Use the Chapters list below to select the part of the video you want to watch.
Please read the disclaimer below the index
- Disclaimers and Rod's background
- Big Picture View
- Details - Advantages and disadvantages of Reg A+ compared to a conventional SPAC
- Tripping hazards
- The two types of IPO methods
- Marketing, Costs, and Timeline
- Post Reg A+ liquidity - OTC listing
- Mistakes to Avoid
- Q&A - Does Manhattan Street Capital help with Marketing?
- Q&A - How do you think the industry will respond to this use of Reg A+
- Q&A - Raising money from non-US investors
- Q&A - Is Debt or Equity more attractive?
- Q&A - Recommendations to mitigate risk
- Q&A - Reg A+ vs Reg D
- Q&A - Can you cover what a regular SPAC is?
- Q&A - Acquiring plans
- What does Manhattan Street Capital do?
MSC is not a law firm, valuation service, underwriter, broker-dealer or a 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. When Rod Turner provides advice this advice is based upon his observations of what works and what does not from a marketing perspective in online offerings. Rod does not tell the audience what to do, or how to do it. He advises the audience what is most likely to be easier to market cost effectively in the online context. The choices of all aspects of companies offerings are made by the companies that make offerings.
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.
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
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So, my name is Rod Turner. I am the founder and president of Manhattan street capital. We specialize in Regulation A+ I expect most of you are aware of that. We host offerings. We consult in quarterback and help our client companies to succeed with their offerings. And, um, we aren't, but from a disclaimer, point of view, you want to make it clear to you that we are not valuation professionals. We're not securities attorneys, we're not broker dealers and we're not underwriters. So, bear that in mind, whatever I say, I'm going to give you my best advice, my best, uh, guidance here. Uh, I'll give mine all, that's the point, but I cannot tell you what to do. I'm not doing so I can tell you what I think will work. And I can tell you, um, help you learn from what I've learned in this space.
As a, as a Regulation A+ specialist, I launched this company five and a half plus years ago, focused on Regulation A+ we do some reg deal for it. Uh, but the primary thrust has always been about Regulation A+ from the beginning, um, a little background on me, I've, I've had the good fortune to be a co-founder or senior executive with six prior successful startup companies that we built, the liquid outcomes I've had failed startups to, uh, done two IPOs to the NASDAQ where I was one of the top executives. One of those was Symantec, uh, the company that makes or made Norton antivirus. Um, my, we grew by acquisition, which is relevant to this conversation. Um, in that we added numerous acquisitions to accelerate the growth of Symantec. And I headed up the mergers of the most strategic, uh, largest, most opportune acquisitions, including that of the Peter Norton utility business, which is the business from which we launched Norton antivirus and built it to be the leader in its market.
Most important thing about… Go through the agenda here. Actually, let me just do that. That's the next slide. What I'm going to compare Regulation A+ the method using Regulation A+ as an alternative to a spec, from a big picture view, I'm going to go into more detail about what the specifics are and how to contract, how do they contrast in terms of the advantages and disadvantages of using Regulation A+ in this way, you can kind of start off with the disadvantages and then move into the advantages and then I'll get into tripping hazards around that strategy, that plan, they don't talk about which method of going public via Regulation A+ to you, underwriter evolvement, marketing, and cost and, uh, liquidity, which is pretty straightforward in most of these cases, OTC options and post IPO what's needed. If this time, that last one or the last one there is there's optional. I also have some other tips and techniques I'll get into if there's time, but we'll see how this goes. I don't want to be speaking so fast that you don't get to hear or register what I'm saying, but on the other hand, there's a lot of different issues here. That would be nice to call to cover if, if there is time. So without further ado getting started here, we have, uh, someone waiting to enter. ACOs accuracy is a great guy and he, will there be a presentation that will be available? No. Um, this will just be me talking to the subject in as value added a manner as I can. We will record this webinar and, uh, we'll, we'll put it on a blog on the Manhattan street capital sites and as we'll have a clickable index. So you can just look at the bits you're interested in and not watch the rest of that. We will do. It's already being recorded. Um, uh, big picture view. The big picture view shows that you can do things you can use a Regulation A+ to, to do broadly. Actually, before I get into the big picture view, let me make a couple of things very clear. The sec did not recently amend Regulation A+ to include, uh, blank check companies. They did not do that. I'm going to let Itani because he's waiting. We, the sec did not suddenly make that change and I'm here to tell you about it. That's not the case. Uh, you cannot in the, with the exception of real estate, where there have been many, uh, Regulation