Influencers, Athletes, Collectors, Real Estate Companies; How To Raise Capital From Fans & Followers Via Series Reg A+; Interactive Clickable Video

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

Chapters:

1. Rod’s Background
2. About Manhattan Street Capital
3. Disclaimer
4. Webinar’s Agenda
5. Summary of Regulation A+
6. Advantages of raising capital via Reg A+
7. What is a Series Reg A+ offering
8. What are Series Reg A+ offerings best used for? (tangible – art, real estate, collectibles)
9. What are Series Reg A+ offerings best used for? (intangible – art, influencers, music, athletes, fans)
10. Successful Series Reg A+ raises - examples
11. Reg A+ Series offering liquidity and listing options
12. Conventional Reg A+ liquidity
13. Post offering listing options and reporting obligations
14. The advantages of Reg A+ on a company level
15. How to market your Reg A+
16. How to involve your friends so they can conduct similar capital raises within your offering?
17. Regulation A+ timeline
18. Costs of conducting a Reg A+
19. Tips and Techniques for a successful capital raise
20. Q&A - Comparing a Reg A+ to a SPAC
21. Q&A - Do Reg A+ IPOs have the same reputation as SPAC IPOs?
22. Q&A - How big does a Reg A+ candidate company have to be?
23. Q&A - What social media advertising platforms do we see working?
24. Q&A - Does the SEC regulate the price of Reg A+ shares?
25. Q&A - If there are more subscribers, is the LLC considered one shareholder in a private company?
26. Q&A - Can you offer product discounts or incentives to make investing more appealing?
27. Q&A - Can a public company use Reg A+ to do a secondary offering?
28. Q&A - Should you do Reg CF before Reg A+?>
29. Q&A - What's the difference between Reg A and Reg A+
30. Q&A - Is putting together a stock option plan for third party, something that is subject to securities laws?

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.

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.

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. 

So the subject matter for this webinar is how to raise capital from fans, followers, and collectors and investors using Reg A+ and Reg A+ series offerings. So I'll be covering, I'll be covering quite a lot of ground. So welcome, thanks for joining us. I have had the good fortune. I grew up, I started my career as a, an electrical engineer on a nuclear power station in England. Then I moved in to computers, initially many computers, and then into microcomputer software and moved to the US to California. And I've had the good fortune to play a key role in building six prior high tech startup companies. Two liquid outcomes two, which were IPOs to the Nasdaq. One of those was Ashton Tate, which dates me. That was a database company. We made a product called dbase, dbase two, dbase three, dbase three plus. And then I went on to Symantec where I was, I was the 12th employee at, at Ashton Tate making dBase. We went public later. And, and at Symantec, I was the, the executive VP there, responsible for large chunks of the business. And then when we started buying companies, I ran the largest acquisitions. My team launched an antivirus, and we went public also on the Nasdaq.

Launched a, I launched Manhattan Street Capital because of Reg A+. To me, it's a very well-written regulation. I see a lot of opportunity for it. It's continuing to grow and gain traction. There's more and more innovation around it, which when I get into the series offerings topic in a moment, you'll, you'll see. So what Manhattan Street Capital does is we do primarily two things. We advise companies that work with us to, by bringing in the right service providers of all types, and then advising them to optimize how they make their Reg A+ work and the marketing of them. We have an investor membership that, that are interested and engage in those companies. And we also have a website platform. You can see a picture of our, of our homepage behind me. So we host offerings, not just Reg A+, but primarily Reg A+ offerings on our website to maximize the ease with which investors can invest and with which, and also the efficiency of marketing so that we can reduce the cost of marketing for our client companies. So we do those two things. I launched the company in March, almost eight years ago in March of 2015 because of Reg A+. I'm not an attorney. We're not valuation professionals, so we're not underwriters or broker dealers. So please take everything I say with the pinch of salt. I'm trying to do, I'm trying to convey to you inform you about everything I say here. But I am not claiming to be, and I'm absolutely not. Any of those other things that I just disclaimed.

At the end of the session. I'll answer questions. So you're welcome to put them in the, you're welcome to put them in the chat box and I'll answer them as best I can later on. I suggest you use Speaker View, or it may be the, the view that I've set up this time may end up being better enough. Just let a couple people in. Yeah. The, if you are if you're seeing me front and center, then leave the view the way it is. If you're not select speaker view, that will improve it. We are recording this webinar and we will make a version of it in a blog post on Manhattan Street Capital with a content with a clickable content list. So you can easily go and look at the parts of the video you want to see later on. So the agenda is, I'll touch on what is Reg A+, what are its advantages what is a series Reg A+ offering? I'll explain that and what it's good for, what, you know, what a good use is for a series Reg A+, cuz it has a bunch of neat things you could do with it that weren't possible before. And I'll talk, I'll also talk to the subject of when you have, when somebody's posted a funny question. Yeah. But I'll also talk to the question of aftermarket listing of ownership of units of ownership or shares of ownership in companies that are using series offerings. That's a unique listing phenomenon.

I'll talk about liquidity in Reg A+ for insiders as well as for investors, how to market Reg A+ briefly how to involve friends in a series offering. It's a particular special case. I'll talk to the schedule for typical Reg A+ as well as the typical costs. And then I'll get into some tips and techniques, assuming there's time for that. And then I'll get into the q and a. Again, my name is Rod Turner Manhattan Street Capital. And welcome, thanks for joining us.

