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Rod Turner
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
www.ManhattanStreetCapital.com
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
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Touching on the benefits of combining Reg A+, and Reg D together. So one of the key factors in promoting a Reg D offering is that the principle advertising instruments, I already said Facebook and Instagram and maybe TikTok, they are never very good. They're never good enough at only bringing in accredited investors. You might get eight unaccredited investors for every one accredited investor you get. I mean, I have a lot of experience of this, right? So it's, by definition, it's wasteful. You want to be able to target in narrow in the advertising to only bring in accredited investors because they're the only people you can accept. And every dollar you spent bringing in unintentionally unaccredited investors is very wasteful.
Adding in a Reg A+, in partnership with the Reg D allows you to harvest a sizable portion of those unaccredited investors who like what your business does. So that's one very clear marketing advantage. There's two broad strokes, two ways to combine a Reg D with a Reg A+. Because a Reg A plus has an SEC filing journey requiring audited financials, typically two months or so to prepare and two months to get through the SEC, you've got four months there where you aren't doing anything yet. You can do a Reg D offering much faster, go live with it more quickly and raise money prior to the Reg D, the Reg A plus going live. So that's an advantage from a timing standpoint. But there are two broad strokes ways in which to use Reg D. One is as a straightforward investment vehicle to raise money from investors where they get stock in your company and you would be offering them somewhat more advantageous terms prior to the Reg D as you would expect. And you can continue that Reg D in parallel with the Reg A plus once the Reg A plus goes live. Another way to use Reg D is as a convertible moat instrument where investors, when the Reg A plus is qualified, their investment converts into an investment in the Reg A plus.
So they gain faster liquidity that way and you are allowed to give them a discount on the valuation of the shares in the Reg A plus. So you can sell shares at a discount via the convertible moat to the Reg D accredited investors. So the Reg A plus, the existence of the plan, the intention to conduct a Reg A plus, the fact that you are doing the work and finding it with the SEC, gives you credibility to the friends of the company, potentially existing investors and other accredited investors that you can draw in. Of course, you cannot promise ahead of time that the company will ever be qualified by the SEC because the SEC reserves the right to qualify or not. But you can state your plan and the intended share price of that planned offering and so forth and so on. But potentially the more interesting twist here though is that once you are live with the Reg A plus, you can continue a Reg D offering in parallel, which would not be a convertible note then. It would be a share offering in parallel with the Reg A plus and you are allowed to offer preferential terms to the accredited investors because they are accredited and because they are more illiquid. Somebody investing, let us say we have been live for two months in a Reg A plus and a Reg D investor is considering investing through the Reg D.
They are allowed to invest in a Reg A plus of course, but it may be attractive to them to invest in a parallel Reg D where they have less liquidity, delayed liquidity, but that they are getting warrants or a lower share price in their investment because of the limited liquidity and because of their accredited status. So that is interesting from a selling and marketing standpoint because we can turn on a feature in our investment software and our back-end payment system where somebody is investing in a Reg A plus and once we identify that they are accredited, then they can be invited to invest in a Reg D offering by your employees. You have somebody, maybe one person working half time or more than that depending on the size of the capital ways, but those people are allowed then to email that person and say, hey, you are accredited if you would like. You might want to look at our Reg D offering. Here are the details. Click on the link to look at the offering page for it and let us know or just go ahead and invest. So pairing the two together, it gives the opportunity for a sales interaction with the investor and any legitimate reason for that can be valuable and it gives the accredited investors benefit of potentially better terms where you are rewarding them for putting in larger sums of money in a less liquid instrument and we have seen that work very well for some of our clients. So let me see, selling opportunity, more efficient advertising, I mentioned that, and Reg D will sometimes bring more institutional interest because some institutions are still not aware of Reg A plus whereas they are aware of Reg D. They do Reg D investments all day long.
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