How To Raise Capital From investors outside the US using Reg S - Interactive Clickable Video

Use the Chapters list below to select the part of the video you want to watch.

Chapters:

1. Rod Turner Introduction
2. Disclaimer
3. Introduction of Manhattan Street Capital
4. Agenda of the webinar
5. What is Regulation S?
6. What are the advantages of Reg S
7. What companies are best suited to using Reg S?
8. Regulatory context of Regulation S
9. Schedule of Regulation S
10. How to market your Reg S
11. Cost of conduction a Reg S
12. Liquidity of Reg S investors
13. Q&A - Isn't it true that non-US investors can invest in any US offering?
14. Q&A - Is there a cap on the amount of funds that can be raised in a Reg S?
15. Q&A - Is there a revenue size or range for companies to raise money?
16. Q&A - Can payment for shares be made using a cryptocurrency payment gateway?
17. Q&A - How often have you seen a client accept a credit card for a subscription payment then see the cardholder dispute or otherwise seek to cancel the purchase?
18. Q&A - Do I have a rule of thumb for how much to budget to market and offering?
19. Q&A - How would you, how would a company structure an offering to give a volume discount?
20. Q&A - Do foreign investors prefer to receive their shares in certificate form or are they okay with electronic?
21. Q&A - Is a 409A typically used for business valuation?
22. Wrap up

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Message from Rod: I made the mistake of setting my Zoom recorded view the wrong way which has reduced the recording video quality. Thank you for your understanding!

MSC is not a law firm, valuation service, underwriter, broker-dealer, or Title III crowdfunding portal and we do not engage in any activities requiring any such registration. We do not provide advice on investments. MSC does not structure transactions. Do not interpret any advice from MSC staff as a replacement for advice from service providers in these professions.

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.

[email protected]

www.ManhattanStreetCapital.com

Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.

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Welcome everybody. My name is Rod Turner. I am the presenter today. I'm the president of Founder of Manhattan Street Capital. Thank you Akos for putting this all together. Akos is co-hosting the session, and as I said earlier, we will be, we are recording the session. We'll be making a a blog post of it, and we'll be sending out an edited version of the video. If I make any mistakes, we'll correct them, correct those mistakes before we send out the video. And I wanna give you a legal disclaimer before I get into the rest of the, the content here. We are not a broker dealer. We're not a value, we're not valuation professionals, we're not securities attorneys. So what I'm speaking to here is I'm describing for entrepreneurs a way to raise money via, via a reg A plus. In this, in this discussion, I'm giving you as much guidance as I can.

I'm not representing myself to be any of those other professionals, so you should check everything I say in order to validate it. But I'm giving you as the, the best information that I can, which is as accurate as I have, and I think you'll find it informative. My background briefly, and then I'll give you a, a brief background on Manhattan Street Capital. I started my career in the UK as an apprentice and then a professional electrical engineer on a nuclear power station. And then I moved into computers in the UK in order to progress my career faster. Then I moved to the US to get better weather and to have a better, more economic opportunity. And then I having got my green card sorted, I switched to a my first high-tech startup company. So I've done, before Manhattan Street Capital, I've been a key founder or a key leading executive in six successful high-tech startup companies.

Where successful means we sold them for a profit, or we took them public. Two of those were NASDAQ IPOs. One was Ashton Tate, going back a long time Ashton Tate Made dBase, and I was the 12th employee of that company. We built it to become the market leading database provider on Microcomputers in the eighties. We went public in the early eighties. I was vice president of the company in the early days, and actually six months in, I was running everything but finance because no one else was there that the founders could delegate and the CEO could delegate to. And then they built out the rest of the team. And then another company I've done that's more, a little bit more recent, but not that much more recent nowadays, is Symantec. Symantec, the makers of Norton Antivirus. I was the one of the early executives for responsible for marketing, product management and sales and international business from the beginning before we had a product through when we started making acquisitions and grew the company by acquisition, took the company public.

And I, my team launched the Norton Antivirus. Having acquired the Norton business, we had already developed the Norton antivirus inside Symantec, and we were able to appropriately label it the Norton Antivirus courtesy of that combination. Anyway, a lot of fun with that. So my background is relevant as a high tech executive having raised venture capital, having done IPOs, and that's part of the reason I launched this company. So Manhattan Street Capital. I, I set up this company in 2015 because of regulation A plus, which is a very beneficial rule system. And I actually know the securities attorney who was at the SEC when she drafted Regulation S interestingly which was obviously the topic for today. I recommend that you use the speaker view in the options you have for viewing of this webinar.