So now I'm gonna go, I'll explain a summary of what Reg A+ is. So Reg A+ came into effect in the summer of 2015. It enables people of any wealth level to buy securities in offerings made online. And they can actually, as far as the SEC is concerned, those investors can come from anywhere in the world except problem states like Iran or, you know, North Korea, that kinda thing. They don't have to be wealthy to invest a typical Reg A+ minimum investment amount. The lowest I've seen is a hundred dollars. But typically 300, $400 is the minimum investment amount the companies established. So it's democratic access to, to great opportunities that non wealthy people didn't have before. It's a kind of public offering. It's, it's limited to us and Canadian headquartered companies. Worldwide Companies can use Reg A+, but they have to be doing something legitimate in the US and the entity doing the offering must be a US entity.

Marketing and advertising is acceptable. In fact, it's an absolute requirement in order to raise money online. And Reg A+ was designed from the outset to facilitate raising money online on the internet. So marketing is a key, key part of it. Advertising especially and one of the side benefits of doing a Reg A+ is that cause the SEC qualifies each company that is allowed to conduct a Reg A+, that credibility goes a long way. It causes strategic partners to come along. It causes institutional investors these days to participate in many reggae buses. So, you know, the awareness level courtesy of covid and people being stuck at home for such a long time, that caused online investing, crowd investing Reg A+ to accelerate its growth, probably four or 5 billion a year being raised in Reg A+ right now. And to put that in context all private placements in the US collectively raise about 1 billion a year.

So Reg A+ is passed that milestone. About 120 companies qualify their Reg A+ per quarter. And that number's been growing nicely. Each Reg A+ offering, it's automatically a year duration. And you can actually set it up so that it's a three year duration. You can terminate it early, you can terminate it whenever you want to, but that versatility is very nice. So you don't have to shut it down. If you want smooth continuity in raising money, you can do that and you can change the share price as you go to, which of course, this one thing you'd want to do over a three year period, it, each Reg A+ requires a filing with the SEC as well as audit that goes back a short period if the company's only existed a short period, but if it's existed more than two years, then the, the company has to provide a, a US Gap audit for those two years.

So Reg A+ has gradually, in the early years, gradually built and become now a significant factor with a lot of innovative things happening around it because it's facilitating offerings that you couldn't do before, which I'm gonna get into with the series offerings discussion. Advantages of a Reg A+. It's less expensive to do than other things like an S-1 IPO and it's more versatile. There's a lot of, there's a lot of new things that you can do that weren't possible before. It costs a lot less than a full bore. S-1 IPO costs the fact that it's the opposite of a, of a regular IPO where you have a quiet period and you can't do anything in the way of marketing that's unusual. It's the opposite. You are required to market your company to raise money successfully, you know, via the expected means, especially social media advertising.

It's faster and simpler. I'll get into the schedule later, but the SEC journey is a lot simpler. So in comparison to a S-1 IPO Filing with the SEC or Reg A+ is probably 10 or 15% of the workload, and it happens a lot faster. I mentioned that you can change the share price and the valuation of your company as you go, and you are allowed to, I'll look at the questions Leah. You are allowed to set a low minimum or a zero minimum raise. So you can draw down investment money from escrow and issue the shares to the investors on an ongoing basis. And if you set up the Reg A+ properly, you are allowed to use the proceeds of the raise to continue to promote the raise. So that makes it much more efficient. Having a high minimum money makes sense if you're buying an asset.

And that's the purpose of the raise. If you're buying a building for $12 million and you probably need an escrow and a $12 million and it's gonna be expensive cuz you have to sell out all the, all the money to reach that 12 million before you bring in dollar one. So it's better to have a low minimum. It's one of the lovely things about online raising is that a lot of the investors become brand ambassadors. They become fans of your company. If they already are fans, then that's so much better again, right? Because they'll, they have a high propensity to invest and you're getting better valuation than you would get in a Reg D or an Angel or the venture investment. And you are providing liquidity to the investors at one level or another, depending on the approach you choose and you maintain control of your company when in comparison to a venture capital investment, you don't put yourself at risk of being booted from your own company.

There are many other advantages, but that's a good summary of them. So I'm gonna talk a lot about series Reg A+ offerings because that's a, that's, that's a, it's opening and has opened up a, a graph of very interesting ways to raise money, especially for people, for people and companies that have a fan base, customer base of scale. So now I'll describe what a series Reg A+ is. It's an enter, usually an LLC is used. An LLC structure is the pri is the preferred structure. It lends itself to this. And you can have one or two or six or 20 or 30 sub offerings within it. Each of those is its own is is its own mini subsidiary, another llc. But it's really simple and really simple to set up and, and it's issuing, oh, it's selling shares or units of ownership in something.

So you could do one of the, for example, if you were doing real estate, you could do 20 different structures, 20 different buildings, and each of them has its own terms. The terms are unique to each building. So that makes it easier to, to market the offering. And it gives you a lot of version versatility because you, you can add more series as you go. You can start out with one or two or three and then add more as you go. That flexibility is is very impressive. So these subsidiaries, these little LLCs are very simple to set up. And the way in which the Primary Parent LLC is set up is designed to facilitate that. So it becomes a very flexible way to raise money. And then the question is, well, where does it suit, you know, what does it help work best with? It works really easily with real estate.