A+ offerings for essentially SPACs for real estate, uh, that has happened on many occasions where companies raise money with the intention of going out and buying stuff. And the stuff was always real estate. And those companies have raised, uh, in one case Fundrise's probably got a billion dollars cumulative now on Regulation A+ offerings. And Brian for finance was the first one to, to use this, this approach. It's very common in real estate. However, the sec treats other kinds of companies in a different manner. So, uh, that, I guess the first thing I want to say here is that you cannot go to the sec and file a Regulation A+ and say, it's a spank because they won't allow, they won't allow a blank check company. So, what I'm doing today is presenting you with a method or a combination of legitimate methods by which you can use a Regulation A+ to accomplish the same goals as you see in a SPAC, but by different methods that isn't called us back. It's a Regulation A+ what name to call it. I'm not sure because I think anything remotely SPAC terminology used at any remotely like spot SPAC terminology that you might use with would be a problem with the STC. I imagine. So, a big picture view. Let me just bring some water here, big picture view. In both cases, you can raise capital, you can go public and then you can buy companies. That's the big picture, simple view. And that's a similar thing when you can use the heat in the market and they, they access capital that's available in the markets and it's in both cases, they're relatively simple methods by which to move forward and execute the strategy. Now we get into the more important part, which is, Hey, what's the detail of this. So, I'm going to exclude real estate for the reasons already stated, right? It's the exception that proves the rule. As my mother used to say, we have another person waiting at caution. If you let them in without my having to do that. Thank you. So, where was I? But I'm going to set aside real estate because most of you probably aren't planning to do a spec or, or Regulation A+ equivalent, uh, for real estate. If you are, you got an easy option before you, the disadvantages first, the Regulation A+ in comparison to a SPAC, um, it's kept you, can't go out and raise $300 million. You just can't do that in one year. You can raise 50 to 75 at the moment. The regulation changed to 75 million is on hold because the new, uh, the new president Biden has put a hold on a whole bunch of things in order to figure out what he wants his people to do. And the sec had not at that point and they turned a $75 million max Regulation A+ effective. So that's currently on hold. We'll see how that plays out. The disadvantages though, annual cap in a Regulation A+ SOPs at the moment that this instant 50 million a year, um, that the sec will not allow a Regulation A+ IPO to list on that is the sec going to say that the NASDAQ will not allow Regulation A+ IPO to list, unless it has two years of operating history.
And that doesn't, that can't be, you buy a shell company, which has been around for 20 years, but the last two years, nothing happened that doesn't count, right? There's no operating history for years as a, this is a tiny amount of money flowing human though. No real business. So, it has to have an actual history over a two-year period at the point of time that you want to list the company in order to do so. So that's the limitation of Regulation A+ and the, and the, uh, another one. Then this method is that the sec will model how you to, uh, make a plan to buy companies and just go raise the money. He'll allow that with real estate, but they will not allow that.
You're welcome. It's funny. I'm seeing the comments and I normally see them. It's a bit distracting. I know later on; I'll figure out how to turn that off. Okay. So, uh, yes, the big, the big issue here, which is manageable, but it's still a big issue is that if you, you must have a, a legitimate business purpose, it doesn't mean that you have to have been in business for the sec Regulation A+ filing on there, talking about you. If you, if you launch a new company, you can't just go to the sec with a company and say, we're going to buy electric vehicle technology related companies. And it'll be a wonderful story. You can't do that. That's a blank check company. And by the sec, his interpretation of that term, what you can do is develop, build a team that has credible skills in electric vehicle technology, and have a plan to build your own technology. That is legitimate. That can't be that you're playing games with the sec, right? You can't no one wins in playing games with the sec trickery never, never works out obviously, right? So, I'm not advocating that by any stretch of the imagination, but you could, for example, uh, bill a technology that is additive and that is valuable, but it's all right, that makes the business a business. And part of the business plan is to grow by buying companies that is an entirely legitimate thing to do. And then it's a matter of how great are the companies you find, how much you pay for them when you buy them and how much money you raised in your Regulation A+, et cetera, et cetera. Okay. So that's a very important downside or disadvantage of using Regulation A+ you don't have to have done it. You don't have to have proof that you built it and it's credible when it's tested and its patented and it's been in the market making revenues, but you do have to have a plan at least to do something legitimate. And that plan must be real. Fair enough.
