How To Raise Capital Online Using Reg D and the Advantages of Combining Reg D With Your Reg A+ Offering - Interactive Clickable Video

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

Chapters:

1. Disclaimer
2. Introduction of Rod & Manhattan Street Capital
3. What is Reg D?
4. What are the Advantages and disadvantages of using Reg D to raise capital
5. What types of companies Reg D is best suited for?
6. Benefits of combining Reg D with your Reg A+
7. Reg D regulatory constraints
8. Reg D offering timeline
9. Reg D marketing methods
10. Payment logistics
11. Logistics of combining Reg D with your Reg A+
12. Reg D costs
13. Minimum and maximum capital raise amounts
14. Liquidity for Insiders and investors
15. Q&A - How is Testing The Waters different between Reg D and Reg A+?
16. Q&A - Will advertising agencies charge a monthly fee for content creation?
17. Q&A - Is Reg D available in Canada?
18. Q&A - Does the advertisement need to run as long as the offering?
19. Q&A - Do you need to ask investors to sign an NDA?
20. Q&A - Reg A+ costs briefly?
21. Q&A -Does Manhattan Street Capital recommend service providers?
22. Wrap up

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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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I'll start with a legal disclaimer and then of course we'll put the legal disclaimer up in the chat box as well.
We are not like Manhattan Street Capital, we're not valuation professionals, we are not broker-dealers, we're not underwriters, we're not securities attorneys, we're not investment advisors. So we don't do any of the things that those professionals do and you should check with professionals on anything that I say. My intention here is to be as pragmatic and helpful to you guys in assessing the merits of Reg D and how to market it and how to sell it and to do so legitimately. That's the intention of this webinar but again if in doubt check, if there's any question check and I'm not going to be telling you what your valuation should be anyway but bear in mind those disclaimers. So I'll get started now, my name is Rod Turner, I'm the CEO and founder of Manhattan Street Capital. I launched a company nine and a half years ago because of Reg A+, frankly I think it's a very good rule system and I think it has a great broad set of uses for capital raising purposes and as a growth of that we got into Reg D offerings and Reg S, Reg S being international style offerings, otherwise somewhat similar to a Reg D offering and this webinar as you know is all about Reg D and how to combine Reg D synergistically with Reg A plus offerings so we'll get into those topics. Akos is here with me, he's a key member of our team at Manhattan Street Capital, thank you Akos for getting all of the blog together, the webinar logistics together and the email invitations and so forth, thank you as usual for that and for your help now. My background is that I started my career as an apprentice and then I became a professional electrical engineer on a nuclear power station in England and then I moved into computers in the UK in marketing computers in order to progress my career more rapidly and then I moved to the US for California for better weather and for better business opportunity as well and then as a result of that I moved over here, got myself situated with my business my temporary visa and my green card and so forth and then I got into high-tech startup companies during the PC industry's growth phase, early growth phase so I have prior to this company Manhattan Street Capital I've played a key role in building six successful high-tech startup companies to liquid outcomes, of those two were IPOs to the NASDAQ, the first one was a company called Ashton Tate, we made a product called Debase, I was there during the Debase 2 and Debase 3 and 3 plus era, I was the 12th employee there, built the sales and marketing organization and the international organization at Ashton Tate and was there for the IPO and then I moved on to the other more well-known company that I helped to build is Symantec, the company that brought Norton Antivirus to market, my team built the Norton Antivirus and launched it in 1990, 1991 and 91 is when we launched it, we built it to be one of the leading, if not for a while it was the leading antivirus at least in the US and I ran the largest acquisitions that Symantec implemented, I made those mergers succeed and I launched, I've done venture capital in the past, we have a small venture capital fund here that is also coordinated by me and run by me and Manhattan Street Capital I launched this company, I launched the company, we went live in May of 2015 about six weeks before REG A+ went effective, we were the first focused REG A+ funding platform and advisory service, there were other companies that were already doing regd offerings that added in REG A+, we were the first to focus on REG A+ and we were very early in that game, 2015, we are a boutique company, we don't try to do hundreds of offerings, we do a handful of offerings and we add a lot of value to those companies offerings and advisory services as well as our back-end investing platform which we continuously improve which makes, it makes it easy for the investors to invest and it makes it easy for the marketing integration to tracking of all activities in the back-end in order to better optimize advertising outreach. I recommend you use the speak of view settings, click on the view button and use the speak of view setting during this session, feel free to put questions in the chat box at any time starting now whenever you see fit, after the prepared remarks I will address as many questions as I can at that point, it'll be an open Q&A essentially, we will be recording this webinar, I request that you do not record the webinar yourself, we'll be recording it and we'll edit it, if there are any mistakes that we identify we'll remove those mistakes, we'll send out a recording to you, everyone who attends and everyone who booked to attend this session will receive a link with a clickable index that shows you the webinar recording so you can just go to the parts that you want to see without having to watch the whole thing because this is going to go probably an hour and 15 or an hour and 20 minutes is my expectation. Our focus today is raising capital online via RegD and in particular in addition how