Real estate has been more than 65% of the capital raised in Reg A+ today has been for real estate offerings for all sorts of good reasons. But series offerings are, are, are nice because literally you can raise money for one str one purchase at a time, or multiple purchases at a time if you choose to. That flexibility is nice. So being able to, because people are more motivated oftentimes by a particular specific opportunity than they are by a general opportunity. So it can make marketing a lot less expensive. People use, you can use a series offering for collectibles where for things, there's a whole raft of, of things that you can raise money for. So you can put art, you know, collectible art for, for sale in a series offering, and you can therefore sell fractional ownership to it. You can sell 20%, 60, 80, a hundred percent of it that way, and then later facilitate the owners selling their purchase units and units will shares of security in that, in that unit offering.

So going through the list, actually I'm spending too long on one or two of them. So alternative assets as a class, there's a lot of interesting things that, that individuals that aren't really, really wealthy would like to invest in, but they weren't able to, you know, you can't invest in a $250,000 used Ferrari if you don't have 250 K. But if it's a collectible and you are able to buy units in it for $10 per, you can decide how many you want and become an investor in an appreciating asset. And of course, with the fluctuations in the stock market, people are a little bit more interested in more stable returns and uncorrelated returns. Music set lends itself, well, the SEC as for real estate and music, the s sec gives more flexibility to making offerings. So you can, you can set up a, a system to sell to buy the rights of music rights of various musicians, any number of them within reason in the series offering artworks, I mentioned jewelry, collectible, jewelry, collectible cards, collectible watches, collectible, vintage cars.

Those are some of the things that people are using or can use Reg A+ series offering for. And they are using actually not just a hypothetical that's being done as we speak. So we're democratic, we are democratic, democratizing access to expensive items that can be very attractive, investments, that could be a good diversification strategy. And of course, when we're doing that, then those items themselves are attractive, have a following and are interesting. And that makes the marketing expense lower in the series offering when it's offering things that people are interested in, which of course those things are all examples of, but you can do it, you can use a reggae series, R series offering for other things beyond stuff. You know, things that, like the ones I just listed. So it suits. So social media influencers and athletes and sports teams and established brands that have built sizable presence because you are able to, it has to be done in the right way.

There's a little bit more complexity from a legal setup standpoint than there is when you're just selling fractional ownership of things. But for example social media influencer might be doing exceptionally great now and ex kind of burned out from all the work that he or she is doing. And then want to sell a slice of their future income through a Reg A+ offering or a Reg A+ series offering in order to, in order, in order to diversify and de-risk their life and maybe professionalize their business. So that's, that's an example. Athletes can do the same thing. Sports teams can do it. And it's more obvious with brands, companies that have a successful brand following that, it's obviously the case that they're gonna be able to reach out to their fan base and to raise money more easily. You know, I'll, it's funny, I'm seeing some questions come in, I'll look at them later.

It's, it's, it's, it'll be fun to get to them. So and the versatility to do more than one offering within an offering. So Reg A+ max is capped at 75 million a year. So the parent LLC entity can is limited to 75 million maximum per year. But again, you can do sequential years. However, you know, establishing that maximum going forward with your Reg A+ series offering, you can, you can have just a couple of relatively humble starting points of things that you are selling and then step it up as you go. So that flexibility is also nice. The democratic access to attractive investments that Reg A+ brings is a very attractive component and series offerings. In particular.

Some examples of companies that are, that are doing or have made Reg A+ series offerings Commonwealth for Racehorse. So you're buying an ownership slice in a particular horse racehorse for music royalty traders for real estate. There are a few, but Arc seven properties is one diamonds, there's a company called Lux Argyle that does that. And then a lot of, there's a company called Collectibles that does trading cards, you know, collectors cards, collectors, art collectors, comics and collectors watches. And there's one that specializes in rally Road. So there's a, there's a variety of things that includes vintage cars. So you, you know, I'm giving you a sense of why a series offering can be an attractive thing there. Of course, you want to be able, you may want to be able, so what you see happening in series offerings is in some cases, let me check the time, how we're doing, okay.

In some cases, the idea is that people are buying fractional ownership in something, and they're told that in eight years’ time is when there'll be a liquidation event. We'll sell this asset at that point. In other cases, the companies conducting these offerings are intending to provide an option for their buyers, their investors to sell their securities easily. Online Reg A+ provides that as far as the SEC is concerned, any Reg A+ investor is allowed to sell their security immediately unless the company locks them up from doing so. Or, and of course, the company isn't required to make that liquidity easy, but it's an advantage to do so. So the point here is that there are two attractive methods for the people who have invested in the sub-series in a Reg A+ that have one or other assets that they've, they've brought into the two places that are really appealing to list those securities or those, yes, securities are alternative trading systems and things called ats.

One of our webinars talks in great detail about what ATSs do and how they work. And, and another one is a bulletin board. That's a phrase that the SEC has a specific definition of. And I think, frankly, that the bulletin board approach is probably the most appealing because it's simpler. It has a lot fewer regulatory hindrances attached to it, but you aren't allowed to make money on those transactions. So a b a bulletin board is a simple way that people who would like to buy and other people who would like to sell the securities that you have brought to market are able to meet and, and ex and execute a trade. They're not being, they're not paying you a fee. I'm not paying you a commission on that. So there's more detail behind that, of course. But to me, I think a bullet brought up offers a great deal of promise as the, as the aftermarket exchange vehicle for Reg A+ series offerings.

So now I'm gonna touch on general Reg A+ liquidity, because it's one of the powerful things about Reg A+ every Reg A+ is, as far as the S SEC is concerned, it's a public offering. It's not automatically an initial public offering. You can use Reg A+ to list on the NASDAQ or the N Y S E, and you can use Reg A+ to do a direct listing on those exchanges too, in the right circumstances when everything's set up properly, when you've accomplished the right things. But you don't have to do that, you don't have to list anywhere you are allowed to. So in theory, somebody who invested a thousand dollars today, yesterday in your company, if you issue them, issue them the shares right away, it might be a, a week or two delay in getting them their share certificates, their shares are typically held at a transfer agent.

