Online Capital Formation; Beyond Crowdfunding


Oscar Jofre

CEO and Co-Founder


Oscar Jofre

CEO and Co-Founder

Oscar is currently one of the Top 10 Global Thought Leaders in Equity Crowdfunding, a Top 5 Fintech Influencer, Top 10 Blockchain and a Top 50 InsureTech. He has published an eBook that has been downloaded in over 20 countries, and been distributed by partners worldwide. Oscar is a featured speaker on Fintech, regulated, equity crowdfunding, compliance, shareholder management, investor relations, and transparency in the USA, Australia, UK, Germany, France, Netherlands, Canada, Singapore, Indonesia and China. He speaks to audiences covering alternative finance, RegTech, insurance, banking, legal, and crowdfunding. Oscar also advises the world’s leading research, accounting, law firms and insurance companies on the impact Fintech, RegTech, LegalTech, InsurTech and OrgTech is having in their business.

Rafael Gonçalves

Marketing and Communications


Rafael Gonçalves

Marketing and Communications

Sara Hanks


CrowdCheck Law

Sara Hanks


Sara Hanks, CEO of CrowdCheck and Managing Partner or CrowdCheck Law, is an attorney with over 30 years of experience in the corporate and securities field. CrowdCheck and CrowdCheck Law together provide a wide range of legal, compliance and diligence services for companies and intermediaries engaged in online capital formation, with a focus on offerings made under Regulations A, CF, D and S, whether of traditional or digitized securities. Sara’s prior position was General Counsel of the bipartisan Congressional Oversight Panel, the overseer of the Troubled Asset Relief Program (TARP). Prior to that, Sara spent many years as a partner of Clifford Chance, one of the world’s largest law firms. While at Clifford Chance, she advised on capital markets transactions and corporate matters for companies throughout the world. Sara began her career with the London law firm Norton Rose. She later joined the Securities and Exchange Commission and as Chief of the Office of International Corporate Finance led the team drafting regulations that put into place a new generation of rules governing the capital-raising process. Sara received her law degree from Oxford University and is a member of the New York and DC bars and a Solicitor of the Supreme Court of England and Wales. She serves on the SEC’s Small Business Capital Formation Advisory Committee. She holds a Series 65 securities license as a registered investment advisor. Sara is an aunt, Army wife, skier, cyclist, gardener and animal lover.

Douglas Ruark


Regulation D Resources

Douglas Ruark


Douglas Ruark is Senior Principal for the Denver, Colorado office of Regulation D Resources, Founder and President of Regulation D Resources Enterprises, Inc. Mr. Ruark began his career in corporate finance in 1992 with Heritage Financial, Inc. a company he co-founded that specialized in sourcing commercial real estate and corporate debt financing for commercial borrowers. In 1994 Heritage Financial was merged with InvestCap Partners, a Washington DC based corporate investment banking firm. Mr. Ruark assumed a partnership position in InvestCap Partners and was tasked with managing several areas of corporate finance for the company including real estate syndications, transactional risk assessment, Federal and State securities compliance, and investor relations. In 1999 Mr. Ruark served as a primary founder of Regulation D Resources. The Company was formed for the purpose of providing private placement offering advisory services to corporate clients. Regulation D Resources currently provides SEC Regulation D exempt and Regulation A+ exempt securities offering preparation and execution services. The Company also provides custom software solutions for management of investment compliance processes. Regulation D Resources has provided advisory services for over 5,000 securities offerings since 1999. In 2015 Mr. Ruark was instrumental in leading the team responsible for development of Regulation D Resources Investor Portal Compliance Management application. The web application provides for public promotion of Regulation D 506(c) and Regulation A+ exempt securities offerings and handles all compliance, subscription, and investor verification processes. The critically acclaimed software is now on build v2.3 and has been used to manage compliance processes for hundreds of private placement securities offerings. Mr. Ruark holds a degree in Economics from Elon University in North Carolina. He is regularly scheduled as an expert speaker at various venture capital, real estate and corporate finance conferences with regards to private placement offerings and the syndication of investment capital.

Rafael Gonçalves 00:45

Good afternoon, everybody. Good morning. Good evening, depending on where you’re listening to us from. I do hope you have started listening to us since the beginning because Oscar was given great tips on squatting and on losing weight. That was awesome. But today, we’re here to talk about online capital formation. We are here with two great partners, such as Sara and Sara Hanks, please, would you like to introduce yourself to our audience?


Sara Hanks 01:16

Sure. I’m Sara Hanks, I’m CEO of Crowd Check, Inc. and managing partner of Crowd Check Law. And together the two of them provide a wide range of legal compliance, due diligence and filing services for online capital formation in general, especially all the exempt offerings.


Rafael Gonçalves 01:41

That’s nice. Thank you for coming. It will be very valuable to have you here. And we also have Douglas Ruark, Doug, please, if you’d like to introduce yourself and your company to our audience.


Douglas Ruark 01:52

Absolutely. My name is Doug Ruark. I’m president of Regulation D resources. We are a 24-year-old firm that specializes in SEC filing, preparation, and general offering preparation. And we also do investor raise portal builds. And we do specialize in Reg D Reg CF and Reg A plus exempt offerings and pleasure to be here.