to combine RegD with a RegA plus offering and make that synergy, make that work more effectively than just a RegD or just a RegA plus alone. We'll touch on the advantages, I'll describe what RegD is, I'll explain its advantages and disadvantages, I'll describe what companies are better, more likely to have success with a RegD offering, I'll explain the benefits of combining RegD and RegA plus and how to do so in broad strokes terms, I'll review the primary regulatory compliance issues that the SEC requires in a RegD offering, I'll cover the schedule as well as costs and marketing methodology, I'll discuss payment processing and the nature and behavior of investors in a RegD offering online and we are focusing online as I mentioned earlier and I'll talk about the logistics of combining a RegA plus with a RegD offering, the minimum and maximum amounts to raise or that you can raise and talk a little bit about liquidity and then we'll get into a Q&A session and when I get to the Q&A session I'll prioritize those that are posted first as well as those that I can add the most value to, if it's a question that I really can't add value to then I'm probably not going to prioritize answering it. So what is RegD? RegD is one way or the other, it's been around for a long time, the SEC amended RegD in 2012, September of 2012 to enable companies to market themselves and their offerings online via for a RegD raise, so RegD is, there are two forms of it that matter 506b and 506c, many people who have only done raises offline habitually use 506b which where you when you know the people that you are emailing and making phone calls to are accredited then you're allowed to raise money via 506b and they're able to self-validate, they're able to state that they are accredited, what their income is, what their net worth is, which is a blessing. The disadvantage of 506b is that you are not allowed to market that offering online to anybody, you can only promote it to people that you already know are accredited, not that somebody else knows are accredited but that you already know are accredited. So that is a significant restriction which is why most people use 506c when they're raising money online via RegD. 506c allows general marketing, PR advertising, social media advertising where people who are attracted may be accredited or not but you are only allowed to accept investments from those who are accredited and this is a negative that goes with that. They are required to validate that they are accredited with a third-party service that is run by an attorney, so we have such a service that we work with but it is a bit of a pain, somebody who is very wealthy has to prove that they're wealthy and they have to take some steps, upload a couple of documents and it's a bit of a pain to do that but that is the price of entry in order to be able to advertise and promote your offering to the masses essentially. I'll be getting into more of these things later. Online solicitation is okay, I said that there is no maximum amount of money you can raise in a RegD in any period of time. Logistically you are limited by the number of investors that you can bring in. If you exceed 2000 accredited investors there's a thing called Section 12G which can in some cases, depending on the size of your business, when the business is big enough it can require you to do expensive audits every quarter as if you were publicly traded on the NASDAQ already. So that is a restriction that matters. There are legitimate ways to solve that problem. Typical investment amount in a RegD offering online will be 15 to 50K, obviously depending on the nature of the offering. Disadvantages of RegD, I've touched on a couple. Investors tend to be skeptical. Most RegD investors that by definition are already billionaires. Many of them have burned their fingers as I have. So they're more savvy and they're more difficult to reach because they have a bazillion options. So many companies are raising money and providing them accredited investors opportunities to invest. It's harder to get their attention. For the issuer company, you guys are probably most all of your public issuers, you will get a lower valuation raising money in a RegD from accredited investors typically. Then you would via a RegA+. RegA plus is a public offering with restrictions that go along with that, but you can generally get a higher valuation in that offering. And the accreditation verification step that I already mentioned, that's something which will irritate some people or put them off online investing. Advantages of RegD, you're allowed to make projections unlike in a RegA plus or an S1 IPO where we have to protect the investors from naive or greedy founders. I'm going to close the door for a minute because my dog is barked. So unlike in a RegA plus where we have to provide a great deal more protection, in a RegD offering you're allowed to make a projected internal radio return statement. You're allowed to project how many buildings you intend to buy or how many acquisitions you might accomplish, you intend to accomplish over a period of time, depending what it is that your business plan is. Those types of projections are a luxury that you get because the SEC says, they don't say this to me, you know, the SEC's behavior indicates that they consider accredited investors to be sophisticated enough that they don't need to be so protected. They can interpret with the right degree of skepticism the statements and claims that you are making in your RegD offering. Another advantage is you don't need audited financials in a RegD. The process of filing with the SEC is very simple. You don't file and ask for feedback, you don't expect any response from the SEC. You're supposed to file a Form D offering within 30 days of accepting your first investment. So it's very, very relaxed. That's a remarkably demanding thing. But the SEC then obviously reserves the right to audit, that is to say, to check your filing at any time in the future and compare it to what you're doing and make sure that what you're doing is legitimate. But it's a heck of a lot simpler than an S1 IPO or a RegD A-plus filing, for example. I would say the marketing restrictions in RegD offering 506C are very straightforward. You're not allowed to make hyperbolic kind of statements. You can't say we are revolutionizing the entire AI chip business. You can't make grandiose claims like