They're allowed to sell those shares. So liquidity, a really good thing about Reg A+. Then it comes to, where would you list, you can list, as I said, NASDAQ, N Y S E in the right circumstances. You can list on the OTC QB or the qx. If you go to the, there is a post offering reporting obligation in Reg A+ where once a year you must produce US Gap audit. And, and every six months you must produce management financials for your company. And if there are material events, they must be reported within 48 hours. So my point is that for companies to go, if you, if you use a Reg A+ list on the NASDAQ or the N Y S E, then you need PCA or B audits from one port prior to that listing and thereafter once every quarter. So it's a, that's an expensive ESCAP pay, but if you go to the O T C QB or qx, you're still just doing one annual US gap audit. So that's a very much less much reduced burden and expense. And you are required to keep that annual audit going forward after having Reg A+, obviously.

So one of the advantages of Reg A+ offerings at the parent company level is that you are allowed as the owners of the company or your, your existing investors are allowed to be selling insiders in a Reg A+. So up to 30% of the capital that you raise, a maximum of 30% can be selling insiders, be they founders or investors. So that's a nice flexibility. And the fact is that conducting a Reg A+, unless you as the company CEO prevent this, unless you put in a lock, the Reg A+ unlocks all of your investors that have owned their stock for more than a year, once they've exceeded their rule 1 44 holding period. So you may be raising money in a, in an offering with this particular security here, but all of your investors are made liquid, which isn't to say that it's easy because you haven't listed their security, but you can provide, you could provide a conversion from the security they own into the one that's listed as an example. And of course, if you go public to a major exchanges, then all of the preferred, a ABC class of investors, all of them convert over. So insider selling is, is, is, is allowed in a Reg A+ in a post join the Reg A+. And afterwards there's more detail to that. We have a fact on that, on the MSC site, and we have a whole webinar about liquidity in Reg A+ as well. You, you can search the top right box, search box on the MSC site. We'll get you that content.

I said, you don't have to list your company by doing a Reg A+. There are some limited ways of providing direct liquidity to investors if you choose to. I don't find them to to be terribly attractive, but they do exist.

The main entity listing options, I said, you can don't list anywhere. You can list on an ATS, the alternative trading system on the otc, the NASDAQ or the, or a direct listing. They're not. One of the nice things about the, it's not an atc, it's an ats. One of the nice things about an alternative trading system is that they don't have shorts and they don't have naked shorts. A lot, a lot of companies share price gets decimated. Yeah, a lot of companies share price gets decimated by naked shorts from broker dealers that are allowed to do that. So you are vulnerable to that on the Nasdaq, on the NYSE or on the OTC markets. You are not vulnerable to that on the ats. So an ATS is a simpler opportunity for listing for that reason. It's very attractive.

So now I'm gonna touch, I'm gonna move over to how to market your Reg A+ especially in the context of a series offering, but not exclusively then. So one thing to know is that most of the main Street investors who engage and they are entertained by that want to, that choose to invest in a Reg A+ are optimists. It's a completely different thing than institutional investors. And many accredited investors, wealthy investors tend to have so many options before them. They tend to be more skeptical, which is fair enough. So to give you an idea of what, I mean, we've had days where advertising outreach in social media drew in investors to a particular offering that was put together well, and they looked at the offering page and they liked it enough that they clicked the Invest Now button, which we have on our site, of course.

And we asked them for their email and their phone number. They provided that information and then went on of the people who clicked the button and gave us that information. We've had days where 70% invested on their first visit. So, you know, when that happens, we're dealing with optimists, right? We are dealing with optimists and I, I see a lot of that because I monitor the email traffic going to our companies, our client companies, CEOs and their other team members to make, to make sure that they know how to answer those questions and make sure that they are answering the questions that come in. They're not that many, but I pay attention to it. And it's amazing to see how optimistic some of these folks are. So a company that never talked about doing a public an I P O anywhere, never mentioned it, never hinted at it.

Jim who invested three months ago will be, will fire off an email to the CEO asking him, you know, when's the I P O? You know, so that's an optimist. So just know that because it makes a very big difference as to what kinds of offerings can succeed in a, in a mar in a low-cost marketing way. Main street investors, 60%, 70% of the investments are made on a smartphone. Apple, obviously an Android on a tablet and a PC as well, you know, one or other of the computers. But mobile phone is the dominant. 55% of investments are made by debit credit cards and ACH is another 40% and the rest is checks and wires. And institutions do invest these days at Reg eight plus that, that, that is new in the last two years. Continuing on how to market. If you have a established brand or if you are a social media influencer, if you have a lot of followers, then the cost of outreach to your followers and fans, it's drastically lower, which can make a Reg A+ offering and an extremely cost effective way to raise money.

And that's one of the reasons I chose to put this Reg A+ webinar together is because it's so cost effective when all you have is the legal filing and the audit and you know, some other miscellaneous fees, but you're not spending mega bucks to bring in every investor because you've got a large fan base. So you can bring them in with your own communications. So that's a fantastic, a fantastic thing. I think the lowest cost Reg A+ that we've done so far we're, we're, we're helping a client was a biotech company where their total cost of capital was six and a half percent, but that included all of their advertising expense, all their expenses for their Reg A+. So very exciting delivery in that case. But if they had been dealing with fans, that could have come down to two and a half percent, could easily have been a two and a half percent total cost of raise.