And you are welcome to post questions using chat at any time. And when I finish my prepared remarks, I intend to then answer the questions both in terms of, you know, by sequence of posting the questions as well as where I can add value. You know, if it's an ambiguous question or one I can't really add value to, I'll put it as a lower priority. But then we'll do, we'll have that q and a session at the after the prepared speech prepared remarks. And again, we will be recording this session and sending out a recording. The topic is how to raise capital online from investors outside the US via regulation S And I'm gonna touch on what is regs reg, excuse me, what is regs? What are its advantages? What companies are best suited to use this instrument? What's the regulatory, regulatory context? Pardon me, schedule I you the timeline. How to market a Reg S what the costs are. Minimum maximum type of capital raise, post offering liquidity. Those are the topics I'll be covering. And then the Q and A. So what is Reg A? Reg S it is a SEC regulation. You've heard of Reg D, you've heard of Reg A plus, you know, of S one IPOs. Regulation S is specifically designed to enable US companies to raise money outside the US and non-US companies to raise money outside the US in an e compliant manner.

It, some of it's interesting characteristics, the investors do not need to be accredited. So investors of any wealth level are allowed to invest via Reg S. As far as the SEC is concerned, you can raise money via Reg s offline or online with general solicitation or other, other methods. I would say interestingly, you are allowed by the SEC to compensate non-US brokers via the regulations that apply in their countries with, you know, within reason. Of course, there could be some peculiar exceptions to that, but there are regulatory environments in place in France, in the uk, Germany, and as long as those you can use brokers that are working via their methods and and, and compensate them accordingly. Advantages of regs probably the biggest one in my view is that it's SEC compliant. So outside the US both for the investors as well as for really for, for investors and for the issuer for the issuing company, it can be very beneficial to be using a SEC compliant regulation because the SEC is highly respected around the globe, as, as we know.

And the fact that non-accredited investors are allowed to invest. They don't have to prove that they're wealthy 'cause they don't have to be wealthy. That's a big advantage worldwide, meaning any legitimate country, not North Korea, not Iran, not, you know, any problem states. Obviously not Russia in the current context, but there's a heck of a lot of the world that is available. And if your company has a strong presence in a given country a guy I know did very well in the early days of Reg a plus raising money in the Philippines. 'cause He had a strong, his company had a strong US and Filipino presence. So of course the investing of MAG is gonna be a lot lower if you're raising money per person in the Philippines. But because of the word of math than the presence his company had there, he was able to far more easily engage with investors in the Philippines.

And it's a lot lower cost than the other regulation systems. So in comparison to a reg D, it's less expensive. Not hugely less expensive, but significantly less so. And you don't have to get investors to verify that they're accredited. So that's a nice step that eases the investor's journey as well as the issuer's journey raising money. And it's much faster to launch than a reg A plus, for example, or an S one similar, perhaps a little faster than a Reg D. And we'll get into some of the context around that a little later in this session. So what companies are best suited to using Reg S Very similar to the types of companies that are suited to raising money online via Reg a plus, or regulation crowdfunding. Actually, IE we have to be able to easily explain the company. It has to be appealing, it has to be visually appealing.

Actually, you know, in the case of, you know, there are some biotech companies that I've talked with where what they're doing is wonderful, strategically a great fit. But when whenever you try to describe the ailment that they're treating, it's so awfully disgusting. You know, you may not be able to find a way to convey it and communicate about it and have people stay, you know, in a non vomiting state, right? So, you know, it has to be pleasing to the eye. It has to be possible to make a pleasant presentation about it so that people will stay engaged, pay attention. It has to be, it has to be something you can convey in an online offering page that you can communicate and describe accurately and more difficult that you can describe in an advertisement. 'cause Almost all of the outreach will be via social media advertising.

So ads in the midst of somebody's social media stream have to be compelling and also accurately able to convey what the company does. It's, and better yet, if, if the company has emotional appeal and can appeal to main street investors, you know, a B2B business that only sells to companies that are making an excess of 500 million in revenues, it's a little less engaging for a main street investor, depending what they do, of course it can be a bit boring and difficult to explain, but, but a company that is, you know, in an ideal world would make a cellular phone that would have a four day or a 10 day battery life. That would be nice. I'd love to not have to plug in my, my cell phone, that kind of thing. Battery technology, EVs were a, a bigger thing a few years ago. Also, things that engage with consumer interest, most of the online investors are male.

So cars, airplanes, hover craft race cars, you know, things that appeal devices that appeal to Main Street folks. And then if you look at categories or segments that are appealing, even in the us Green tech is catching on now because the regulatory environment has made it financially attractive to do or invest in. A lot of the green tech companies and people are gaining a heightened depreciation that climate change is, is real and needs to be dealt with. Biotech companies, gen tend to do well online because their gen, they can be very engaging and appealing. People want to to vote with their feet. They may tell their friends and family. They may be just telling themselves that they're patting themselves on the back, that they're voting with their feet and backing a company that is doing something very worthwhile. Real estate companies, because people understand real estate.

I'll get to the questions later, but go ahead and put them up. I see there's one question being posted by Carl. Yeah, real estate companies, artificial intelligence, courtesy of chat GPT and what, what's, you know, the accelerated, the enhanced awareness now with robotics coming more, becoming more exciting, potentially more interesting given what Tesla's been doing and others. Yeah, so anything which is, which is showing great signs of activity, but those are good examples of on, of companies that lend themselves to an online raise. Business to consumer is easier than business to business, but there's some, there are some companies that we can market successfully that are business to business from a regulatory environment. A couple of important things to know. The SEC says that we can raise money anywhere around the world, whether it's a US company or an non-US company, doing so via Reg S.