that. What you say has to be based on fact and be reasonable. But you are allowed to do broad-based marketing via advertising vehicles online. And I think it's pretty straightforward, frankly. I don't think the SEC's restrictions are unreasonable. The legal filing documents are a lot less expensive than an S1 IPO or a RegD A-plus. PPM is required, private placement memorandum. It has other people call it other things. But this is a document that provides extensive risk factors in it to warn the investor and to reduce the risk of future lawsuits. It also describes the terms of the offering. And it's essentially a statement of credibility for the company. It states what the business is. It states who the principles are, what the terms of the offering are, et cetera, et cetera. And that's less expensive by far than some of the other capital-raising methods. RegD is widely known and accepted. The last time I checked, it was something like $6 billion a year being raised by RegD. And that probably severely understates how much money is raised. You are allowed to provide investor optionality. For example, you're doing a real estate project and you will offer the option at the three and five year points for investors to redeem their investment with whatever gains that they have accumulated or to stay on board and reinvest. That optionality is a very powerful thing which you have in RegD that you don't have in a RegD A-plus or an S1, for example. And you can use more sophisticated instruments in a RegD, which you can probably use in other methods, but it doesn't work so well. So because the investors in a RegD offering are accredited, more sophisticated, you can offer things like warrants that might confuse investors in a public offering, in a RegD offering, sorry, or in a RegA-plus offering. Suitable companies. You've got to look at this from the investor mindset, right? So accredited investors in a RegD offering are a skeptical bunch. They're going to do due diligence. They're going to check with their buddies. They're going to look at the investment, the competitive landscape. They'll spend time and effort checking into your company and your offering. Fair enough. But with that understanding, then that gives us a better handle on how we should market to them. Demonstrate the credibility of the company, the credibility of the team. Make sure that the offering documents are professional and comprehensive or well-written. But also the terms have to be attractive. You know, the valuation you're normally going to get in a RegD offering will be substantially lower than in a RegA-plus, for example, because we're dealing with accredited, sophisticated investors who really demand that. One of the things that I like to use as a test in considering the viability of a RegD offering is it should be so attractive that when a suitable, when an investor who recognizes and understands the business is evaluating it, they like it so much. They don't want to tell their friends because they're worried that if they do, their friends might take the capacity thereby displacing them from getting in. They have to think of it as a hot opportunity. It needs to be easy to explain. But doing online advertising, right? But doing social media advertising on Facebook and Instagram and if we can get into it TikTok because it's so much more cost-effective than Facebook and Instagram are. But we're talking about somebody's doing something else in their social media stream and we're intervening with an advertisement that has to be compelling and attractive and easy to understand. And if they click on it and come to the offering page, the offering page has to be so compelling that they stick around, that they spend 10 seconds so that we can get them to spend 30 seconds, so we can get them to spend two minutes and potentially engage, give us an email, start an investment even. In these online offerings, you would be surprised, if you haven't done them before, you would be surprised how often people will advise themselves and will start an investment or even complete an investment on their mobile phone in these online offerings. Obviously more so in more retailer or more retail-oriented raises like Reg A+, but we see that in Reg D, 506C offerings also. Must be easy to explain. The trends in the business must be favorable. These are just obvious things. You know, if you're in a business where the market's declining in size, it's going to be hard to convince people to invest. Very obvious. Has to have a credible team. You know, the kinds of businesses or pre-IPO companies, companies that have the potential by the nature of what they're doing and the stated intention to go and list when circumstances suit is going to be a more attractive kind of company in a Reg D offering. IOTech companies can be very strong. AI companies are topically, you know, very current green tech companies since the passing of the IRA Act, which puts a lot of money in play for companies to do good things in the green tech space. There's a lot more attractive, there's a lot more engagement from accredited investors in Reg D offerings on that are green tech from that as a result of that. 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. So moving on, we have already touched a little on the regulatory side but I will now give a bit more emphasis to the regulatory side here in a Reg D offering. Every investor must have a know your customer step done which we do on our investing back end. There has to be an anti-money laundering check to make sure that each investor is not on the federal bad actor list event in any way, shape or form and in a 506C which is really the only viable way to advertise broadly a Reg D offering. In a 506C they must verify their accredited status so we integrate that into our back end payment processing system and they have to complete that step. So those things must be done in a online Reg D offering. The private placement memorandum is a requirement, the SEC requires professional disclosures and you as a leader of your company want professional disclosures because you want to minimize the risk of future litigation. You want to disclose everything that matters. So the investors are well informed. Let me see if that's the origin. Risk factors I mentioned got to be comprehensive because we live in a litigious society and we want to thoroughly inform investors so they know what they're