefit from the lower costs associated with RegA+. Since it is more flexible and cheaper than a traditional IPO, the cost is not prohibitive. One of the primary reasons that Louis supports the regulations is that it “helps facilitate the raising of capital for smaller issuers, who always need capital and do not have as many avenues to obtain it.”

 

However, Louis also thinks that the resale market could be improved. Currently, companies looking to allow their shares to be traded “must identify a market maker willing to file a 211 application with FINRA”, which can be a difficult process. Making this process easier will allow more people to trade the shares purchased through a RegA+ offering. Additionally, for investors to deposit the shares they’ve purchased into a brokerage account, they typically must incur the fees associated, as the brokerage is generally required to perform their due diligence. 

 

For companies looking to raise money through RegA+, Bevilacqua provides clients with the legal services they need for a successful offering. Whether they need help “testing the waters,” filing the offering statement, drafting shareholder agreements, etc., Louis and his team provide expert guidance. Also, “ having a platform like KoreConX that brings all the components necessary to accomplish a Reg A offering in one easy to use platform is a fantastic tool to help us help entrepreneurs raise capital.”