Rafael Gonçalves 02:17

It’s great, thank you. We’re very excited to have you both here. And of course, we could not have a webinar without our special guests. Oscar, I would love to hear about you about your company. And could you please explain our ride charter idea and what you’re doing here? And what is our proposition here today?


Oscar Jofre 02:39

Great. Unfortunately, we haven’t been around as long as Doug has. I feel like you have a full-grown adult there. 24 years congrats. So I’m one of the co-founders of KoreConX. And glad that everybody’s here, obviously, today’s discussion, we’re ending the year 2022 in a somewhat of a chaotic state. And because of some of the activities of individuals in the marketplace that some of us could have foreseen if you ever listened to Sara, I really encourage people to please pay attention to the words, she says but we are where we are. Chaos is a good start. Because chaos creates a bit of clarity. And that clarity is where we get to see the companies that are compliant. And obviously, today’s discussion is around the Jobs Act, it’s celebrating its 10th year, we have we are having a great ride, and everything is really maturing. And I think that’s part of the discussion today is that we’re maturing. And when you hear Sarah and Doug go through that discussion today, I think we need to consider as well where it all started. And I think sometimes we tend to forget or there are those who would never even have this opportunity. So prior to online capital raising, I think people need to be reminded how capital was raised. Those days, you would actually go out and print physical business cards and physical presentations and spend lots of dollars doing it each time. And you would go to these events and pay 1000s of dollars to go and sit at a table when investors or potential investors would come by your booth to learn about your company or you would attend events to meet potential investors. We call those face-to-face events. And basically, it was who you knew, or what you knew to be able to find investment in your company. Those days were very difficult. Why? Because these events would only allow an X number of companies, depending on who pays the most. And then there was a limited audience meaning it was only the venture capital or maybe some high net-worth individuals that would come to them. But the vast majority, about 35 to 40% of them are intermediaries meaning lawyers, auditors and everybody else in between who could be the buffer for your money. So imagine all that capital you spent, and you need to be reminded of this. And whether it was an angel group or an angel group that brought you, angels, they still exist, these models still exist, and they’re evolving. But you need to be reminded of how capital was raised prior to the Jobs Act being introduced. And this has nothing to do with the compliance element that’s just getting you to the door to the door. And there were limited activities you could do about it, you would, and literally, you would go from one event to the other one meeting to the other, changing the power deck to reflect the information they provided. And then you’d go back to the printer and reprint all over again, and maybe you were fortunate enough, you were able to get a bank loan. And if you were Bravo, you know, how you got a good credit rating. This doesn’t necessarily mean any kudos on the other end. But that’s great, you’re able to do that. And then if you can get government grants, that’s fantastic. You can couple them all together, but the vast majority of individuals have been raising capital in this manner. So what happened in 2012? Well, the President of the United States, Mr. Barack Obama signed into law the Jobs Act, and the jobs act transformed that it allowed people to be able to invest online. And today’s discussion is going to take you through the evolution of that date, to where we are going in 2023. But it’s important to keep that in the back of your mind, we have always been raising money. We have always been raising money by gathering the herd, and talking to an audience, whether you physically went there by driving, flying, or tracking, however you got there, you’ve been doing that the internet just allowed you to go there faster. But it doesn’t change the fundamental model, you still need a power deck, a presentation deck, but now you don’t need to print it, you still need to be compliant, and you need to be everywhere. That’s what this discussion today. So enjoy your session today. Sarah Doug Rafael, it’s going to be a great one. Looking forward to it.


Rafael Gonçalves 07:00

Thank you, Oscar. Thank you, it was great having your introduction. So we can all remember how it all started. While we used to do things. We used to print material and business cards and presentations and everything. And now we can do it online. Right? We can do it online. We have the whole world ahead of us. And the Jobs Act has really changed the way we start. We help startups rate growth. But I would like to ask you guys, Sara, Doug, if what you guys can say about the SEC regulations, how they progressed. You had an expectation about 10 years ago, regarding to the democratization of access to capital and the entry of non-accredited investors in the capital market. Had the Jobs Act regulations progressed, as you expected, I believe it can start with Sara.


Sara Hanks 07:57

Yeah, I say in some ways, they have progressed, as expected are in that, you know, we thought this would be a way that early-stage companies could raise funds from everybody, including their fans and their friends and their family. But the interesting thing is that this, this market has gone in some very interesting directions that we really wouldn’t have expected, including the securitization of racehorses, sneakers, diamonds, and everything else. I mean, the Jobs Act was supposed to provide the ability for companies to raise funds to hire people and create jobs. Companies that wouldn’t have access, you know, non-Silicon Valley companies that don’t really have access to the Silicon Valley funding resources. But this is the great thing about the American entrepreneurial mindset is, once the rules were in place, the markets went in some very interesting directions. So we got you to know, we got the electric cars, we got the beverages, we got the, you know, neighborhood restaurants, but then we also got the securitization of hard assets, like racehorses, sneakers, and diamonds, and the securitization of soft assets, like music royalties, and I don’t think any of us were expecting that. I don’t know about you Doug. But I that was a surprise to me when we were like, oh, yeah, okay. Yeah, you could do that, couldn’t you?