getting into. There should be no secrets. Having a transfer agent is not a requirement but it's a heck of a lot easier when you do use a transfer agent and believe you me they do a lot of work, they earn their keep, they don't charge much money for their services, they provide legitimacy to the offering, they provide an online account access for your investors to check in and see the state of play and if you've raised the share price, the security price since they invested, that will be reflected. The current raised price will be reflected as the value of their security in their transfer agent account. That's great stuff but most importantly for many companies who have only raised money through Reg D in the past from angels or other wealthy investors like VCs, they may have had four, six, eight, fifteen investors. The idea of dealing with hundreds of investors is pretty intimidating and the transfer agent does the logistics of that stuff. You know somebody's transferring their investment from their personal name into their family trust, they deal with the transfer agent to do that. You're paying dividends, you can have the transfer agent distribute those dividends in a cost effective manner, they take a lot of the work off your plate. Regulatory wise I mentioned if you exceed 2,000 accredited investors in your Reg D then in your company through offering money through Reg D, then if when you reach certain size levels I think 75 million in revenues, 50 million in float, I think is the right number, double check on that. We have that listed on our website in a FAQ. Then if you were to exceed those numbers then you need to produce expensive orders every quarter going forward. So you want to avoid that in any reasonable way but of course 2,000 accredited investors is a hell of a lot of investors when they're putting in size of what amount of money each. And you know liquidity for all these accredited investors is limited. Theoretically an accredited investor is allowed to immediately sell their stock in your company to another accredited investor they won but only with a cooperative securities attorney letter telling them that that's the state validating that. It's more normal to do accredited to accredited investors at the six month point and technically an accredited investor can sell to any investor at the 12 month point after making their investment unless you put a lock up on them. So those are the principal regulatory issues around Reg D offerings along with a couple of other minor ones or other ones that I mentioned already. How are we doing on time? No we're doing pretty well. Okay so from a scheduling standpoint it's you know as is often in the case in life theoretically you could put together a wonderful offering page in two weeks especially with the advent of chat GPT and so forth but life intervenes complexities are there. It's normally going to take you four to six weeks to put to have the marketing agency which we bring in. Typically you're certainly welcome to use your own marketing agency but we have qualified marketing agencies that we know and trust that know their stuff. Point being to create the content and have it beautiful have it effective have the right messaging and have it ready to go live. It's normally going to take six weeks it can be done faster so the finding the creation of the private placement memorandum can be done in two or three or four weeks assuming that you are ready and able to answer the questions on the key aspects of the offering for the securities attorney and that we have a good securities attorney on board which of course we will bring to the table if you don't already have one. So I would say going live at six weeks is realistic as long as proper attention is being paid by you and your team. The offering page content is critically important because not only does the advertising outreach and the email outreach have to be really strong. When we bring these potential investors to the offering page it has to be clear cut it has to be attractive it has to be visually pleasing has to be complete enough that the the thorough investor can find everything they need to find within reason. It has to be well done you need an offering video the offering video needs to be short enough that people will actually watch it to the end and it needs to be clear cut it has to style of delivery has to be right on it can't be too salesy needs to be more of an honest and open kimono style. And I guess the most important thing to know in going live I'll get into actually I'll get into the marketing in a moment I'm on schedule here so let's stick with that six weeks to go live is a realistic goal that's the key item thereafter we build a marketing funnel we build a prospect investor funnel and I'll talk about that now marketing okay regd marketing online general solicitation we have an investor member base of accredited investors that you're welcome to email to we'll encourage and facilitate that with the marketing agency involved you aren't going to raise all the money there because our investor list is too small we don't abuse them we respect them they don't get inundated with emails but each offering is so different than the other I only I think that the only way we'll raise money easily from our investor base is when we have more than a million investors that are not abused and that these days are a big platforms like start engine with giant investor list but they abuse the privilege so there's all sorts of restrictions there in terms of the effectiveness of being able to access those people okay but advertising is the so the real issue here is that advertising outreach is the most effective vehicle and there are some exceptions with email we're working exclusively where they start an email company that has rebuilt the email system they vertically integrated and use AI in judicious careful ways but also do very intelligent things with getting email delivered to recipients in an effective way for a 506c offering so this is a rare exception to where what I've seen in the main with email with with bought and rented lists of supposedly or actually accredited investors generally those email outreach programs are very ineffective I've seen that chapter in verse advertising outreach through social media is the best way Google isn't very good LinkedIn isn't very good twitter slash x isn't very good although that might change because