Can't call us back. But I think you got that already. Now going on to advantages of Regulation A+ in this context, um, it's more available, right? You know, there are some entrepreneurs are in a situation where can pull together the team that will command the respect of underwriters, et cetera, in order to raise the money to do as fact as the conventional way by R and S one more power to them. And some are not in that situation. So, it's a broadening of appeal of this method. You can use, there's more founders and CEOs that can make this happen. It's less costly to less, uh, via Regulation A+ because you're paying the, the auditors for us gap audit prior to going on. And it's not, uh, at the beginning of a Regulation A+ that will later list on the NASDAQ. This is not a yet listed company and so, the fees you should be paying for the auditor and for the securities attorney, a dramatically lover, like one third, the price one quarter, one third, the price, depending on who you would go to marketing loud and say Harriet part, all the Regulation A+ is the aloud that you are allowed to raise up to 50 or $75 million, uh, via the offering up in a 12-month period, right into a period that is up to 12 months of duration. So, the ability to market the offering, um, can be very powerful in building brand awareness and building momentum and preparing the way and also building strategic potential, right? It makes it, it's a lot more interesting to a potential acquirer. If you are in the process of raising money and your company has been in sec, your company's offering has been qualified by the sec. One of the things I hadn't anticipated about Regulation A+ is that our client companies, by dent of having been quantified by the sec, get much better treatment from potential strategic partners. That makes sense, right? I just didn't anticipate that.
I said, it's, it's also a faster sec process and that's one. The next one is a seriously challenging process to get through the sec for all sorts of valid reasons. And a Regulation A+ is challenging too, but it's a heck of a lot less challenging when it's done properly. When it's prepared properly. Then the Regulation A+ offering is much easier than the form. One a process is a much easier journey from the sec. Typically 60 days to get through the sec process is the norm that we see have been much faster than that. We had a couple of really delightful exceptions that were much faster, but expect it to be advanced 60 days, as long as you are preparing and submitting the form one a in a proper manner, the way that is, is unlikely to cause all forms of grief. We helped with all of that for our clients obviously. One of the things is it's inherent in SPACs is that they raised the money and typically they'll allow themselves two years to go out and buy target companies and use that money. And if they don't do so, they refund the money and then everything ends. And it, so dear rodeo, what a waste of time that was, which is fair enough. Um, if you're doing this wire a Regulation A+ I don't think that's such a smart thing to include in the offering and you have a real business anyway, with a real plan. So, it's, I think a better model, frankly. I don't like from a SPAC point of view, there are a lot of, you know, there's a, there's a lot of SPACs out there that are funded that are, which in the end of their two-year window, and you know what that does, it creates a sense of desk count.
It can create a sense of desperation where companies go out and Willy nilly buy stuff with just to keep themselves going and make money out of this thing, which is definitely not a positive, not a constructive dynamic. I don't like personally, I don't like deadlines of that type if I can avoid them, but that's certainly the case, a Regulation A+, you could do that, but I would recommend not to. I would recommend that you raise the money. You need, you grow the business and you do it in a legitimate manner. Somebody okay. Um, in a legitimate manner, um, Regulation A+ is very flexible. Of course, let's, if you're doing a Regulation A+ where we get significant enough on the writer's support that we're going to do, we're going to qualify and then immediately do the IPO. Then in that case, um, you don't really have that much flexibility because you've got a value of pre money valuation. You've got, uh, you can change that. Of course, if there's excessive demand or insufficient demand for the underwriter, you can change the price up or down in the Regulation A+ wherever it gets to be lovely is when you are raising money online prior to engaging the underwriter. I'll talk about that more in a moment because you are allowed to change the share price or the valuation as you raise money, according to developments in the business or other items, other issues.
When you set up the Regulation A+ properly, you are allowed to use proceeds of the raise to pay the ongoing expense of raising money. The biggest single expense is marketing and being able to make escrow closes as you go from day one, by establishing a zero minimum capital raise for the Regulation A+ that makes it a lot easier to fund where you don't have to pay all the capital expense of raising whatever $50 million prior to closing. Right? If you have a very high minimum, that's a seriously expensive expedition, expedition, not the best use of language. Um, but, and of course in a Regulation A+ that is offered online, which is the norm. We find main street investors are the easiest to reach. That is to say regular people who weren't able to make investments with this time in the past, they are the easiest to reach.
They're the ones that are most attracted to the right kinds of offerings. And I'll get into that in a minute. Um, and they're optimists and there, you know, the average investment of mine, the highest we've seen in a Regulation A+ so far that we've been involved with is $8,000 average investment amount. And the lowest is $1,400 average investment in land. So, you get a lot of investors that puts off a lot of people, but guess what, if you're in public through your SPAC, you're going to end up with an open lot of investors too. And this is a regular thing with being public, right? These investors tend to be effectively effective to work with you, bring on a transfer agent. Of course, and most of the day-to-day stuff is handled by the transportation brand ambassadors wash you all raising money, you all building brand ambassadors. And that can be very valuable depending on the focus of the business.