Douglas Ruark 09:47

Yeah, I mean, it was interesting watching companies like rally road come out where you could buy your fractional interest essentially, and participate in a 65 classic Mustang. And they were using these types of programs. I think what’s interesting is, and I know Sara had these conversations back in the day, watching the internet progress, and I’m talking, you know, oh two through, you know, 2010, 2011, all the way up to the Jobs Act, and seeing the internet develop, seeing social media develop, and then not being able to really access that. I mean, when you think back, Reg A was the old Reg A, very cumbersome to use, there was no Reg CF, there was no 506 C Reg D. And so ultimately, you’d have, most people were going into the old school, traditional Reg D, private placements, which you couldn’t generally solicit. And so then you’re having these conversations with clients where it’s like, well, now I’ve got all these followers on my Facebook account, and I’ve got all this customer base, I’d like to access and you’re telling me I can’t access them? I can’t put something out on my corporate website saying we’re raising money. No. And so I think ultimately, you know, in a way, it was almost like these regulations were, you know, seven, eight years, a little late, in a way. I mean, kudos they’re here now. But I think ultimately, helping companies aggregate capital and raise funding is good, all the way around. I mean, it’s good for the economy, it creates jobs, and it creates taxable revenue. And when you looked at the pathways that were available to a private company, I mean, prior to the Jobs Act, and prior to the modernization of Reg A, it was just Reg D, for the most part. And that was locked down to being an old-school traditional private placement that you couldn’t generally solicit. So I’ve, yeah, I think ultimately, it has progressed, I think, part of what I’ve seen too is that with the SEC, taking the Reg A limit up to 75 million on tier two, and then with CF, going to 5 million. And also with this, with that change, or the 5 million opening the door to FINRA broker-dealers serving as intermediaries, I think what we’re seeing is the SEC has gotten comfortable with the fact that, hey, we can allow this. And there’s a framework that can be used, and it can work. And so I think, yes, I think we are starting to see things. But that to Sarah’s point, there are some abuses here on some of these offerings that are, you know, pretty amazing. Like you said, Sara investing for actually in a racehorse. So that’s, that’s kind of fun to see what entrepreneurs are coming up with.


Sara Hanks 12:18

The other thing to build on what you were saying, I mean, that the, you know, the whole use of the internet, you know, we thought, or at least I thought 10 years ago, that there would be like internet presentations and the like, this was pre Tik Tok. And now we are seeing Facebook and even more so Tik Tok being used as a method of raising, raising capital. So you’ve got, you know, the stupid, the stupid dances and the makeup tips, and the securities tips. And some of this is not good. I mean, some of this, when you think of the channels that were being used by some of the people to promote crypto, and I see in my Twitter feed all the time, I see things where people are trying to convince me that so and so is a master at investing in crypto in general. And I should follow them for tips on like, yeah, that’s not going to happen. But seeing all of the various different types of platforms being used for advertising securities, I know that some of my old friends and you know, I am no spring chicken, I’ve been around a long time. People older than me are going, Oh, my God, this is terrible. They absolutely hate the idea of securities being advertised. And, yeah, but that’s just the way it worked out.


Douglas Ruark 13:55

Yeah, I think the other thing, Rafael, too, is one of the other things that I’ve seen that I just think is impressive is the technology that’s backstopping these offerings, KoreConX, you know, bringing in the end to end subscription processing technology. All of that automatically feeds into a cap table management solution. Because, you know, a lot of times when you start talking to people about raising money, and they start thinking about the prospect of having hundreds, if not 1000s, of investor shareholders on their cap table, the very first question they ask is, is how am I going to manage all these people? And who’s managing that information? So I think that’s the other thing is, you know, the ability to hit an invest button on an e-raise portal and three minutes later, move on with your day and you’ve bought securities in a private company through a compliance solution with an SEC transregional on board, you know, broker-dealer on board. And it’s, it’s an interesting time in the business, I mean, watching the technology that backstops these offerings, progress and reaches that kind of point where it’s E-trade slick as far as hit that investment. Then three minutes later, I bought securities, I’m moving on with my day multiple payment rails. It’s, it’s, it’s impressive. And I think that’s one of the other things to have builds confidence with investors if they’re going through an investment process like that, and there is a broker-dealer on board, and there’s a transfer agent on board and there is a third party escrow on board, they feel more confident, oh, it adds legitimacy to the process.


Sara Hanks 15:22

Yeah, and that’s the other thing that I didn’t think that we didn’t realize when the Jobs Act went into effect, was just how much we were going to be relying on technology for all of these things. And for all of these things to be linked together in, as you say, a seamless way. And you’ll look at some of the objections that people make to regulation CF and having large numbers of investors. And the one that keeps coming back for me is the so called messy cap table. And the fact that venture capitalists don’t like that, and why do you even care? Because the technology now takes care of that you don’t care about the mess. You can do a concertina-style cap table, where it’s just others, and you never have to look at how many others there are. And we went out, we now have companies that have 30,000 40,000 investors. And it’s not a problem, because we have the technology to take care of that.