I mentioned social media advertising is the most effective outreach vehicle to people who don't already know your company. That when, when we need to do that, that's the most effective vehicle. The ads have to have a clickable link in them so that the investor can see what the terms of the offering are, what the offering circular, which is what it's called when the offering is qualified. The SEC uses the term offering circular with all the details and the audit numbers in them and so forth. And the s SEC's restrictions on the, the kind of advertising you can do are mostly reasonable. Nothing terribly unexpected there. You can't use hype, for example. You know, you can't introduce a new product and say it's gonna replace everyone else. You know, we're revolutionizing the market. That's two grand acclaim.

An advantage of a series offering is that having pinpoint precision, this is the building we're offering, this is the vintage car we're offering, this is the racehorse we're offering is much more motivating. It's much easier to get investors. They, they're when you are, when they're narrowing in on something they really like. So that makes for lower cost marketing itself. And of course, in the case of many alternative investments like jewelry and art, select art and select jewelry and select vintage cars, they're appreciating assets with a very strong track record. So the track record speaks for itself and that makes it much easier to market the offering and raise money because people can see, oh, if I buy this, this diamond and this quality, I can see what the benchmarks have done for diamonds at this quality. So that makes it less expensive to market.

The nature of being a series of separate little offerings, they're much smaller, so they run out of capacity quickly that motivates, that makes it easier to raise money. And the fact that a lot of them are attractive investments that already have a following, you know, so playing cards, trading cards, you know, vintage cards for that matter, they already have a following. So it makes it much easier to to, it makes it much easier to market the, the, the raise. Having an app helps me these days. Having an app is a good thing for this type of raise for communication, better communication with the investors and engagement offers, because that engagement is such a valuable thing. If you do a series offering, you can involve friends or business associates where you work out a deal with them and they offer, they make a similar offering within the umbrella of your parent LLC entity. So that's a nice thing to know. We have a customer now that is working on bringing her company through to, through a Reg A+ and, and and raising money through it obviously. And she writes books and does movies of her books and she's got a lot of great fame and reputation and success and she's considering inviting influencers and other successful people in her field to join her and do a series offer because it makes sense, right? Okay, now lemme check the schedule. Okay, we're good.

If you have a comp complex company with messy financials that go back two years or more, then it's gonna be expensive to get the audit done, and it's gonna take a lot of time. So that isn't fun, but that's life and you cannot make the firing of your reg a plus without the audit being included. However, there are quite a lot, quite a lot of these, these companies that are doing series offerings that I was mentioning earlier, quite a lot of those were pure startups at the beginning. So if they had an audit, it was for six weeks since they set up the entity. So it's extremely simple, low cost audit, which doesn't take a lot of time. So, you know, that is what it is. You know, the complexity can be there if the financials are rms. So actually, one of important points that I missed there on the schedule front.

So in a situation where the audit isn't gonna be a problem from a time standpoint, then typically it takes two months for the company to prepare their content for submission to the SEC, with the help of the securities attorney, with the help of my team when we're involved. So about two months to prepare, it can take longer. You know, if the, if the team gets distracted by a major business event, then it'll take longer. But with, with sufficient detention, two months to get the documents prepared to fire with the s sec is reasonable and two months to get qualified by the SEC is reasonable. And we've had three or four of our client companies who were qualified in a week or two from when they filed the SEC says, make your filing, have it be complete and we'll get back to you in a month with our comments.

And if, if they could decide that there aren't any comments, but if there are comments, then the company needs to respond at that point, and then they give themselves another month. So 60 days is commonplace as a, as a metric to use for how long it'll take to get through the SEC. But again, the SEC seems to like Reg A+ filings. And when there are known service providers involved and they're uncontroversial in their terms, then getting qualified by the S ECC unusually quickly does happen enough to be aware of that and to build that into your thinking. So that's the schedule stuff. And then you have a year automatically, your regular class is qualified for a year and you can set it up such that it can run for three years and you can terminate it when you are ready.

Costs. So real estate offerings are a little more expensive from a securities attorney point of view, but if we assume a simple audit, which is what I'm, I'm doing right now, I'm assuming a simple audit because I can't figure out for you what your custom order would be. If you've got messy financials that aren't complete, that could be a lot more expensive, but with a simple audit, then to spend about $150,000 in all, all-inclusive expenses to get to the point that you are qualified is a reasonable number. It wouldn't get much lower than that. And it could get higher than that if you delayed and so forth. But hundred 50 K is a reasonable budget to go in with. And then when we are live raising money, the sequence of events, it does vary according, you know, so if we are, if we're talking, if, if, if a company has a large fan base, then when we're ready, marketing that fan to that fan base is gonna cause rapid action.

So customers with, excuse me, companies with large customer bases can rapidly raise money. We've had that happen. But when it's a company without a large fan base, without a large customer base that's starting out, then you aren't gonna spend much money in the first month of advertising because we know, we don't really know yet which target audiences, which ad creative are gonna work the best. So if you spend five or $10,000 in advertising in month one, that's enough to test and evaluate and tune and optimize. And from that point, you go on improving the optim and optimizing the marketing to the, to, to you reach a stage that you are happy with it, and then you expand the spending on that outreach marketing and obviously marketing, sending emails to our member base is, is a good thing to do. But that goes without saying, okay, so I was, let me touch on the expenses then.