I would. Now I'm going to talk about tripping hazards in this approach. Um, what you plan must be what you do. You can't gain the sec, you can't permit this. How are we going to do this and then not do that. But you have to, you have to do what you said you would do, right? Uh, that's a tripping hazard to be fully aware or don't call it a spot. You know, that's just not going to fly because the sec ones alive look their definition of a blank check company, unless it's a real estate business. And will, if you plan to raise the money online, will the company appeal online? That is the single biggest constraint to this online Pratt investing business that we're focusing on every day is, does the offering appeal to main street investors? Is it compelling? Anyway, of course it has to be compelling, but is it, and is it easy to explain?
Is it easy to explain it in an ad through social media, which is the most effective way to reach these folks? So not every company that's has strong potential appeals online in a pragmatic, in a practical way, right? So, then we're left with the dental Flint, where's the interest rate that's exciting, or you shouldn't do an online crowd investment, right? If it's something which kind of the, either the one or the other, if you're selling shares, it's got to be easy to explain. You can imagine that a, a company that does is planning a roll up through all of the SAS business, S a a S business that are doing track trash truck routing is going to be a tad difficult to make a PA. It might be that the metrics of that business are phenomenally exciting. And then you're talking about the metrics of the business and overall, the trends in that business and how many targets are all to acquire.
And that might end up making it appealing. But what it's doing is dead boring, right? So, it ends up being a story of here's a clear success. And here's why you can't predict what the company will do, but you can show what the opportunity is. Um, my regular class is all about marketing. It's about excellence in marketing. It's about all of the integration between the marketing and the platform through which you are raising the money. Like I'm biased, Manhattan's free capital, where we do a phenomenal job of that, that matters intensely. So, you can choose the efficiency of the marketing, right? Marketing is everything in an online raise and an important one too, is the bigger the rays, the more valuable.
Drawing out the larger, the raise, the more important it is, or can be to bring in family, office investors. So that, that implies that the offering is strategically attractive and that the valuation is attractive also, right? So main street investors, aren't very hung up on valuation. We, that is the issuer. Uh, and my company wants valuations that are reasonable so that the investors are happy later, of course, but the family, excuse me, family offices, maybe more demanding on the valuation front that's worth figuring out early, which we can do. Of course, we can approach them whilst the offering is in filing with the sec. But the other issue is primarily the primary issue is, is this offering, is this company strategic is the combination of what you're planning to do is strategic such that accredited investors. Yes, but family offices in particular will want to engage.
That can be very helpful in getting early Keystone investors on board and filling out grace. Because if let's say that the 75 mil gets okay, and let's say we're raising all of that online. Um, it can be challenging. It is gentle. Excuse me, not calm. I understand that it is challenging to raise $75 million in 12 months. Cost effectively is a heck of a lot of skill science, our, you name it, uh, and paying, paying serious attention that goes into getting those, the cost of that raise down big deal. So strategic appeal of the offering will help which IPO method. And I pull it here is that, um, if the net, if the destination is the NASDAQ, then there were really two ways to go. As I see it, one is that we already have enough, uh, underwrites underwriter engagement, because this is such a hot company.
The team is so strong that we can engage them and have the IPO take place almost immediately after qualification by the sec. So, then the 12 months is nice, but you don't need it. You get the whole thing done in four to six weeks. Um, it will be good to be able to raise money online, to, to have numerically more investors. That's what we helped Akimoto with and their NASDAQ IPO. They raised $4 million in four weeks online whilst the underwriter wr ham bread, which has since retired the business. When he was tarred from the business, they raised 15 and a half million out of the 19 and a half totals. And they did that in two and a half weeks, which is the norm, right? So that's one way in the event that we don't have, we're not high enough on the list of priorities to get underwater attention, to do it right away up front, which is many times the case because the market is so hot and there's so many easy pickings for underwriters.
Then we can go out and raise money online by the Regulation A+ and get sizable progress that way. And when there's enough money left for another writer to engage and how to have them help us finish the race, it isn't essential, but it's a good idea to do so. So, let's say nine months in, we engage an underwriter, then say, we, you engage the underwriter with our guidance and assistance and help. Um, and then the company listing is an easy process and gate getting serious attention from the underwriter is easy because we already raised 30 million bucks, whatever the number might be, that is enough to, to make the difference.
