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Chapters:
- Steps to complete before launching your Reg D offering
- Is it important to have a transfer agent for your Reg D capital raise?
- Regulatory limits on your Reg D capital raise
- Investor liquidity in Reg D offerings
Disclaimer:
The content in this webinar is not and shall not be construed as investment advice. This information is meant to be informative and for general purposes only.
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Rod Turner
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
www.ManhattanStreetCapital.com
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
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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.
THIS TEXT TRANSCRIPT HAS ERRORS IN IT THAT WERE CAUSED BY THE SPEECH TO TEXT CONVERSION SOFTWARE WE USED. DO NOT DEPEND ON THE TEXT TO BE ACCURATE. WATCH THE RELEVANT PARTS OF THE VIDEO TO MAKE SURE YOU ARE PROPERLY INFORMED. DO NOT DEPEND ON THIS TEXT TRANSCRIPTION TO BE ACCURATE OR REFLECTIVE OF THE STATEMENTS OR INTENT OF THE PRESENTERS.