because that's a moving target but advertising is the outreach vehicle that does work targeting using the right investment target I'm sorry right invest or targeting methods which is a state-of-the-art thing that is constantly evolving so if we're working together I'll be advising you and the advertising agency in order to make sure that they're doing the right work to target the right people and bring them in cost effectively one of the nice things about this method is that it's easy to see quickly how cost effective it is how much resonance we're getting from the advertising and from the offering page it doesn't take months and months or even weeks and weeks to tell whether we have successful engagement or not not to say that everyone's going to rush in and invest on day one with accredited investors they will take their time and again consider what they're doing but they will be investing over time but the point here is that we can easily track the cost of acquisition of each lead and that tells us an abundance of things right and then of course the conversion rate of those leads into investors is also easy although not instant to figure out so my point here is that you don't spend a lot of money up front in advertising typically a ten thousand dollars of ad spend per month is enough first month to ascertain which which ads are working best which messaging is working best you're obviously not going to raise much money on a 10k ad spend but getting that efficiency of conversion into prospects who then and then optimizing the conversion of those prospects into actual investors is key and we build that efficiency over time we are not a marketing agency we we're involved in too many things to be allowed to be a marketing agency but we advise you and we advise the marketing agency to maximize their efficiency and your efficiency of the outreach okay you don't need a broker dealer you're allowed to have a broker dealer on a REG D generally it isn't it isn't going to help much because excuse me in these online raises a broker dealer even if they intend to raise money from the get-go when it's a blank slate they're not going to do anything they're not going to put their client relationships at risk for an unproven offering once we've we've done the heavy lifting together to bring in prospects and get them to invest and have a good result from that it's going to take a little while to do that once we have that success if we think it's less expensive to bring in investors through a broker dealer then adding one would make sense very rarely the case in a regd that would have value a big a big part of there was a question in the preamble for the few folks for the folks who were here before we got started about how to target how to find accredited investors the problem isn't so much finding them it's getting their attention in my view because they have so many and such an abundance of places to put their money that's one thing is showing is being exciting enough for them to care another one is that i'd have to say probably intentionally if you if you go for the most wealthy segment of investors on instagram and on facebook they still deliver an abundance of people that aren't accredited probably they're doing that for their selfish reasons to bring in more money to their coffers but it isn't helpful to us right so it is difficult you some of you guys are familiar probably with the way online advertising works in today's market in today's world there's a lot you can do with targeting of advertising to fine tune it and these platforms these social media platforms they have ai software that is tracking it's up to us to make sure we get early effectiveness and that from that effectiveness then their ai will track oh we got another one of those people that like this company enough to invest let's get more of those they continually adjust through their ai to find the right people and it's up to us to nudge it and adjust it and tweak it enough to make that work quickly to get the efficiency of outreach as high as humanly possible okay all right again if you want to ask questions you're welcome to put them in the chat box let me just change the setting here good payment processing a couple of important points most investments are completed on mobile phones these days more than half even an erect d offering credit card debit card ach payments wire transfer and checks are the payment methods of choice obviously with large sums it's going to be a wire transfer usually ach is the least expensive method but making it convenient to invest via debit credit card satisfies a lot of people and again on a smartphone amazingly you know used to be nine years ago nine and a half years ago when i launched manhattan's three capital we would we would rarely see investments via smartphone we would see people finding an offering and inquiring checking into it on their smartphone and then coming back on their computer or possibly their tablet but these days we see a lot of investment activity on the smartphone very impressive change in dynamics keeping the costs low is important um these days unlike in the beginning we have a lot of companies that we're competing with they aren't like us in that they don't offer the same degree of services that we do but they're at display i could i could consider them displacement competitors where companies will go to them because they find them they come across them and without looking at us so they may go to those other companies but they're often charging very rich payment processing fees you know four percent on a check deposit or a wire deposit ridiculously rich fees adding to the already significant fees for debit credit card payments making it way too expensive we do not make any of those charges we do not mark up any of the payment processing we don't mark up payment processing our back end system is the most cost effective you can find i think man i think one thing to to explain to you guys obviously there's a mix in the audience i don't know exactly what your experience level is but for those of us who've only raised money in person or via email and phone meetings and discussions at length the fact that people will invest in accredited investors will invest online without having a meeting without having a discussion is really intriguing and impressive to me and probably it probably should be impressive to you because it's very