There's a question I'm going to get to the questions later. Otherwise, I'll lose my, my, uh, momentum or my place I'm getting into. So, I think I made that clear two ways to go, right. Um, fair enough. Yes. That's good. Underwriters. We know who the underwriters are that are, that have an interest in doing Regulation A+ IPO's and what kinds of companies they want to see. So, we have as a part of our service offerings, the ability to bring them in, to introduce them and to help you pitch your company in such a way that it's going to get successfully received versus not marketing and methodology and costs. This is, there was a question about that. This is the next item. So, um, timeline wise, depending on the state of preparedness, depending on the complexity of the audit needed, let's say it's usual. It's commonplace to be able to get through the sec process in two months and have two months of preparation to get to the point that you fought with the sec.
So, say four months, and then you'll live on the fifth month for up to a year that's that sequence or at that part of the sequence and the upfront cost of reaching that point. Pretty much the low end of the range of the costs there with a simple audit will be 150 K all and all in costs to reach that point in approximate form. Then when you, when we go live, if we're doing this online, then the initial ad spend is typically, typically the ad agency on behalf of the clients will spend $10,000 a month in advertising in the first month two, which is all testing and tuning. It's all-around tweaking. We bring in all of the service providers, and most importantly, the marketing agencies and we are involved in guiding advising and helping challenge them with the decisions being made by the client.
Um, but where we challenged them to do great work and to use different tools and instruments as needed in order to maximum success and minimum cross, but going back to what does it cost and stuff. So, the typical Regulation A+ online in that first month spending 10 K we'll raise 30 to 50 K we've had it be as high as 120 K in the first month, but that's unusual. So, three to three to five X is normal whilst we don't know what we're doing with testing and tweaking and adjusting audiences and advertising should be on the landing page content. We'll do multiple landing pages if we need to. And we're doing that, we've done that. It's a really powerful instrument to use. So, the point here is that at the front end, you're not raising mega bucks, but you are getting efficiency higher. And as we get the efficiency higher, then you will want to spend more money and start ramping up the race part as a lobbyist.
So, month, three month four was when the amount of capital flowing in is, is a much, much more sizeable assuming that we're succeeding and there are no guarantees of success, right? All you can do is do a best. And that's what we bring to the table as we do our absolute best to help our client companies. That isn't the guarantee though, most success. Is it the part that matters most in that is figuring out, up front whether or not the inherent appeal is there. Part of that is gut feeling, intuition, knowledge experience, which, uh, we, you know, I bring to the table, uh, part of it is testing. If you want right test, the waters are for that. Um, okay. So, going back to costs. So, what does that mean? If you are raising above $10 million, which I think you need to be in, uh, in this non spec context that we're discussing context that we're discussing here. Then if you're talking 10, 12%, maybe 14% total cost of capital. And depending on the, the approach more when the underwriter comes in, because their expenses are higher, but when push comes to shove, there's somebody waiting there. I post on that in the middle when push comes to shove.
When push comes to shove, if the underwriter is raising, raising, megabucks marketing up until that time to create the buzz and excitement around the offering and the fact of the raise money raise that's been made already by that time, uh, make it much easier. And the, you know, the, the broker dealer themselves don't need marketing to help them sell the offering to their syndicate. It's already been done in the sense that the momentum has already been built. So, in theory, you could reduce the spend for the last few weeks when the, when the underwriter does their bit, or does that make sense?
So, there's some savings there, but not mega savings because their, their fees are seven and a half, 8% commissions plus warrants of similar face value. Okay. Marketing is everything online. I've touched on costs. I've touched on, Regulation A+ liquidity. I'm going to talk OTC for a moment, a little bit out of my intended sequence. Obviously going to the NASDAQ is the more attractive option for the liquidity that it provides. Uh, but I don't know from this audience where you're at, what your plans are, you might have, you might have a target market in mind that is, uh, relatively easy to approach relatively less capital intensive, or, and you may love the idea of an OTC QB or QX destination, which you can do with Regulation A+ One advantage of that is that when listed, you still only need a U S gap or that once a year. Um, so that's a heck of a lot less demanding, right? You need obviously to report to the sec and your investors promptly, any material changes in the business, if you own the QX, you need management financials quarterly, but still only a annual audit. So, it's, uh, an easier journey from a reporting obligation standpoint. There is the biggest issue with all of these listed company being public on any of these exchanges, the NASDAQ, the NYC OTC, QB and QX is that it's too easy for brokers for stock brokers to put naked shorts on the stock. That is the serious, biggest issue, which is where being ready for the post IPO period, uh, is critically important, which we help with that too. We have a consulting service to help with that, but nothing that's the real point, right? If you all, however, making a series of acquisitions and have a series of announcements about that practice, that's going to really help. Right? Of course, um, Tommy Frightened put the Frighteners on the naked short people. So, they'll go find some other company to short. That's a very good strategy. Um, okay. There are other options in Regulation A+ now that I don't think are as relevant in this context, but all alternative trading systems are a nice, easy way to list your company where there is no shorting at all, no naked shorting, no shorting, just buying and selling of your securities. If you choose to list there. I like that very much personally, for many companies, but it's kind of off target for the SPAC and non-SPAC approaches we're discussing here, right? You know, for, for mega transactions, you want to be listed on a major.