Rafael Gonçalves 16:30

Yeah, that’s, that’s, that’s very nice to hear about the technology we do at KoreConX does exist to make that happen to help that, of course, and I like the creativity to actually that brought about, the fraction of the racehorse right, that entrepreneurs are coming up with different ways to raise capital and for different applications as a whole. Right. But yeah, when we talk about the democratic access to capital, we’re still educating people. We’re talking about a 10-year-old regulation, like the Jobs Act. But do you guys believe that crowdfunding still evokes the idea of Kickstarter, because Kickstarter was based on rewards, right? If you contributed a certain, a certain level of money, you would get better rewards are not a good one. But we’re not talking about the rewards, you’re talking about the shares, right? We’re talking about being part of a company and being a shareholder? Do you believe that in the public as a whole, the idea of Kickstarter, is still very strong when you talk about crowdfunding?


Sara Hanks 17:50

I think it kind of is. And I’ve got to say, you know, in this holiday season, and now we’re actually in a holiday season where we actually went to parties, I find that, you know, when people do the Okay, what do you do? I don’t say crowdfunding anymore, because that gives the wrong impression. And I am using phrases like, you know, online capital formation, a lot more, it sounds sexier, it sounds more grown up, and more sophisticated. And I think that does actually emphasize the fact that we’ve moved on from the free T-shirt. It’s not a t-shirt, it’s a share, and we’re helping people. We’re not just helping the companies raise, but we are helping build a new class of investors who actually understand that one of the ways that you build wealth is through securities through equity. And so that’s something I try and I use it even more. So yeah. Crowdfunding is not sexy at cocktail parties anymore.


Douglas Ruark 18:52

We are, you know, I agree with Sara 100%. I mean, I think, first of all, I’ve seen the term crowdfunding applied to literally everything. I mean, it’s been applied to reg a 506, C Reg. D Reg CF, obviously, of the donation base stuff like Kickstarter. And so yeah, I think it confuses people, they think crowdfunding and in their head, they might think, Kickstarter or something like that. And, you know, they might even think, well, we have to execute a CF on a platform like a start engine, which these days you don’t, you know, you can do your own custom-built raise portal as long as it’s hosted and owned and administered by a broker-dealer. So yeah, I mean, ultimately, what we’ve come down to is, is looking at it from the standpoint of, you know, with Reg CF, just another way to raise capital. I mean, I look at these programs as options for a client and, you know, usually there’s going to be one that fits a client’s needs fairly well. But you know, that crowdfunding term probably served a purpose back in the day, but at this point, I almost find that it just confuses people at this point.


Rafael Gonçalves 19:55

Yes, it confuses people and it, doesn’t it doesn’t hit where we need right? Because there’s a lot of education involved when it talks about raising capital online. And yeah, zone capital formation is, is much about gives a much better idea about what we’re doing here and about what people will go through, right? Because we are using technology, which Sara has just mentioned, we’re using, we’re relying on technology for the whole process. We have broker-dealers, we have escrow providers, we have platforms, and it’s all there. It’s all compliant and everything. And it’s a very interesting change of mentality if I can say that. Do you guys believe that only through education, we can change that?


Sara Hanks 20:45

Yeah, I think we do need to really focus on getting more information out. Again, to go back to the cocktail party conversations again, most of the world just doesn’t know this exists. So when they, when they think of, you know, online investing, they’re thinking of, you know, buying secondary shares in Tesla, through Schwab, or something like that. They are not thinking about, oh, I should go into the here’s this new robotics company, or this racehorse that’s raising funds, and I should use that as part of my, you know, my risk money. So, yeah, absolutely. Education, including not just people, but also their advisors. I mean, registered investment advisors, I think, are really staying away from this market. And they shouldn’t be.


Douglas Ruark 21:43

Yeah, I mean, I think ultimately, too, we’re like, we’re talking about government regulations. Right. So, you know, education. I mean, it does take an edge. Most people aren’t specialists in this, they don’t understand these things, you know, they run a software company, or they’re a real estate developer. And so I think, yes, ultimately, the educational piece is big. And I think ultimately, as we move forward with these programs, as I said, I think it really comes down to these are just various ways to raise money. And so ultimately, you know, it really kind of just depends on what’s going to fit into the box for the client as far as what their needs are.


Rafael Gonçalves 22:24

Interesting, because when it talks about education, we always talk about entrepreneurs, right? Because the person has a great idea, the individual has a great idea for a company for a product, but they don’t know how to start, and they don’t have the money to do so. But Sara just mentioned advisors. Do you believe that educating advisors is as important as entrepreneurs? Or maybe even more? What do you think about that? Sara, you mentioned that, but Doug, please feel free to jump in.