different than one might expect by definition anyone who is open to investing in an online offering and actually has to be an optimist you know people who are not optimistic won't even contemplate it right the likelihood that somebody's going to fly across the country to check out your your business and have meetings with you in person is slim so it's up to us to do the maximum job possible via the offering and by email updates and by videos and webinars to convey the credibility of the company but it's still a leap of faith and only an optimist would take but they do take it so it's commonplace to see people investing 15 20 25 000 in a REG D offering without having had a phone call without having had a meeting of course the efficiency of conversion goes up when we have people when you have somebody working for you that maybe we introduced but that is working in your employee as a contractor or as an employee that is following up via email to inquire why that person started their 50k investment but didn't finish it and helping them nudge them across the line in legitimate ways then in that case of course we're training those people so they know what they can and cannot say and do and how they can be paid and so forth but my point is that obviously when there is when there's a proper appropriate sales effort going on then that will increase the number of investments that come in but you would be surprised how many people will invest unhelped with the content being provided to them and the follow-up emails that build credibility. The logistics of combining Oreg A plus and Reg D one of the features we've added into our investment flow as an option for clients that do combine both we used to have it be that when somebody's in the investment flow they can anyone can invest up to if without being an accredited investor anyone in a reg A plus offering is allowed to invest up to 10 percent of their income or their net worth whichever is the higher number in any individual reg A plus which is a pretty generous maximum amount if they want to invest more than 10 percent and they self-state they don't have to prove we don't have to check and they don't have to prove their worth or their income if they are accredited they can state that and they can self-state their income and their accredited status in a reg A plus which is advantageous but we don't make that intrusive because most people don't need to be accredited to invest as much as they want to invest when we're pairing a reg A plus with a reg D then we have a switch we set which requires people to state are they accredited or not and if they're accredited then they become a prospect for the internal salesperson on your team to approach them and offer them the opportunity to invest in the reg D and get advantageous terms so that's a little change that we make the other obvious things are if somebody starts off in your reg A plus and then decides they want to invest in your reg D we intelligently fill in their data in the reg D so they don't have to type it all over again which is an obvious thing to do and there are similar things other similar things that we do then probably the most important thing of all here is that the back end investment process integrates into the customer relationship management software that you are using and tightly so so that the person or people in your team and the advertising agency can see what's going on in infinite detail infinite not infinite in in great detail as to what the state of play is who's reached what level in the investment process which person from which ad on what day with which target audience in which target audience metrics is the reason is what was the ad that caused this person to make this advantageous investment all of that integration but most of all the most convenient access to the internal sales people so they can efficiently sell whether it's the reg D or the reg A plus the integration of all that data doing that very smoothly is hugely important and of course we facilitate that okay moving on to costs assuming competent service providers which is one of the reasons we're here if you were working with us to get a ppm done it's going to be twenty to thirty thousand dollars of course you can spend a lot more and sometimes that's there are good reasons to spend a lot more but you can get it a very good ppm done for twenty to thirty thousand dollars marketing setup is typically going to be twenty five to thirty five thousand dollars including all moving parts and again of course there are exceptions if you insisted on having fifteen offering videos on your landing page i would recommend the case but if you did that would cost you much and that would jack up the price a long way so the front loaded expenses assuming that this doesn't that you are are not unnecessarily delay in the whole process of around fifty seventy five eighty thousand dollars front loaded expenses to get your reg A plus live of course if you already have one and you already have a ppm that you are not offering online and you want to convert it to be online then it saves a lot of money and time that's that goes without saying once we're live it's all about that marketing outreach and getting the efficiency higher and higher and raising the spend on advertising according to the outreach being higher and higher so that we can raise lots of money cost effectively and this is where it comes down to how appealing is the company how attractive is it how well suited how good are the industry trends how good is the advertising how much attention is being paid to adjusting everything to optimize it in order to bring the cost of raising capital down the least expensive that i've seen in a reg d is to spend five dollars to raise a hundred that's the least expensive i've seen you're more likely to see a ten dollar per hundred dollars raise ad spend but it doesn't happen instantly overnight that is a building process where we're building a prospect funnel we're sending regular emails to those folks with updates with short videos explaining about the company in an open kimono style and those emails become more and more valuable because they cause people to convert from prospect to investor or to adding to their investment or to coming back with their ira the managed ira and investing a larger sum through it minimum maximum numbers excuse me when i refresh uh we're doing okay on time um