Once you have a achieved, once we have achieved efficiency in that marketing outreach for a company that doesn't have, or, or an offering that doesn't have a large amount of traction already, it doesn't have a big fan base, then, you know the advertising cost, the best that I've seen so far was $3 and 30 cents spent per hundred dollars raised. But that was before, that was for a biotech company. That was before Apple started imposing limitations and restrictions on marketing efficiency on Apple devices. So that number is no longer precisely relevant, but that's the best that we've seen directly. But once you get it working properly, you know, to achieve a six or eight or 10% marketing spend level per for the money that's brought in from fresh investors is is a reasonable expectation. And you, and you have to, as a cost, you have to do management financials once every six months.

And an annual US gap audit if you don't list on a major exchange. So that isn't the worst. I mean, our US gap audit is relatively straightforward, but it is an expense. So leveraging the fan base lab, leveraging the brand, leveraging customers is, is intensely valuable. When a company has an active website with a lot of activity on it, then that becomes a very effective, very, very cost-effective place to promote their investment offering. So we have customers that are doing that and that's working very, very well for them, as you would think to bring down the cost of marketing. Okay, so now I'm gonna move on to tips for success. Excuse me. Some of these things may be very obvious to you, but pardon me, I don't know the level of knowledge that you guys have in the audience today. So one is, there's a thing called test waters.

I actually suggested this in June of 2012 to the SEC that they allow entrepreneurs, CEOs to test market their company to see if it would be cost effective to promote in a raised situation without having an audit, without having an SEC filing to make life simple. So that's called test waters. We've trademarked that term in a number of interesting ways cuz we were there, we were paying attention. But the point is that you can cost effectively test market your company in order to see how it would fly. You can't raise money from that. You could take reservations that are non-binding and later when you do the raise, reengage with those people to invite them to invest. But when you're doing the test, of course you can't actually raise money from that. There are two tiers of Reg A+ tier one and tier two.

It's almost always a bad idea to use tier one. So I'm not gonna spend time on that, but, and we have a FAQ on the MSE site that goes into detail about why tier one isn't very useful for most companies. Avoid email lists. Of course, there will always be an exception in life. And we have one customer right now where their agency is, is taking in an unusually different approach to emailing to a large list and having some success. And this is actually the first time that I've seen that in almost eight years since I launched this company at Manhattan Street Capital. So in, in general, when you read lists and buy lists of prospective investors it all sounds great until you do the work, when, until you send the emails and then nothing much happens. Email service providers have become more and more restrictive.

Apple is inserting themselves into email delivery on Apple devices as well. But basically, I've just seen so many tests and so much wasted money in time. So in general, be very skeptical about the, the value of renting, buying a list. There are special cases, like our member base is a special case because we're dealing with them regularly and they're already investors and they understand the context. But in general, lists aren't very valuable. Include international, cuz the SEC allows that. And as long as we have the payment methods in place, credit and debit card being the primary ones for international investors to engage, then that could be super because there's, there's a lot of people in the world that are starved of great investment opportunities and would love to own equity in a US company or at a series offering and a piece of art or a car or, you know, collectable watch.

So international can be a very profitable place to market to, you're not limited to the us so don't, don't ignore the, the rest of the world, avoid big auditors because they can't charge too much and tend to be so slow, sometimes remarkably, ridiculously slow. We've had experiences with that. So avoid, you know, the big name auditors, they, they're wonderful in the, in the right place for giant companies. They can afford the expense and they want, they need, they, they love the blessing of having one of the big auditors on their books, as it were, as a provider of that service. But for the scale of the size of companies that do Reg A+, the risk is, is too expensive and the risk of ridiculous delay is, is terrible. Set a low minimum escrow amount if you can, if you're buying an asset, you've gotta set the minimum to be what money you have to raise to buy the asset.

But if you're growing your business and you write your Reg A+ properly for that, then you can set a zero escrow minimum. You know, we'll raise, well that is to say we'll raise money and we'll weekly, whenever we choose to, we'll do escrow closes and issue the share certificates to the investors and set a high maximum raise because that gives you flexibility where you aren't limited later. You know, if you start out planning to raise 18 million and then there's some good things happen and you make an acquisition and now you want to step up the raise size, not having to go back and requalify a large raise amount is a luxury, right? So why give that, why give yourself that built in limit that limitation. Use a low per investor minimum because when we're marketing to investors, I say we, when our customers are marketing to potential investors through their, through advertising outreach and so forth, somebody's doing something else and they see an ad and they like it enough that they click on it and then they arrive on the offering page.

And if they like it enough and understand it enough and it's pleasing to them, then they may invest. But at the moment it's a very casual thing. So, if you give them a $2,000 investment minimum, most people will just leave and never come back. I mean, I've seen higher, I've seen $5,000 investment minimums, which are the kiss of death in a retail reggae. Plus, if you are, are only bringing in accredited investors, then why would you do it in a Reg A+? You may as well do a Reg D offering. But that's important because at that point in time it's a casual engagement. Now, they may invest a modest demand initially, but then they're on the email list for updates and they're visiting the offering page and you are conveying updates to them and making it more and more interesting and building credibility through the success of the raise.

Then people will come back and invest more and then sometimes they'll come back with their managed IRA and invest a lot more. But we would've lost them at the beginning if there was a $2,000 minimum. For example, I mentioned this earlier, but you can change the valuation and the share price of your company during a Reg A+, which is a lovely thing because you re you can reward the earlier investors who took a bigger risk cuz at the beginning it, it was riskier than it is at the end of a large race or even a small race, right? So you are rewarding them for being risk takers. But when you make a modest share price increase and announce it in the proper manner and the right to the right audience, which is regulated by the SEC, then you know, you are reflecting the fact that people could have taken a risk earlier and chose not to.