Douglas Ruark 22:54

Yeah, I think ultimately, there will actually what I’m starting to find is, is there are a lot of like financial advisors, what I would call quarterbacks. I mean, there’s a lot of people that are in the periphery of the industry, CPAs, auditors, business lawyers, that may not necessarily have security specialization, but they are working with companies on formation tasks, and what have you. And I think ultimately, yeah, getting all those people to kind of understand where the industry is, and the various programs and the options that are available, at least on a big picture. Because, you know, there’s a lot of looks, there’s a lot of unwinding, that happens, I get calls from guys where, you know, they go, hey, the last time we did a, you know, an offering was 2008. And we need to go raise $25 million, but we just bought guys putting in, you know, $500,000 as a minimum subscription. And they’re doing that, because of what we talked about before, which is they don’t want to have to manage a lot of investors when the last time they did raise the technology really wasn’t there to manage those investors. And I think the other thing that we’re seeing, too, is that as you build that affinity group of people that have invested with you, that’s power. That’s, that’s capital formation power, you know, you go do a second round. And as long as those people are happy with the investment, they’re probably going to invest more, and they’re probably bringing their friends family, and golfing buddies with them. And so you know, the more you start building that, that capital formation base, maybe you do end up with 2,3,4, or 5000 investors and you’re only maybe on your second round or third round. Great. I think people are starting to realize that that’s that is syndication power have seen a lot of different examples of companies where they just keep building that affinity base, and it’s a foundation underneath them for additional rounds of funding.


Sara Hanks 24:44

And not only that, but you also have the fact that they are there for the company itself as well. I mean, it did that the whole concept of you know fans. If you love the product, you love the company you want to invest in it, same the same way you’ve invested in it. Now you’re probably going to buy its products or services in preference to some other companies because you’ve got a stake in it.


Rafael Gonçalves 25:17

Yes, back when we were preparing this webinar, we had this discussion on online capital formation, and get just used the word syndication. We discussed it briefly, I’d like to hear more of your idea on syndication, and why would you use it rather than capital formation?


Douglas Ruark 25:39

Well, actually, I do like actually, the term capital formation. I mean, you know, it describes exactly what you’re doing these days with these modern securities offerings, which is you’re executing securities offering online, you’re using a raise portal, you’re directing your investors so they’re going through a seamless investment process. I think I’ve seen the term syndication, I probably saw it early with a lot of like real estate sponsors, where they talk about syndicating capital from investors. And you obviously, we had a discussion and Sara brought up the excellent point that you know, really kind of syndication, the true Wall Street sort of investment banking definition, which is still there today is a master kind of lead investment bank, bringing in a lot of other investment banks and broker-dealers underneath them to raise capital for an issuer. But, you know, I’m seeing it used, rightly or wrongly, by a lot of guys in the real estate sector, where they talk about building a base of investors and then syndicating capital for a deal or for a fund. And so yeah, I mean, that’s where I’ve seen that term used. And, in a way, I guess it works, you know, I mean, you’re gonna, you’re gonna raise, you know, you’re going to put together a kind of a syndicate of investors, I guess, but it doesn’t fit into the traditional definition, which is really where you’re pulling together an essentially a team of investment banks and brokers to go raise money. 


Sara Hanks 27:03

I agree with that. I mean, when we’ve seen that phrase used, has very much come from the real estate world. And so you’ve got the real estate, meaning of syndication, then you’ve got the investment banker, meaning of syndication, which is not a syndicate of investors, but a syndicate of intermediaries. And that just gets super confusing. And so, you know, when, when, when we’ve discussed this, I’m very much in favor of using this phrase, not least because this is the term that the SEC uses. I mean, the SEC, when you look at them, you know, what do we do we protect investment, we, we foster a capital formation? The office of this, the Office of the advocate of small business capital formation, I’m mangling their name, but they have just put out their annual report on small business capital formation. So yeah, I think this is the phrase that gets the closest meaning, I’ve also seen some of the earlier discussions were, well, we call them online public offerings. Well, they are online, and they are public offerings. But I think that just didn’t catch on. Maybe their initials didn’t work. Or maybe people just thought it was confusing, because of the idea of a public company, which these companies are not, they’re doing public offerings. Reg A Reg CF, are both actual public offerings. D. D, is not even when it’s advertised, just to be confusing. But they are not public companies. And I think once you use the word public, you’re now really confusing people. So yeah, I’m in favor of this phrase.


Rafael Gonçalves 28:57

You know, that’s, that’s weird, because not weird, but we have so we have crowdfunding, which can be misleading, right? Because crowdfunding doesn’t mean what most people think it means. We can when you say public offering, it’s also confusing, because we’re not talking about public companies. In fact, when you raise capital like that, you are not going public, you’re still renting property. And the word syndication can also be used, but it’s also confusing, right? Because it’s, it brings us to real estate because it has a very specific meaning. So we do need to educate a lot, ourselves first, right to the whole market before we make it, we make it public. We go to a bigger audience. I try to avoid the word public again, but I’m sorry, there wasn’t a lot of work. But yeah, we do have to educate ourselves when you when we, when we see from that perspective, right? There’s a lot of misleading terms around here. And if we, if we agree upon capital formation, which you all do we all like this idea. We are all in favor of that. Do you believe that it changes how we do crowdfunding from an investor’s perspective? Do you think it’s easier for the investor to realize that, wow, this is something different, this is not the old-school crowdfunding?


Sara Hanks 30:29

It might be easier, but I think it really is going to depend on the educational outreach that we talked about before, which is whatever we call it, people have really got to understand what it is. So I think there’s the terminology is like the second step, the first step is, this is not the t-shirt thing. This is the shares thing. And then we’ll explain, you know, how you use the various terminology.