You can do successive Regulation A+ every year until you are on the NASDAQ. Actually, even, excuse me, what am I saying? My gosh, even on the NASDAQ, you can do secondaries with Regulation A+ my point being that you might consider using that as a way to provide support for your stock in the market, do a small raise every year, keep the costs Stan of doing so and the dilution down of doing so. And that can be an effective way of maintaining your stock price at a sensible level. But that's, again, that's a little bit of a digression from the spank topic. How are we doing on time? Not too bad.
Mistakes to avoid. Um, then I'll get to the questions. It looks like we've got quite a few questions you are allowed to, if you plan and describe your Regulation A+ correctly, you are allowed to have a zero-minimum race. So, then you're doing this escrow closes or segregated. They can close every week, as frequently as you choose to every month, whatever it might be from the get-go, um, don't establish a low maximum raise because why do so having a high maximum raise, it gives you the flexibility to raise more money. If it turns out to be easier than you thought, or if there's some attractive developments on your radar, that now you want more capital for no good reason to have a low maximum it's your business, how much money you really intend to raise? Don't do tier one, unless you're a bank. And even then, it may not be the best idea, probably in 2022 or 3% of capital raise via Regulation A+ was in tier one. It's so difficult dealing with the States. Firstly, nobody does that to you Two-year-old. It confuses people. Um, if your company already existed for a year, you need a one year audit the U S gap audit. You don't need two years. Although for other reasons, you may want two years as, as discussed earlier, covered that.
High investor per investor minimum is makes the marketing cost very hard. So just know that going in, when you, when you imagine the cost of brewing your whole social media advertising, drawing in and invested, they were doing something else. They see an ad, they find a, and they come in and they're interested to know, can I make this investment? Is it alive? Can I afford it with my play money? Cause right now, and enough thinking about this, this has to be play money, low number. And then, you know, is it attractive? Is it real, et cetera, et cetera, follows. If the minimum is high enough that they get put off by it, that is go away and you won't get them back wasted, then you wasted that advertising money. So, it's obvious, but it's not necessarily that obvious. So that's why I mentioned it expensive law firms.
Haven't done it before charging an arm and a leg can take forever and a big-name auditor. We had one company planning to do, intending to do an N Y S E IPO back in 2017. And the CEO was dedicated to using, a big-name law firm. The company had multiple locations in the, in the U S and outside the U and had two subsidiaries outside the U S the big auditing firm was never able to get an audit done in time for the Regulation A+ filing to take place successfully because they were a tiny company on the, on the scale of things. And they had B-level employees working and never got it done in time and killed the offering. The board vetoed the CEO's plan and took VIP at the whole IPO agenda off the table. This was a company growing at about 80% a year while still making a decent, very healthy profit. It was a very attractive business in a strategic space Credit cards account for 50 or 60% of retail investing. That's a very interesting dynamic. The smartphone people are mostly investing for the smartphone now for Regulation A+ offerings.