That does not mean that the UK or the French regulators, the their SEC equivalents love or, or will be happy about you raising money in their countries. So, you know, there, there's an element of risk, right? If you actively raise money in those countries, in, in any country that's sophisticated enough that they have their own SEC equivalent regulator, they may protest and ask you to stop raising money. We have not had that happen one time yet, but that may occur. So there's, there is obviously a risk that the local regulator may not approve, but in many countries, the local regulators aren't thoroughly established. And in countries like Dubai, which has a largely I would say a less regulated market, they have regulations, but it's a less regulated market and there's a lot of money being deployed in startup companies. Online is fine there. And there are obviously other examples.

So when we are raising money though, these are the sorts of things you need to handle from an SEC compliance standpoint. We must have the, we must get know your customer information. We must know the identity of the investor without ambiguity, and they must pass the anti-money laundering tests checks. So we do all these things in our website platform for raising money, but those are requirements. And again, non-accredited investors, accredited investors and institutions can all invest via Reg S and it's legitimate to offer a better valuation to investors who put in larger sums of money. So you can do that, I suppose that may be very obvious, but you can do that via an online raise and we can support that too. But again, I'm not only trying to sell my company here, obviously, I am pitching my company indirectly. One thing to be concerned about if you are a US company is there's a thing called Section 12 G, where if you have too many investors in certain circumstances, you will be forced by the SEC to register your company and file quarterly PCA or B auditors.

There are legitimate ways to postpone or prevent that. I won't get into all the detail of that right now, but that is a hurdle for us companies to be aware of. And, and, and of course, if you take, if you take steps to prevent that being a problem, you have to take those steps in the legitimate way. Again, there isn't time here to de to describe that, but I can if needed covered that already. You need a private placement memorandum or similar, A Reg D offering requires a private placement memorandum. And really you need a very similar document for Reg S. And in the case where we're pairing a Reg S with a Reg D, which is commonplace because they are a natural, they're naturally cooperate, cooperate, they naturally enhance one another. Then when we have the Reg D, you know, maybe 2% of the document needs to be changed, maybe 3% to make the Reg S variation.

So it's inexpensive to make it when you've already got the Reg D, but if you're only doing a Reg S technically you can get away with a lighter weight document, but I don't recommend that you want to have all the right legal protections in place. And risk factors, for example, having comprehensive risk factors disclosed in your documentation is a really good way, both to inform investors what they're getting into, but also to reduce, significantly reduce legal exposure down the road. So you want a PPM like document and you know this cost involved in that, but it isn't difficult and you don't need to go file with the SEC and ask permission. You don't actually need to file the Reg S with the SEC, of course, they re they retain the right at all times to inspect everything you are doing, wherever your company is, whenever, when you are using a regulation which they promulgate. So if therefore, of course, one must always make sure to conduct these offerings in a proper manner such that the SEC if they inspect it will be happy with it.

Having a transfer agent helps you are not required to, but when you get lots of investors, you really don't want to deal with numerous investors and housekeeping issues and somebody transferring their, their beneficial interest in your stock into their trust fund or something, family trust. So moving on to the schedule for regs. Let me just gonna answer the questions that we have. There is no I'll get into, I'll get into those answers later. I'm gonna cover both those questions later. But they're good questions. Thank you. So schedule wise while theoretically you can, you know, you should be able to do these things in, you know, five days using AI or something. In truth, it takes time to, to launch these offerings because there's decisions to be made, there's documentation to be done, there may be board resolutions needed. That stuff takes time.

So I would say six weeks from pressing the start button to going live and starting to raise money is a reasonable reasonable timeframe. You can do it faster, of course, but I think six weeks is, is reasonable in that time. You're preparing the PPM type document and making sure that the class of stock that you are issuing has been authorized, getting everything documented in that way, writing up the legal, the description of the business properly in the PPM type document. And as, as important the marketing agency is being signed, has been signed up, you know, we'll introduce the agency assuming that they're we're working together, and that the, the agency has to be brought up to speed on all the nuances of the business. Then they need to produce the right messaging. Video videos need to be produced, graphics need to be produced, compelling content that is legitimate, that is to say passes muster from a regulatory standpoint needs to be produced. So you have a nice beautiful offering page. You have emails written, you have advertising content prepared, all in that six week window. And that is a reasonable time. An online social media advertising account set up.

An important thing to know I don't know of, of the folks that are on the call, I don't know which of you have experience raising money online versus who does not. But the fact of the matter is, when you launch the initial advertising outreach, the only thing we know is that we don't know exactly which ads with which messaging and which target audiences are gonna resonate best. So you don't spend a lot of money in the first weeks because it doesn't make sense to blow a lot of money inefficiently it. What what does make sense is to be rapidly adjusting the content, identifying what is working and optimizing and optimizing and further optimizing. And then as the efficiency increases, we're building a prospect funnel. We're building momentum. People are investing from the get go, depending on how efficient the initial marketing outreach is.