Douglas Ruark 31:02

Yeah, I agree. I mean, I think it just, you know, it’s time to get past that, that, as I said, that crowdfunding term because unfortunately, it you know, evokes certain mistaken impressions of how these operate, how they work. Even though from a sophistication standpoint, I mean, really, you know, when you look at the process of someone going through one of these race portals on a CF versus a Reg A, as far as the investor experience goes, there’s not a lot of difference. Obviously, there are two vastly different offerings. I mean, as far as the preparation and the filing work and the rules, but as far as the investor experience, they hit that invest button. There’s not a ton of difference there. So, so I think, ultimately, you know, I think from the investor side part, part of what I think is probably going to help is one of the things that we’ve seen over the years is people are starting to realize, hey, I can invest into a private company, you know. I mean, it used to be locked down. I mean, unless you had, you know, 10 or 20 million with a broker on Wall Street, you know, you didn’t normally get access to private placement stuff. So now, with the ability for people watching Shark Tank going, man, I would have invested in that company, you know, like, what a great idea. And then, you know, they start to realize, well, hey, you know, there are there’s the ability for me as an average person to put money into a private company. So I think, I think from that perspective, it kind of leads into, you know, probably the next part of the discussion, which is, you know, just the regulation side, and I think ultimately, you know, I think people will get more and more comfortable with what these offerings look like and in the process.


Rafael Gonçalves 32:47

Yeah, should we rename the regulation itself? What do you guys think?


Sara Hanks 32:53

The funny thing is that you know, I like it. You know, pretty much everybody in this market calls it regulation CF. The SEC always refers to it. And it’s full name regulation, crowdfunding because CF could mean the Division of Corporation Finance or Corp fin, and they didn’t want that confusion. So yeah, well, we’ll just call it CF and forget that it stood for anything.


Rafael Gonçalves 33:23

Who should we talk to in the SEC to change that name?


Sara Hanks 33:28

I think we can let the market lead the SEC in this respect.


Rafael Gonçalves 33:35

Okay, yeah, that’s a good point. That’s a very good point. So yeah, online capital formation brings a much better idea of what we’re doing. And it can definitely help us through education, of course, reach, reach more people, so we can generate new investors. Right, and what Doug just said about watching Shark Tank, that’s basically it. You don’t have to be an accredited investor. You can invest in private companies. And that’s even much better for the entrepreneur himself or herself. Because, they don’t have to go public, which is great for this is the report of the Jobs Act and these regulations. But as we talk about the evolution of the Jobs Act and these new regulations and online capital formation, I know that’s not exactly what we do. But we have to mention that it has matured over the past decade, but we still face news, like the recent FTX crash. And the idea that online capital or online transactions as a whole have no regulation. But there are we just need to apply the regulations that already exist. Do believe that all in capital formation from Taiwan can affect how people see that idea of regulation.


Sara Hanks 34:56

I’m glad you brought up the whole crypto thing because there are some issues here that I think we need to address. Because as you said, there are regulations. I’m with Gary Gensler that a whole bunch of these things are securities. And I know that people out there in the world, in the crypto world, especially, who I know and respect, disagree with me on this, but I think many of the coins tokens, whatever you want to call them, are actually securities and should be treated as securities. One of the issues that we’re going to have to address is there are regulations, but they don’t actually help crypto. So let’s go to the next, you know, the next stage, which is, the SEC says, all of these things are securities, and therefore they should, they should comply with securities laws. They have to be registered or find an available exemption, well, Reg CF, you actually might be able to sell some securities. Under regulation CF. Regulation, A, the way it’s defined is you can use Reg  A for debt equity, or convertible securities. And we’ve had this conversation so many times with the staff, where we filed something that looks slightly unusual, maybe it’s sort of crypto adjacent, and they say, under Rule 261 of Regulation A, you can sell debt equity or convertible securities, which one of those is you? Well, is this sort of like equity, or we will say, they’re sort of like that? And then we have this long conversation where they disagree with us. And sometimes this goes on forever, and then the client gives up and goes away, and sells under Regulation D instead, which doesn’t help anybody. So I think, you know, if we are going to have if we’re going to bring crypto into online capital formation, we’re going to have to have a little bit more flexibility from the regulators on that specific issue.