And you create genuine legitimate rarity value by telling people that, you know, on Thursday at midnight the share price is changing. If you do it in the right manner, the right language, then that can be very helpful to nudge people from spectating into actually investing. A couple more tips. FINRA, the regulator for broker dealers is very slow. So bear that in mind when you are making your plans, you don't have to use a broker dealer, but if you do use one, then you are dealing with FINRA. So getting everything, getting all the ducks in a row filed very, very early is, is a valuable thing cuz of that. And of, of course, marketing is key. It's all about marketing, marketing, communication of one kind or another. So that concludes my formal prepared remarks. So I'm now gonna look to the q and a and do my best to answer questions here. Thanks very much for your attention, guys.

I'm gonna go to the list, I'm gonna start at the top of the list of questions. Please feel free to add more questions now. Yeah, I don't have any comments on Bob, Bob, Bob Marley. That would consume time in an unprofitable manner. Comparing it and comparing a Reg A+ to a SPAC. It's completely different. I mean, a SPAC is essentially an acquisition where you get in touch with a company that is done a SPAC IPO and is ready to buy a comp a target company. And if they like your company, then it's a sizeable buyout. So that's like dating, you know, you don't know until you meet the right partner. If you've met the right partner, it may never happen or it might take 10 years Reg A+ you have control over it, which isn't to say you have control over everything happening in a smooth and delightful, successful, inexpensive manner of course, but at least you have control over doing it, implementing it running, and how you set it up.

So, it's much more flexible in that way. And do Reg A+ IPOs have the same distal reg reputation as SPAC IPOs? Well, no, you know, SPACs were hot for a while, right? But they, you know, you can imagine it's a different thing. A SPAC thing is a very different situation. So, Reg A+, I would say in the, in, in 2017 when the first Reg A+ IPOs took place, some of them underperformed in the aftermarket and there was there was quite a lot of criticism of some of those companies. Some of it was valid, some of it was not. But over time the reputation of Reg A+ and companies conducting Reg A+ offerings is, has, has grown and it's become more accepted and credible and much more broadly used. Yes, there's no shorting on an ATS and no naked shorting both.

Well, of course if you can't short then you can't naked short. But yes, that was what I was saying. And Jose says an LLC cannot do an I P O C can actually an LLC can do an I P O Jose. But I, I'm, I'm not gonna dwell on that, but that's the case. How big does a Reg A+ candidate company have to be? It's not about the size so much as it is about how, of course in some companies case, it matters how big you are because if it's in a relatively boring business area, then it needs to have dynamic numbers about it and it still needs to be very appealing. But at the end of the day, the ca the SEC doesn't qualify a company or not qualify a company cuz of how big it is. They're not saying, oh no, you're not old enough.

Oh no, you don't have 360 employees, so we won't entertain this. It's the investors. Do the investors like the offering enough to want to participate? That's the question. And the investors are motivated by how big is the upside? Do I like this, what the company is doing? Does it, is it engaging? Is it motivating to me? Is it well explained? So that is more important than how big is the company? Yeah, so the scale of the market you are dealing with, if people can easily understand the business, if they can easily be a, if, if the advertising can be visually appealing. I mean, there are biotech companies that I've recommended do something else who were making products that were valuable and useful, but absolutely abhorrent to think about. And a picture, you can't conjure up a picture that anyone wants to see in an advertisement and text ads don't work very well.

So, you know, it's gotta be something if it's engaging, if it's address, if you're addressing a big market, if it's exciting and if it's more well marketed, then it, it could be a startup company. Quite a few, few successful Reg A+ have been new companies. Some of them had long-term planning behind them and then launched. And obviously there are some well established companies. We have a company called Cub Crafters is with us on our platform raising money for their Reg A+, and they've been in existence for 42 years. It's a really neat company. And they have a great brand and awareness and so forth, but it's, if I've answered that question now, I'll go on down the list. How and what social media do we market, do we see working? Usually, Facebook and Instagram are the most effective in, in general terms. And you might not want to hear this or you might be skeptical, but TikTok shows promise they're a bit too disorganized, but their AI targeting algorithms are astoundingly great. So, we've had some of our customers do exp do, do test marketing on TikTok with very good success.

I have three businesses in three locations, I'd like to expand, but I don't want to give up rights to my initial three. I'd like to include in the option to purchase location to, to include in the op in the option to purchase locations as well as opening a fourth location. Yes. Well, that, that's something you can do in a Reg A+. Does the SEC regulate the price of Reg A+ shares? They don't, they don't judge the merits of the offering. They're not gonna tell you, oh no, that's overvalued. They're not gonna say, you know, a $68 share price is too high. Which I think it is, but they're not gonna tell you that they aren't judging how appealing the investment is. They're making sure it's legal, they're making sure that you're following all the rules and you are adhering to their system very carefully in delivering on all their requirements. They aren't second guessing whether or not this is gonna be a great investment for someone.

If you have a thousand subscribers in an LLC, is the LLC considered a one shareholder and a private company? Or is each shareholder that's a, that's a, that's a longer question. You know, you can use an L L C as a feeder into another company, so a thousand investors are treated as one by that company, but that takes more dis discussion to explain. You don't need it in a Reg A+, but technically what you are describing is true and make sure I'm seeing the second part of it. Yeah, so if it's done properly, the sh that LLC entity can be one investor in the entity that it invests in as long as it's done in the right manner. But that's, that's a longer discussion. Can we offer product discounts? Oh yeah. Can you offer product discounts or incentives to sweeten the deal?