There's a lot of work involved. Don't underestimate that. It's not a remote-control thing where you just hand it all off and it happens. You have to be heavily involved. We guide and advise and engage in a little fat, of course, with our clients. You can't neglect social media comments. Now it's a bit too much detail there, I think now I will go to the questions. Hopefully you guys are enjoying this. I, I like public speaking. You can, I guess you can probably tell. Yeah, you don't have investors in a Regulation A+ Okay. So, let me step back and hits on a couple of the important characteristics of Regulation A+ investors of any wealth level kind of invest. As far as the sec is concerned. They can come from anywhere, the world, as long as it's not places like Iraq, Iran, North Korea. So Europe, Asia, there's a lot of very attractive investment audiences that are allowed to invest. They do not have to be accredited. And non-accredited investor is capped at 10% of their net worth or their annual income. Whichever is larger per Regulation A+ investment. And they self-state that an accredited investor itself States we don't have to verify that they're accredited and they have no limit to how much they invest, but they are not required. There's no restriction on a bat. The offering can be marketed far and wide online, whether it's a clickable link to the offering circular and the offering page, which has the offering. I'm going to go to the list of questions now. So bear with me while I do that. You can see this tiny porthole, like probably can do a better job than that, but let me go to the top of the list. You saw the disclosures. Very good. You read the disclosure. Andrew, you would have to explain to me what you mean by GM. I don't understand the question. Wow. Most of disclaimer is there. Yeah, that's true. Possible to file a Regulation A+ offering to describe my real business activities and mentioned that the company plans to acquire a specific company that has potential synergy. As soon as we complete the public offering, this will enhance the value, the Regulation A+ company. You don't have to wait. Two years to combine with an unspecified company and then a spank. You don't have to wait to do it either. You do it as you go. But to answer your question, yes, it's fine to do that. Um, if the objective of the raise is to buy that company and its cost Strat million dollars, and you have to have a minimum closing of $12 million to raise, you know what, before you can draw it out in any money, but if the, if the raise is to grow your business and you would like to acquire that company, then, uh, you can do so after the fact. But that is, that is not the objective of the raise. The completion of the sec qualification could be one of the hurdles triggers the availability of the offering of the transaction. For example, I've answered that question. Does Manhattan street capital help with marketing and sales? If the company goes through, yes, we do help. If you go through the sec process by yourselves, what's the budget required to have a successful. I covered that later. You know, it's going to cost a lot, but if you've got it where you're doing closings, as you go, then the cost is coming out of the raise proceeds. But think, you know, for a large race thing, think 10 or 12% cash costs in that range and you raise a Regulation A+ capital. If you already listed on an asset NASDAQ by selling treasury stock, you can do a secondary, as you already listed on the NASDAQ for any legitimate security, it can be a data. It could be a debt security; it can be a bond. It could be an equity. Inequity can be common. It can be preferred. The treasury stock would be okay. Depends. You'd have to make sure that it's legitimate stock, but I'm sure it would be qualified investor requirements. I think the industry will respond to this use of Regulation A+ um, I think I don't really know, right? Yes. He sees par is the most important one here I am spouting off, you know, trying to help. I think I'm pretty knowledgeable about this stuff, but you know, the sec might look back at, well, the real estate deals they've done, which were essentially smacks and say, Oh, Hey, we should stop doing that. We've done loads of them already. You know, I would say as of now, you know, I talked about one company, but, uh, more than a billion dollars, maybe one and a half billion dollars has been raised by companies doing SPAC, like transactions in real estate only. But so I think the sec is the key pivot here, but really it comes down to doing it right, doing it the way that I hope I'm describing here, where it's a legitimate offering that fits with the requirements and the intentions of Regulation A+ raising money for a company that plans to do a business and grow by acquisition is an entirely digital thing to do. That's entirely legitimate and always has been by my interpretation of what Regulation A+ says. There's never been a battle. You can't buy companies, they'll go, no, you can't call it a spot for heaven’s sake. Right. But I think it will be fine at the end of the day. I think you'll be fine. As long as the offerings are filed properly with the sec, if you offer an issue in the UK or Australia, don't get any permission to sell there. Well, that's where it gets interesting, right? Because, um, you have to choose if you are going to use, what, if you're going to raise money outside the USA. If you want to take a risk that the, the regulators in that country will, will not like what you're doing up until now. The companies that we've helped, which raised money off shore have not had any, any protests or complaints whatsoever outside the USA, Canada being the exception where you need to file state by state to get approval, or just don't take money from Canada. But that's a fair question. You know, the sec has no clients inside the USA, right? It's respected highly, but it has no cloud. We will be forwarding to the attendees of this call, a link to the bog, recorded blog, both blog posts, post, which has, which will have a recording of the webinar with a clickable index. So, you can just see the interesting bits, not all of it as much of it as you want. Right. Anyway, that'll happen.
The new rule off. Yeah. So, the cap is because of president Biden, putting a freeze on stuff that had not yet been enacted. And, uh, even though apparently that freeze may or may not apply to the sec, probably doesn't, uh, we don't really know the sec can or cannot follow that guidance at the moment. Nobody knows. It certainly is the case. They did not publish the increase to the 75 mil on the federal register, which means it is not currently effective. The intention was that it would be effective, but it will not be, it is not. Now we don't know is Regulation A+ getting loaded London, UK financial circles. I don't know. I, you know, we hear from companies in the UK, but, um, I can't speak to the big ambient knowledge there.