Douglas Ruark 37:16

Yeah, I mean, I think ultimately, look, one of the things that I tell about Reg CF and Reg A plus is it is a more regulated offering. You know, when you look at a Reg D, private placement, I mean, the issuers drafted up some PPM documents, and there’s a short notice filing the SEC. I mean, you know, a lot of times there’s not even third-party escrow a lot of times there’s not a transfer agent on board. So I think ultimately when it comes down to it, I mean, investors, I think, do feel more comfortable when they go to a raise portal, for example. And they can see that there’s a FINRA broker-dealer on board, whether it’s a CF, where it’s required or a Reg. A. So I think ultimately, the there, you know, yes, there’s a cost there. But I think, you know, having that be a more regulated, defined process with licensed, you know, entities on board, like broker-dealers, like transfer agents, you know, that is one of the things that I tell people, yes, there’s a cost there. But you’re executing a more sophisticated offering that is hopefully gonna build investor confidence. I think on the crypto side, you know, we’re in the infancy on crypto, I mean, tokens and crypto, I mean, all this stuff is fairly new. And I think it has been interesting to kind of see the evolution of it. I do have clients that I feel like try and put themselves into the token or crypto box, when there really isn’t a need to where, you know, you kind of have to back up and ask them, Well, what’s your goal is your goal just to you know, bring in some equity capital, I mean, you know, sometimes it’s better to just, you know, sell traditional security than then try and fit into the crypto box. And I’ve actually seen a lot of people kind of move on, because of the FTX stuff, because of the collapse in NFT values. I’m seeing, you know, seeing some people kind of start to see the light there and move away from it. Certainly, there are deals where tokens work, you know, might be like some kind of married investment token that’s got some utility features within a company’s ecosystem. But I think ultimately, as we watch these offerings, execute, you know, if there is regulated bodies on board, like broker-dealers that have some, obviously some compliance responsibilities there, I think it’s helpful. I think it’s helpful because it builds trust with investors. And I think that’s, that’s the big thing that we want, we really don’t want people thinking, Oh, don’t go to do one of these CF offerings because you know, those things blow up all the time. I mean, you don’t want that, you know, you want not that companies aren’t going to fail. I’m not saying that. But I think ultimately, you want these offerings to execute in a compliant coordinated manner with trust, whether the company makes it or not, that’s investment risk. But I think as far as the process goes, more regulation isn’t necessarily a bad thing. And that’s come from a guy that, you know, lobbied the SEC for a long time just to get 506 C in place. So, yeah, I think ultimately, you know, we’re seeing crypto is in its infancy still. And there’s going to be growing pains there. And I think that’s what we’re seeing right now.


Rafael Gonçalves 40:20

We just received a comment on LinkedIn from Darlie Howard, I believe that’s how you say it all when kept information or online capital raising makes sense. Syndication implies the investors work together as one entity, which is not the case here. Yeah, I believe that. That is a good point. Exactly. That’s exactly what you mentioned Sara, from the real estate arena, it has a completely different meaning. Yeah, and as we were talking about tokens and digital assets and the FTX crash, we just had the Oscar jumped back in our digital assets specialist, Oscar, would you like to add anything to the discussion? Please do.


Oscar Jofre 41:03

Well, thank you. It’s been it’s been good. You know, the, you know, I’m just going to recap, just a couple of things that I think are really important. I think that as the evolution trying to get regulators to change names, it’s not going to happen. So Sara is 100% correct there, we’re just going to have to make sure that we all coin up Reg CF. And we do that diligently day in and day out, people will follow we know that when we first came up with equity crowdfunding, nobody did it. And I think we need to do the same thing with online capital formation, we need to put it there, put the descriptor on it, and people to embrace it, the advisory, they’re intermediaries, and then it will trickle down and to also provide a definitive definition for each of the other ones. So we’re also providing education to the general market. Now regarding crypto assets, and digital securities, given the FTX, fiasco, and chaos. I’m going to give it a word of chaos, because, like no other bankruptcy in the history of the United States or anywhere in the world, are we in a state of the unknown? What we do know is that the regulators, both sec, FINRA and banking regulators are putting the squeeze all the way down. So we in the space of online capital formation are going to see a little bit of that pain as it trickles down. What that means is that we onboard ourselves with the financial institutions to be able to transact. We’re going to need to provide additional information assurances, and we may even need to be providing personal guarantees, even though your company will have no affiliation with crypto or anything like that. It’s just this trickle-down effect, or what has occurred, whether companies should continue calling themselves doing crypto or anything like that. I think that the real key here is we’re in the securities world, you can call it banaba, banana, mango, crypto, or whatever you want to call it. It’s still either a Reg CF, a Reg A plus a Reg D offering, and it’s going to be compliant. Whatever you want to call it, whatever color you want to put on, it is entirely up to you. I think Doug said it best Some people use it, as you know, to make a statement to be able to be seen by that community. Let’s face it, everyone, I think everyone needs to understand this. They’re not coming to your party. This is not the party they want. They want the party which is unregulated. So it thinks can skyrocket from 70 to 100%. Overnight. That’s not happening in our world. We’re building companies we’re building helping small mid-sized companies build and grow hire employees to bring back something to society. So we can look at the only reason we’re lasting 10 years is that we’re building, we’re not just coming in to make a quick buck. So not suggesting that everyone in the blockchain space or the digital asset space is doing that. But this is flushing out the market. This is the best cleanup. You can’t have it at a better time. December of 2022. January 2023, for us, is really simple. For everyone involved, it’s only going to come down to two simple words, trust and compliance. That’s it, trust and compliance. That means we need to make sure that you have to be a compliant company all the way through. There’s no way investors are going to trust your company. Unless you have the FINRA broker-dealer, you have an auditor, you have a lawyer, you have an escrow agent, you have an SEC registered transfer agent, you have all the pieces to make sure that to build that trust because otherwise, it’s going to be you know, once again the wild wild west. So you know, last words I anybody that comes to us regarding tokens or anything they like, I only have one statement for them. Do you want to make you know to make a statement or do you want to raise capital? If you want to raise capital let’s use the regulations today. Let’s make it really smooth. It’s a series of Class A shares no problem. You want to make a statement. Go to that door We’re getting ready to write a $2 million check to the lawyers who will actually make it happen if they even will do that anymore. So, you know, that’s, that’s, that’s the view and the reality now, you know, David Weild send me a note the other day is that in all this chaos, there’s only going to be two or three companies left standing. And thanks to Sara, actually, I’m, I’m very thankful to you, I got to say thank you to you. Because we’ve never really told anyone, because of her firm and a client, we went through the front door, the SEC, and we did get a qualified we, you can’t do it. It’s just you, you can do it only in a way that. And then the end of the day, nobody saw it. Nobody, we didn’t get the rah-rah. Because we’re we did it the right way. And it’s funny, we don’t get write-ups on coin desk or anything like that, of course not. But in the end, we’re the only ones left standing while the other ones are shutting down or not all of them are going to shut down, the good ones are going to come back fully compliant, or the big banks are going to acquire them and so on, but it’s going to be a fun 2023. Looking forward to that.