But be aware that you don't start this and raise mega bucks right away. It's a journey to get efficiency in the early weeks and really the early couple of months so that you want to spend a lot more money to raise a lot more money when the efficiency is low. You don't wanna spend a lot of money by definition. So recognize the ramp. You know, you can't raise, let's say you're launching a new offering and it's a compelling company and you want to raise, say, $16 million. Just picking a number to, to assume that you can raise $16 million in, in the first eight weeks after you go live to go live is naive. Very naive. Unless you have a gloriously happy fan base and customer base who are chomping at the bit to get into your company in which case, then of course anything can happen.

But in a more normal situation where we don't have a, an existing fan base and existing investor base or customer base that are really ecstatic, we've gotta build all that momentum from scratch. It's gonna take time, right? And it's a journey and it's an educational process with constant, with constant, with regular updates, ideally weekly updates to inform the people in the prospect funnel who may have invested a modest amount and are considering investing more who have or who have not invested yet, but just become a prospect. It's a journey to get the, to, to get more of them and to get more of them to invest by reassuring them and conveying more and more content to show, to show the reality and the credibility of the company and essentially to push them over the line.

There is an internal selling effort that needs to be done in all these online raises. So someone needs to be working the phone. Someone needs to be responding to emails and posting responses to social media comments. One of the lovely things about social social media advertising for online offerings is that we get sharing of the ads and we get positive comments, but we also get negative comments. There's a certain percentage of the populace around the world that wants to be, I don't know if they're funded by competitors or if they're just poisonous people that want to poison the well, and you can't just ignore them, you have to respond to them. If it's irrelevant, po political nonsense or other nonsense, you can delete it. But if it's relevant to the offering the questions or the statements that they've made, then you need to respond to them in a positive manner. And that takes time. I had, you know, I've had a couple of, of issuer clients where they were complaining that it was taking too much time, but they were getting hundreds of positive comments and shares all sorts of wonderful things. When you have that happening, this is a thing of beauty because it amplifies the effectiveness of the advertising.

Okay? So I spent expect a ramp up in efficiency as schedule and marketing combined. Now I'm moving into marketing. So in a Reg s you are allowed to call your friends, you're allowed to meet them, you're allowed to present to them verbally, personally. You are allowed to do general solicitation online outside the us you are not allowed to solicit to US investors specifically. You are not allowed to do that. The SEC does not want you or you with our help or doesn't want us to be tempting US investors who are not accredited to pretend to be non-US people in order to invest in your company, right? So we have to make sure we don't cross that line. But otherwise, international solicitation to legitimate markets is entirely, entirely allowed. It's almost always gonna be social media. Of course, you can use email if you have great lists of friends, associates contacts.

Generally cold emailing does not work. But there are some exceptions. I mean, we're working with a very savvy email startup company, early stage company where they are using chat GPT judiciously and they have vertically integrated, so they don't depend on things like MailChimp. And they're using intelligent methods to do cold solicitation via email, which works. So it can be very cost effective when it's done well. But my god, have I seen a lot of failed efforts to do this? Renting lists and buying lists generally does not work. This is the only exception that I've seen in nine and a half years since I launched this company.

Social media platforms do vary depending on the country, of course. So that's a key part of the outreach. And therefore we need one or more marketing agencies that are able to execute with, with skill in country. And which depends on the countries, depends on the markets that we're targeting. Ongoing emails to the prospects that we've, we've accumulated a prospect list. So imagine this scenario. Somebody's in their social media stream or they receive an email and makes them interested enough to come to the offering page. And if they like it enough to stick around, they may click on the learn more or the invest now button to check it out further. If they do that, they have to at least give us their email in order for them, for us to know who they are so we can follow up via email to promote the offering to them.

So now we have a growing prospect funnel, and the cost of acquisition of those leads is something very early stage, which we can measure that, you know, that window of cost matters greatly because it is, it's an indicator of how effective the, the outreach is, right? If it's too expensive, we know it isn't working right away. We don't have to spend the ages figuring that out. We need to change it right away. So advertising, email outreach, and then frankly, you, you, you know, we set up an automated sequence of emails like four or five emails that goes out to every new prospect and a carefully timed sequence. But in addition, weekly email updates to add flesh to the bone, to build credibility, ideally with the spokesperson, which will normally be the CEO speaking on camera 45 second to an 92nd type videos with an update in a very open kimono style. You know, in order to engage and tr and build trust with the audience. We don't want to be just selling, we want to have an open kimono style where you come across as human, you come across as real and genuine.