there is no tech depending on the nature of your offering there's no minimum but if you are let's say you're raising money to buy a building it costs 12 million dollars then you can't close escrow until you hit 12 million dollars by definition if that's the purpose of the raise but if you are raising money where the the legitimate strategy is to grow the business and to do the marketing the software development the development whatever it is that your business entails then you can do a zero minimum raise um obviously there are risks in any offering and you delineate those in the um in the risk factors of the of the offering but you can have a zero minimum in that case and there is no maximum that the sec applies except the number of investors that you can conveniently bring in right so minimum and maximum is straightforward um at least in many cases it's straightforward the investor can thing i took i talked about earlier that's a section 12g issue an important factor in doing an online raise of any kind is to is to make sure that you set a minimum investment amount that is not going to put off investors so if you think about this from the investor's standpoint in the reg d they're doing something else on their mobile phone or tablet uh in social media and they see an ad and they like it enough to click on it and then they arrive on the offering page and they're looking to see is it attractive is it interesting what are the terms you know what's the valuation what are what is the minimum investment amount and at this point literally it's a remarkably casual interest because they just arrived and they're as likely to leave after two or three seconds as they are to stay it's up to us to make it compelling so they stay but if you have a high investment minimum like 50k then a very large portion of those people that we spent good money you spent good money drawing in via the advertising are going to leave because at this point in the cycle 50k is way too much they're only casually interested our job is to get them to stick around long enough that we can convince them they should be putting in 50 100 or more but you you don't do that if you put them off with too large an investment amount up front normally we see companies choosing about a ten thousand dollar minimum because frankly in my opinion most accredited investors don't want to waste their time investing less than ten thousand dollars the hassle factor doesn't justify it okay so I'm touching on that yep you don't want people put off by and actually that's another issue I want to touch on here you do want to attract institutions to invest in a reg d and this applies in a reg d paired with a reg a plus and in a standalone reg d as well so it may be it may be wise to offer advantageous terms to people that invest more than a million dollars say so institutions will participate and having a high enough maximum can be an intelligent thing because you know a typical a typical institutional investor they may have a minimum investment amount of say eight million dollars and another rule that says they cannot be more than twenty percent of the total race right and you if you would like them to be able to invest then you need to have a maximum that's high enough to take that and and not have them be more than twenty percent of the total race so bear those sorts of things in mind as you're establishing the terms of your offering but what I'm getting at here is making it attractive to institutional investors as well okay moving on to liquidity as I already touched on this typically well at 12 months after having received the the security the reg d investor is allowed to sell to anyone if they can find someone to buy their security at six months they're easily allowed and able to sell to an accredited investor or even sooner with a an opinion letter from an attorney but none of this is easy and you're not listing the shares typically with the advent of alternative trading systems ATS for short you are allowed to list your reg d security on an ATS to sell only to other accredited investors when you have enough credibility in the company enough scale enough interest and enough investors to make it worth doing so an alternative trading system is a useful vehicle in some cases for listing your restricted stock fair enough ATS there are too many of them right now this is a new category of exchange there is no shorting and no naked shorting on ATS so that's a very big advantage in my opinion um and they're a straightforward place to provide liquidity when you deem appropriate to spend the money listing on an ATS obviously if you're pairing a reg d with a reg a plus then the reg a plus provides great liquidity um for all investors all owners in a in a company actually as long as they've exceeded their rule 144 holding period okay so now i've covered my intended material very similar actually so um i believe the sec adopted testing the waters because i suggested a thing like that i called it crowd audition in 2012 the summer when they were 2011 2012 when they were looking for input i suggested that they allow entrepreneurs to test market their companies and they started off with reg a plus and we trademarked that term in numerous interesting ways for because we were paying attention but they since then expanded it to encompass other offerings so you can use test orders in reg d as well and essentially you are allowed to test market your offering as long as you do not you absolutely do not accept any investments you can take non-binding reservations in test orders and you're allowed to use marketing outreach the same kind of outreach that they will allow in general you can't over promise you can't hike but the only valid way to do it is to do advertising that is a proper test we did a test um one test where we did three different campaigns with three different landing pages for one identical company offering and the worst example cost us eighty dollars for each attractive lead and the middle of the pack one cost us forty dollars approximately probably forty two dollars for each attractively and the best one was five dollars per lead that was a really useful piece of testing right but and you're allowed to do it well you know it's a good thing to do as long as you don't spend months and months doing it and delay everything while you're waiting it doesn't have to take a long time you can do it via email or via