I'll explain that. And how common are product discounts or incentives? So they're reasonably common. So you can do it in two ways. One way is, hey you just bought a product on my website and you spent $500, here's $50 off your share purchase as long as it's prepared and put and included in the Reg A+. So now you've got somebody feeling motivated to consider investing and you put a clickable link in there. You could do it the other way around where they are buying an investment and you give them a, an incentive to do so. So if you, if you invest more than $5,000, we'll give you 10% off your electric, our electric car, or you'll get a $8 price per share. Price per share can't change, but you can give free stock to people, right? So you can say for investing $10,000, we'll give you a 10% bonus shares for your investment.

The share price is always fixed, but you can give bonus shares for a larger investment. That's another way to go. Or you can give services and, and you know, lunch, lunch with the, the CEO or lunch with the spokesperson, things of that type too. My thoughts about using a safe and a Reg A+, I, I don't think you can do that. I I don't believe the SEC would allow that. Because it's an offering of, of a security, it's not a potential offering in the future. So a safe is a convertible loan really, where investors lend money to a company and later on they'll find out what the share price is and what the terms are. You can't do that in a Reg A+ and it would, yeah, I don't like safe cuz I don't like the uncertainty of what the terms will be later. If I'm putting money now into a company where it may raise venture money four years from now, I don't want that venture around determining what price I paid four years earlier. You know, I'm taking a big risk in the earlier stages in that case.

Okay, so I'm at the end of the questions and if you have more questions post 'em now, otherwise I'll move to start wrapping up the meeting. I hope that you guys have already found this to be a useful webinar just a while. While you are thinking of a question, if you are, I'll conclude on a couple of points you've made. You've seen the disclaimers. We're not attorneys, we're not valuation professionals, auditors, underwriters or, or professional valuation companies if I didn't already say that. So I'm giving you the best guidance I can about what works and how things work. But if you need a securities attorney, I'll find you one, but I'm not the one. Then we are making, we have made a recording of this webinar and we will be making a blog post with the recording and we'll be sharing that to you and to the other people who booked to attend but didn't. And it'll be published on the MSC website with a clickable index. So you can just look at the parts of the webinar you're interested in. You don't wanna watch the whole thing twice, right? It would be a bit too slow. Okay. I'll see what questions there are.

Oh, thank you guys. Yes, Steve, that we're making a recording. A public company can use Reg A+ to do a secondary offering. Yes. And actually one of the nice things about Reg A+ that I didn't mention yet is that you can use it to do a direct listing to the NASDAQ or the N Y S E. So you wouldn't use an underwriter and you save a lot of money in that way. That's, that's something we know how to do and we can help you with. And I've got a couple thank you very much guys for posting your thank your. I I really appreciate that. And Alan Stone, should one, already have done a CF funding? No, you aren't required to do a CF before you do a Reg A+. You, if you are ready and willing and able to do a Reg A+ then you can do so and you can do a Reg D in parallel with a Reg A+ if you choose to, you have to update the cap table from time to time.

The question Alan asked is, what's the difference between reggae and Reg A+ reggae to Reg A+ was a very big step. The maximum you could raise in a, in the old reggae until Reg A+ was maybe 500,000, $300,000 and you had to go to the states one by one and file and get to get permission to, to raise money in those states. Reg A+ tier two gives you exemption from having to ask permission of the states. You have to file with them and pay them a fee, which is not an excessive fee, but you don't have to go and ask them permission. In the main, there are a couple of states that don't cooperate, but Reg, so Reg A+ tier two is a walk in the park, both because it goes up to 75 million and because you are, you get a much, much smoother journey with the state findings.

Tier one is a bit more like the old reggae where you have to go to each state cap in hand and request permission to raise money in that state. And that isn't it a long, slow journey unless you happen to be so powerful in one or two states that you could raise money in Just those Canadian companies can, can Canadian companies can, Canadian companies can do a Reg A+. I don't know if they can do a Reg cf, I'm not familiar with that cuz we don't do Reg CF through Choice is putting together a stock option plan for third party, something that is subject to securities laws. If the stock is restricted, yes, you don't have to do an s Reg A+ filing to do that. But the, the rules around the IRS is the most heavily involved regulator involved with SOC options in private companies.

But there are aspects of that that get into SEC regulations as well. And you do need audited financials in a Reg A+. Yeah. In a public company then yes, you know, you're, you're, you're dealing with stock options. The SEC has strong views about that stuff, but Reg A+ financials audited yes in a tier two. The only reason, one of the only reasons people do Tier one Reg A+ is just cuz you don't have to have audited financials. But in a tier two you do. And if the companies existed two years or more, then you need two years of US gap audited financials. But if you've started it six months ago, then you need audited financials for those six months.

Okay, so thank you very much everybody for joining us. Thank you to Ákos who's been patiently helping administrate this meeting. And thanks to Peter who's not with us on the call for doing the marketing and promotion and in invitations and so forth. I hope this has been useful for you. We'll be, as I said, in about a week, we'll send out the recording with a clickable index to it so you can refer back and look forward to seeing you. And if you need help with your Reg A+ come and see us, you're welcome to email us. In fact, I'll put my email in the chat box right now. Should have done that earlier. You're welcome to email me for guidance and joining up with us to have us help you optimize your offering. That's what we do. Again, thanks everyone, have a great day. I'm glad you joined us and I hope you are too. Thanks. Bye-bye

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