So those types of over time, as we go further into the offering, those emails become the primary source of investment because we, we are constantly bringing in investors in there. There's constantly a percentage of them that are investing online, but emailing to this prospect list, gaining their, their trust, notifying them about a share price up increase that's coming soon, those kinds of activities cause a lot of, of conversion. Of course, the offering page has to be compelling. You know, we might have two or three variations of the offering pay page in the early weeks, early, even longer. It could be we, we could per, we could perpetually have two versions of the offering page with one set of ads bringing in an audience for this version and another set of ads bringing in an audience for the other version where the lead messaging on each page is different. Of course, the total content is always there, but the lead messaging needs to resonate with the advertising. So it's possible to have multiple landing pages with the same backend investment flow, and that can work very well when, when it's appropriate, it's appropriate.

People can typically, internationally, you know, you can't use bank transfer easily, that we don't have a CH potential outside the us So credit card, debit card and wire transfer are the primary investment vehicles, very rare exceptions to that. But these days, you know, when we're marketing to the right audiences, they're using their smartphones to invest, right? Sixty five, seventy, seventy 5% of the money will actually be invested on a smartphone these days. Didn't used to be that way, you know, years ago. But now it is that way. And debit credit card is the easiest way for those investors to invest. Costs, So the front end costs in a Reg s are generally lower than in the other types of offerings. As I touched on earlier on, probably the lowest cost of entry for a good PPM for a Reg S is gonna be about $10,000, unless you already have one that you already built for some similar purpose, in which case repurposing it will cost less, it can cost more.

You know, you can make it unbelievably complicated and comprehensive, then it'll cost more. You know, it could be 30 K, but 10 K is reasonable marketing set up. 25 to 30 5K is reasonable depending on the specifics of which agency. And so, so the total and the total front loaded expenses, you don't need audited financials to do a reg s as in a Reg D, you don't need audited financials. But the total front loading cost may be in the 50 to 70 5K range. That's realistic. I was talking to a company late last week that's pretty compelling actually, and they've been raising money in a reg D via direct means, and they're exploring doing it online with, with us. And I like the company. It's a pretty compelling company. It has a lot of potential. So in their case, they already have a PPM, it's well drafted, you know, so the editing of that is gonna be quick and very inexpensive. That's good. Helps save time. Still, the messaging and marketing stuff needs to be created though.

So actually the biggest issue I haven't touched on yet, which is the cost of, of conversion, right? What's the cost of converting prospective investors into actual investors? So this varies greatly. And of course it varies greatly by country. You know, going out internationally, you know, there are countries where the level of sophistication of the audience is not there yet, where they're ready to invest online. You know, we've done we have a thing called Manhattan Street Fund, lp, a venture fund, which we use to invest in companies from time to time. And we did interesting tests, marketing it internationally for a while, and we were getting amazing engagement from people, but they would be asking us to email them the package or mail them the package because they weren't comfortable with actually investing online. So obviously that's a factor, right? And it does change with time.

The maturity. This, the online comfort of investors in different countries is developing at a different schedule. So countries like the uk, Germany, Scandinavia, you know, Norway, Switzer, Sweden, Denmark Australia, CA, Canada, when it's appropriate and Dubai, those are sweet spots. But then of course, where you have a presence will be a big factor also. Good that you're putting questions in. Well done guys. Keep that up. I'll get to them shortly. How are we doing on time? How are we doing well? Yeah, so marketing efficiency, going back to that, that's a difficult one. It's really important. So at this stage, I, I haven't done enough, we haven't done enough pure reg guesses that I can just rattle off numbers and give you, you know, hard facts as to what exactly it's gonna be. And of course, it isn't exact at any time, right?

Your company's different than the other companies anyway. But in the early days, we will get traction, we'll get early engagement, we'll get early investments in a Reg s because people don't have to be wealthy to invest people. The people who engage online in an offering have to be optimists, let's face it, right? Especially if they're looking at a com. A company that is outside of their country, they can't touch and feel it, they're not really likely to pay you a visit. So they're optimists by nature, they're usually male. But nevertheless, even though, you know, we have a lot of experience with plus investment activity, and again, we're dealing with mostly male audiences and they're optimists, otherwise, they wouldn't even be considering investing online in a company. But having said that, though, the proclivity, the likelihood that they will invest in an online company offering varies by country, et cetera, et cetera.

So what does this all mean? It says to me that I would expect that in the first month you might spend $10,000 in advertising and you might raise 10 or 20,000 or $30,000 in investments in the first month. No guarantees that that will happen. But in a properly prepared offering that is appealing, that passes muster based on the other things I've described. That's a reasonable expectation. Ho horribly inefficient of course, but that's why you don't spend a lot of money in the first month. And as we get the targeting and the advertising in the ai in the social media platforms in this country and in many countries, Facebook and Instagram are really very efficient vehicles. When we can get it to work, when we can get into TikTok, it's by far the most cost efficient vehicle. But again, it, it depends by on, on which country we're in, there are different platforms that excel in in different countries.