Rafael Gonçalves 46:06

Now that there was a great, and just to remember everyone, capital formation is also CF. So maybe we do not have to change the Regulation name. But thanks, Sara, Doug, would you like to go to your final thoughts? So we can wrap it up?


Sara Hanks 46:25

Just I totally agree that the theme for 2023 is got to be trust compliance and do it right. And just because the SEC hasn’t got you yet, doesn’t mean that we’re not gonna get you that next year.


Douglas Ruark 46:44

Yeah, I look, you know, I think 2023 is going to be a great year, I think we’re still obviously working through the economy side. And we’re like, we’re still working through a once-in-a-lifetime event. And a lot of the damage that happened from that event. And that will, obviously is a whole separate discussion. But at the end of the day, I think 2023 is going to be a good year, it may start off with maybe a little bit of, you know, challenges as far as clearing through some of this stuff. But ultimately, I think it’s going to end up being a really great year. And these programs, keep maturing, and the technology keeps getting better. It’s just an exciting time in our industry. And I think it’s funny, because when we do these types of podcasts and stuff, and you get people like Oscar on board, and you just see the smiles and the glow, and well because we all know Sara too. And we’ve all seen where this industry was 15-20 years ago, it was stagnant, you know, and it was very hard to go raise money effectively. So I think we’re in a fantastic spot. I think as these programs mature, you know, it’s just gonna get better. But it’s phenomenal right now, in my opinion, there are so many options available to accompany to go raise capital, it really is a great time to be in this industry.


Rafael Gonçalves 48:02

That’s great. That’s great to hear, Doug. So thank you all. Thank you, Doug. Thank you, Sara. Thank you, Oscar. It has been a pleasure being here with all of you guys. It has been a pleasure listening to you. And I would like to invite everyone to follow us on LinkedIn, on YouTube, Facebook, on Spotify. In 2023 we will definitely be here, right Oscar will be here more often. 

Oscar Jofre 48:26

Oh my goodness, 2023 is going to be great that we can start educating people, more and more people are going to be listening, people are going to listen to Sara and Doug. I mean, I didn’t mean to be rude to you, Doug, it’s just, Sara. And once in a while, I’ll give her a call. And she goes to people who just listen, that’s an error, if people would just listen, that’s her quote, I’ve known her for a long time. If there’s one word, those words that go in my way if people could just listen. And I’m gonna keep saying that to people over because I don’t want them to say they didn’t know. And the good thing about the SEC, and any, any courts today, you can’t use that as an excuse anymore. Why? Because if you Google it, Sara will come up as an answer. And if it’s not there, it’s on our site. If it’s not an art site, it’s on Doug’s site. And those are the top five hits on anything you search on Google LinkedIn or anything like that. So the answers are there, you’re just choosing not to look at them. So but I do believe that we’re going to get a very different market, regardless of whatever it may be looking, you know, the market conditions. Look, the same thing was said in 2019. Do you recall when Oh, COVID is going to be the worst recession? And look what happened. Nothing happened. In fact, it became an increase. We need to look at it from when we look at the public markets versus the privates. We need to look at what we have in front of us. That keeps us we keep the lights on. You know, David reminds me we create jobs. We create innovation that is so powerful to remind ourselves of that, that all those things are important. Jobs innovation. That means people will keep the economy going and building and building. I look at us in 2019 there were eight of us, in 2022 we’re ending with 54. Thanks to everyone here in the community and our ecosystem. So from my end, thank you. I’m looking forward to 2023 and everything that brings.


Rafael Gonçalves 50:24

Yes, thank you, guys. Thank you, especially for me, thank you because I wouldn’t be here. I was brought in this year to car clinics, and I’m thrilled to be here. everyday learning at this job at this, this company, this market. And that’s it, guys. We’re here to learn. We’re here to teach. We’d love to hear from you on LinkedIn, YouTube, Facebook, or whatever. Just connect with us. We’re all here. And thank you for your attention. See you next year. Bye, bye guys and happy holidays.


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