advertising but you know with email it's a little bit more cantankerous you need to have an audience of people that are interested to be able to do it via email yeah so advertising agencies will usually charge a monthly fee for creation of the content they might charge an upfront fee quick for creation of the initial content right they will charge that but once we're live and running they'll charge a monthly fee which will be usually in the you know seven to ten thousand dollars a month of range and some of them will also charge usually they'll charge a percentage on the advertising media spend so you only spend more money on advertising when you're happy with the results but they'll charge a percentage fee on that typically as well rank d is available in for canadian investors with proper filing in canada it's not automatic there's some filing work to do in canada the advertising needs to run as long as it takes to bring in the money you know it's like how far will i how far will my car go if i stop pressing the accelerator it's going to stop pretty quickly when you turn off when you take your foot off the accelerator same is true with advertising we get the efficiency of the advertising outreach up then as long as the promotion is going on we bring in new prospective investors and actual investors but only as long as the promotion continues it's not a once and done thing it doesn't all happen up front it isn't a walk in the park it's a journey it's a process that takes a lot of effort we're looking for a cfo who can help Giovanni please send me an email um and i might be able to help i don't have anyone in my back pocket um more and more likely to send you a shared cfo resource or service provider cost of reg d um i'm going to send you i've already touched on the costs i'm going to send out um when i send out this recording you can go to the the website manhattan street capital website that you see displayed behind me you can use the search box there and type in what is the cost of a reg d we use a custom built chat gpt chatbot on our website which uses all of our documents and all of our knowledge base to answer your questions so you'll get useful answers there by using that feature you you don't want to ask all the investors to sign an nda because you'll lose so many investors you know you just will lose a hand on the fist you can of course do that cost of a reg a plus up front you know 160 000 reasonable total front loaded expenses and ongoing expenses similar to a reg d a lot of advertising and more to it than that of course you've got a listing fee to be on our platform advisory fees to us um combining a reg d and a reg a plus doesn't change much because you're you're paying per in that there's a there's some fees we charge for that i don't want to spend all of this time pitching my company although i kind of would like to do that but um if you send me emails about this stuff i'll send you detailed documents and explain our terms and so forth but the cost of adding a reg d to a reg a plus is minimal because you've got most of the content is the same it's not all the same but most of the content is very very similar to have two offering pages i don't know the blue sky requirements by state off the top of my head you can search in our website for that too we delineate the different states we recommend them we recommend marketing all of the service providers especially the marketing agency based on their expertise availability and their costs and how our experiences have been frankly it's an ongoing journey where agencies come in we bring them up to speed to the extent we need to so they understand what and how to how to do what needs to be done and they either get burned out and become useless or they get too expensive and arrogant and charge too much so over time we have to bring in new agencies and bring them up i'm doing good how are you doing if you're asking what would be the first step it would be to email me at rod turner at manhattanstreetcapitol.com that would be the first step for me to assess how likely it is we can succeed for you and what it is you want to do and to give you advice on the costs and process and so forth and then once we're signed up then we're bringing in you know all the different service providers obviously um carl says REG A+ your requirement is two years if yeah that's true for a newly fought yes that's just the life of the company that's correct carl yeah i i attempted to say that yes and now maybe i didn't say it clearly but that's correct if your company's you know two months old then you have a two-month order which is very low cost and simple uh amir says is there any cost associated with the initial success no we don't charge to help you figure out if you should do this no i mean i'm assuming a normal approach you know if you would have us jumping through all sorts of hoops doing an audit of your business then we would charge for it but that doesn't normally need to be done it's pretty sweet you know i have a lot of practice with this which helps me understand which companies are appealing which ones are not so appealing you know i mean there was a company a couple years ago probably three years ago that wanted to do an ipo to the nasdaq they were doing about 40 million revenue they were slightly profitable with a slow slow growth rate in a very boring business it was hard to explain and i advise them not to do a REG A+ because they kept coming back and i kept on saying no we shouldn't do this same thing for REG A+ we don't charge for advising you if you should do this yeah we've done life science startups biotech is one of the best segments for companies to raise money via REG A+ especially and in REG A+ REG D because people care to help other human beings and their family and members and friends there are some biotechs that are horribly complex and you know or revolting to consider but there are a lot of them that are very appealing to investors i thank you very much for attending i hope you found this useful and look forward to hearing from you via email if you have follow-up questions and helping you if it's appropriate and again bear in mind the caveats you know we're not securities attorneys we're not auditors we're not broker dealers or underwriters not valuation professionals all these things we're not trying to help you anyway right.
 

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