But long-winded way of getting to the point, which is that we need to, we, we strive to get the efficiency as high as possible. So if we can get the advertising cost, the pure media spend down to below $10 per hundred raised, then we should feel good because that is difficult to achieve. And if we get to that, we should feel good. Of course, we want to get it lower. We worked with a biotech company in a reg a plus context a while ago where the ad agency was happy. And frankly, the company was pretty happy because the cost of advertising was about eight and a half dollars, $9 per a hundred dollars raise. It wasn't bad, it was pretty good, but I felt that we could up the ante by doing more video ads and the agency was reluctant. So I asked the company to back me up in this, which they did, and then the agency reluctantly came around and did video ads and they ended up the one particular eight second animated ad getting the cost down to $3 and 30 cents per hundred raised with that single ad.

That was absolutely stunningly efficient. Of course, I didn't know which ad was gonna do best. I didn't know how much efficiency we could gain, but I was pushing to do so, and the results were phenomenal. So that's just the, the nature of the beast, right? It's all about execution, creativity up in the ante. Mid max, there's, you can have as you know, a zero minimum, which is to say you can set the offering up such that if you raise $10, you could do an escrow close, why would you? But you know, you don't have to have a high minimum investment amount unless you are buying, if you are raising money in order to buy a company or a building, if the price is $10 million, then you have to have a $10 million escrow closing amount, right? But in a grow the company strategy, which is what most people are doing then you can be drawing down an escrow week one, week two, et cetera.

And no maximum, there is no absolute maximum amount you can raise in a Reg s the only thing you have to deal with is the numeric count of investors, which I touched on earlier and the logistics of that. But actually, you know, most companies who go into these online raises are very nervous about having lots and lots of investors. But actually my experience has been that lots of investors is a very good thing and most investors are not expecting to have a CEO discussion once a month, once a week, et cetera. Most of the main street investors putting in modest, you know, smaller amounts very easy to deal with. And really you end up delegating most all of that to the transfer agent. If you are paying out dividends or profit distributions, you can do that through the transfer agent too, by the way.

So to simplify to simplify life from an operational standpoint, one thing that does matter in any of these online raises, but especially in reg S and in reg a plus, is to have a low per investment minimum. So, and, and it depends on the country. If we're raising money, you know, if, if the Philippines was a big target, I haven't recently checked the numbers, but the average income's a lot lower, GDP per capita is a lot lower. So if you were to set a minimum of a thousand dollars, that would put off most investors, right? In the Philippines, maybe a hundred dollars would be a smart number or $200 in the, in the Philippines, if you go to Germany, France less, less so France go to Germany, the uk, Scandinavia, Australia, less price sensitivity. But you know, bear that in mind, the per the point here is that if you think of this, the, the psychology, somebody's doing something else, they're in their social media stream, they're not thinking about your company, they're doing something else, they see a compelling ad, they click on it, they come to the offering page.

It's interesting enough to gain and re reten, keep their interest. Now they're looking to see, they're thinking about investing. We're converting them from unaware and un uninterested to interested enough to stick around. If you present them with a high investment minimum, like something that feels like five or 10 K to them feels like that amount of money to them at this stage, it's casual. If you have such a high number, they're gonna go away and not come back. We need to have a low enough minimum that they'll stay interested and stick around. Think about that. Psychology. Yeah, the typical rate, typically what happens in these online raises is that people will start an investment, maybe complete it with a relatively modest sum, and then they'll stay engaged and they'll up the ante and they may come in with their retirement account with a la much larger number four months down the road.

Okay? Liquidity. So this is, we're getting close to the end of my prepared remarks. So we're running ahead of schedule, which is good. My time for q and a. Liquidity is interesting. So one of the things the SEC cares greatly about is this is for non-US investors only for 12 months from the point in time when the investor invests, right? So when the investment is completed for a non-US person, they are not allowed to sell that investment to a US person for 12 months. A 12 month window has to pass. And you have to make sure that you don't do anything to encourage or allow that to be broken because that will be a big problem. But after 12 months, those investors are allowed to sell their shares to US persons and they're allowed in any case from the get go, as far as the SEC is concerned, they're allowed to sell their position to non-US persons immediately. Not to say that there's a marketplace, not to say that you've listed anywhere, but from A SEC regulatory compliance standpoint, those non-US persons are allowed day one to sell to other non-US persons. So you're aware of that pretty good liquidity. And there are some, there are many non-US exchanges that you can list your securities on with the relevant restrictions that they have in terms of number of investors, amount of money in the bank scale of the business, which depends so much on which exchange you are, you are contemplating.

Okay, so I'm gonna now go to the questions that you guys have posted. I'll start at the top of the list. Isn't it true that non-US investors can invest in any US offering? Yes, that's true. So an non US person from a legitimate country none of the silly country, none of the, you know, expected problem countries, yes, if they are accredited, they can invest in a appropriate Reg D offering. If it's a 5 0 6 C or even a 5 0 6 B in some cases, yes. And they can invest as far as the SEC is concerned in a reg a plus too. Yes. It's just Reg S is an easier way to approach investors outside the us. Is there a cap on the amount of funds that can be raised in a Reg S no cap in a Reg D no cap Reg CCF 5 million Reg A plus 75 million.

Yeah, so that's the answer. No cap is marketing a Reg S the same, has it got the same compliance requirements as a Reg CFIA broker dealer? No. So you do not have to have a broker dealer involved in a Reg S obviously a US broker dealer would, would be of no help. The only way and that you don't need to use a Reg CF platform, which is a FINRA regulated entity outside the us, you are allowed to use finders as long as you use them legitimately, and you are allowed to use out non-US broker dealers and pay them commissions as long as they're following the, the rules of their country. Okay? But completely different than Reg cf. And you wouldn't, you wouldn't want to use a US broker dealer 'cause they couldn't help you at all. We're only allowed to raise money via non from non-US persons in a Reg S offering, you can have a Reg D running in parallel and the Reg D you could use a broker dealer for that Reg D, but again, constrained that would be the Reg D Chinese wool separated from the Reg S because the Reg D investors have to be accredited and that's you know, a bit of a pain in the to prove, isn't it?

Okay. Yeah. Another question got answered that Jim Birch says, is there a revenue size or range for companies to raise money? There is no hard list as to the size of the, the scale of the company or, or the number of people that it has or its profitability. It's a qua, it's, it's a quality issue. How appealing is the company? It that's what matters. Can we successfully raise money for it? Because it's easy to explain, it's appealing, it fits strategically, all the obvious things, right? And it's exciting. It's addressing a large market that people care about, right? So a company doing breakthrough cancer research, by definition, if they were already FDA approved, they wouldn't be raising money in a Reg S right now. They would already have, you know, they'd be doing, they would already be public with a multi-billion dollar market cap probably.

But in the early stages when it's promising but unproven in that case then they would be raising money via these kinds of methods. And it's about the appeal. How appealing is the offering? How appealing is the company can payment for shares be made using a cryptocurrency payment gateway? Yes. It can be in a Reg s it can be, yes. So then it's a matter of which payment gateways are setting it up so it works smoothly logistically, and it that is appealing obviously to people who have money in crypto, may have made a lot of money in crypto. They don't want to have to convert it over. That is legitimate. How often have you seen a client accept a credit card for a subscription payment then see the cardholder dispute or otherwise seek to cancel the purchase? Very, very rarely. Actually the only place where I've seen what I consider to be attempted investor fraud has been with a CH payments in the US where we, we used to have that, we figured out ways with language and warnings to stop people doing that.

But we used to, we have seen instances where someone will invest by a CH, start the process, cancel the transaction, and then pretend they didn't cancel it, pretend that they still funded it, and that they, they deserve to get their, their certificates, you know, their, their securities. That used to happen. It wasn't common. It virtually never happens. Now I've, I've never seen it happen where somebody invested via debit credit card and then deliberately deliberately canceled it via dealing with their credit card vendor. We've had a handful, I've been doing this nine and a half years. We probably had five investors that I can remember who asked to cancel their investment and where the issuer approved that cancellation. You don't have to do that, but you know, some, I think it's smart. If you have an investor that's unhappy and they put in, you know, $500, a thousand dollars, it's better to have them be happy than have them posting on social media about how, how unhappy they are. But that's my, you know, my personal preference.

Do you have a rule? Do I have a rule of thumb for how much to budget to market and offering? Well, as long as we're, we're able to use the proceeds of the raise to fund the ongoing raise expenses, which is the, you need to write that into the offering documents. So that's included. And you need to not have a half a million or a million or a $2 million minimum of escrow close amount, in which case then, you know, you are able to fund, usually you are able to fund the the ongoing expenses via the offering. Its proceeds itself themselves. But so I look at that as being how much is the, the upfront expense gonna be before we get to the point that the marketing is working successfully. And this ver this varies of course, you know, we, we had an Reg A plus context advertising to Main Street US investors mainly.

We did a real estate company. We helped a real estate company some years ago. We all thought it was gonna be a piece of cake. And it turned out people were completely misunderstanding the nature of the offering. And it, we stubbed our toes 45 days to revamp that completely change the positioning and the description completely and then relaunch and it was fine, but for 45 days no action because it turned out we were wrong in our assumptions. So it's hard to say what would be the rule of thumb. You know, you want to have spare money in the kitty to count to handle an, you know, unexpected events. But, you know, I wouldn't want to go live without a hundred K on hand for marketing. You don't want to be caught stuck where you've, you know, you don't, you don't wanna be stuck where you've almost got it right and you just ran out of money and now you're desperate.

Don't wanna be in that situation. Can reg s be used for a Mexican entity to sell to US persons while in Mexico? So a US person who is in Mexico and who first heard of the offering in Mexico, then if they're staying in Mexico, they can complete an investment. But otherwise not if they first heard about it in the us absolutely not. But which is just to be clear, a reg s for a Mexican entity is the Reg S is for non-US persons, right? It's gonna be a very rare exception when a US person can get in. How would you, how would a company structure an offering to give a volume discount? Would it need to have two offerings? No, you could have two offerings that would be more logistically challenging. You can have one offering and you can literally give a, be a better share price in a Reg S context. You can give a better share price to investors that put in a larger sum. Some anyone who puts in more than a half a million or something. Or you can give free shares, which is an easier way to do the same thing. But you are allowed to give volume discounts in a reg A plus or Reg D or a Reg S. Actually, there's a couple more questions.

It would be simpler to, to answer that question, it would be simpler to do it in one offering page. You don't want to have advertising going to multiple different pages 'cause that dilutes the whole thing. You want to have a critical mass in one location that works far better for marketing. Do, do foreign investors prefer to receive their shares in certificate form or are they okay with electronic? That varies by country these days. I would say when we're marketing into a country where they're comfortable enough with the concept of an online investment offering that they'll invest online, they're also comfortable enough to have their shares at a transfer agent that they access online. And it's so much more efficient to do that. And it's, it's better because we want them, let's say you are six months in and you've raised the share price twice.

When they log into their transfer agent account, they'll see the current offering price being stated as the value of their shares. So that's a pleasant dynamic for them to see and it encourages them to pay more attention. Be happy. Pass the word on. Is a 4 0 9 a typically used for business valuation? No. any thoughts on general formulas selling a setting a share structure for an offering? Okay, so disclaimer time, I'm not a valuation professional and I'm not an underwriter and those are the only two professionals in the US that can tell you what valuation you should use. So I'm not gonna do that. I will give you a little guidance in a minute. We have a whole webinar dedicated to valuations on our website that you can pull up by using the search box in the top right corner. But 4 0 9 a valuations, it's, it's a formal valuation method. That's what a 4 0 9 a is.

Many people, many sophisticated investors have have a lot of experience with valuations that are silly because the valuations are only as good as the assumption set they're build upon. So it's very easy to see excessively high valuations, which don't cause people to believe in them. So, you know, I'm health, I have a healthy personal dose of skepticism about professional valuations. But on the other hand, they do serve a purpose and there are times you need them and they can be helpful and if they're credibly prepared and they support the valuation of an offering, so be it. But if it's gonna cost 50 K to do them, don't do that. It generally isn't, isn't worth the expenditure. Rule of thumb, my observation in raising money, I've done before Manhattan Street Capital, I've been one of the key founders or key leading executives, one of the top c-suite executives in six high tech startup companies that became that were successful because we sold them or took them public and therefore sold them to the public.

You either case. And so I have a lot of experience of raising VC money from blue chip VCs. I've done my own VC fund in the past. We have a VC fund. Now, typically when you are raising money from angel investors or other accredited investors or VCs, when you raise enough money in a growth company to go a year and a half until you need to raise more money, you are normally gonna experience 25 to 33% dilution. That's typical. And you know how much money you are raising, you won't be able to raise the that money if it's unappealing. You know, if you're trying to raise 20 million for a company that people don't think is is any good, of course you're not gonna raise the money regardless of valuation almost. But let's say you are raising $16 million, that number I picked earlier in a Reg D for your company, typically if you are successful raising that money, if it's appealing enough, that's gonna typically get you 25 to 33% dilution is sort of normal with savvy investors in a Reg s or in a reg A plus, you'll generally see less dilution because the investigate the investors are less sophisticated and it's more about emotional appeal to Main Street investors.

So what I observe incredibly marketed offerings that are successful online in a Reg a plus or a Reg S scenario is 10 to 16% dilution for the same amount of money raised. So a, a higher valuation is normal, but of course, you know, at the end of the day it's what works. And we can test that by going to prospective investors and asking their opinion, do they like the offering? You know, that's a smart thing to do. You can do that by a marketing using a test The Waters campaign where you can literally test market your company. I recommended that to the SEC in 2012, not by that name. I called it Crowd Audition. They chose to do that and called it test the waters for Reg A Plus. And then they expanded it to be more use, more universally useful. So you can put an offering up and test market it without taking any money in a test the waters scenario.

And that's a good thing to do. Okay, so I've handled all the questions you've posted so far. Let me then move to wrap up. We will be sending out a recording of this webinar via, it'll take us a week or 10 days approximately with a text transcript. It'll be a blog post on our website as well, so you can share it to people that you like and know or help, want to help. I hope this, this has been useful. Thank you very much Akko for your role in pulling this all together and making the emails happen, causing everyone to show up. Thank you for showing up. I hope you found this helpful. My email address, I'll put, I'll type it in right now. Let's see here. This is gonna go to all of you. You are welcome to email me direct at this address if I can type it properly. First time. I'm dyslexic so it's always a struggle to type things properly and I got it right. No, I got it wrong. It's fixed it. This one spelling mistake in there. Alright, please, you are, you're welcome to email me there for further follow up questions. And again, thank you guys. We'll be publishing this and sharing it and all the stuff I mentioned already. Thanks again. Have a great afternoon. Don't forget the legal disclaimer, ease that I gave, hopefully sufficiently. And thanks again. Have a great day. Talk to you soon. Bye-Bye.

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