The question here is do is debt or equity, more attractive, fixed income, and so forth, more attractive to Regulation A+ investors. It depends, right? It depends on the terms and it depends on the nature of the offering. So, if it's a real estate deal, they expect that that's the norm, right? Your decent dividends paid on that. That is a norm selling equity in a real estate deal is difficult because it doesn't fit the norm. Um, beyond that though, if there are companies who are doing secondaries that are public, that are penny stocks, they got hammered and they don't have an instant solution to that. So, these the solution, my, I, I, you know, I don't think it's a terribly good idea in case to go out and offer more of the same common stock has already hammered through the floor. You can do a reverse split to bring it up, but does that solve the problem?
Usually in that case, a separate class is what some companies have done that seems to be working well and has worked well in our experience. And, um, if it's a preferred that isn't the common, the separate, that's a debt instrument that pays a decent dividend, that it's a matter of how often do you pay the dividend? Monthly is more appealing to a retail investor than quarterly or annual. And you know, what is the level of the return? You know, if you're paying eight or 10%, that is very compelling to a lot of people. If the company has some substance to support the belief that it'll go on paying it. Right. So that instruments can be very, very, uh, compelling.
So recommendation of a risk transfer insurance for offerings. Yeah. You know, getting directors and officers insurance is an expensive thing at the best of times. And that's no, there's no difference here. Um, I don't have any particular recommendations for insurance except that whatever method of raising money, you use, you follow the rules, right? We do things in our platforms or identify high risk investors by their behavior, in addition to the obvious things. So that way we, to me, there's always been two issues here. One is stay absolutely clean with the sec at all times because it's so frightening to deal with that giant entity on the rock, if you did something wrong. And the other one is to minimize litigation exposure because we're in the U S litigation is such a habitual thing here. So, in this case, you know, that one's obvious don't break the rules, you know, et cetera, et cetera. And this one is about, not taking on risky investors, having a company, do what it says it would do all the obvious things. I mean, there's a long list. Don't be a target. Don't make yourself a title. Right. Dee versus Regulation A+, how are we doing on time? We're okay. Right. D versus Regulation A+, um, excuse me, Reg D is so much more difficult to market online. It's so easy to use with the, with private equity firms. It's a marvelous instrument. It's a giant business. Um, Regulation A+ in 2019 was just over a billion-dollar capital raise. I expect that when we have finalized the numbers, 2020 will turn out to be $1.4 billion, maybe $1.5 billion raised, which is interesting. I mean the whole private equity category is a billion dollars a year, but obviously dwarf all these numbers adored by IPO's. And in particular right now by, uh, SPAC RPO transactions. Um, so going back to what is reg D like online reg D 506 C is all about appealing to skeptical investors because accredited investors are skeptics are be average. Investment amount online is 15 to 20 K, maybe 25 for, for accredited investors when they like an offering, but they're smart people and they are, they want a deal.
They want a company that's valued at trying to leave for its future. And they will do their own due diligence. Or they'll just write it off out of hand if it's not communicated to them clearly properly, et cetera, et cetera. So, in the case of Regulation A+ I'm not saying this is all good, but this is the case, right? Regulation A+ a P when it can be marketed to main street investors, it is as the most vulnerable audience and they don't pop and don't do enough due diligence. So, it's up to the issuer. And when they're with us, it's up to us to help make sure that the disclosures are thorough. We don't assume that they read the offering circular, which is, you know, 100 pages, 150 pages long, a retail investor. You know, we want to defend them from themselves so that they're happy later.
Yeah. They're optimists. You'd be surprised. The messages I get that I get copies of the emails that are sent through the platform to make sure that our CEOs are answering the right ones in the right ways and et cetera, et cetera, to help them come up the curve. Not just me, even I do too. You'd be amazed. Some of the questions, you know, a company that is offering doing, it's offering saying, it's not listing saying it's not planning an IPO to the major exchanges for ye incredibly long time or ever. And then, you know, somebody invested four months later, they're paying the CEO saying when's the IP up. Even though it was very overtly stated on the offering page, you know, so we're dealing with optimists out of a hundred people who will invest in a Regulation A+ that is to say the people who've engaged and showed interest and a hundred of them that will go through the book, the journey at some point, a couple of them will invest on the first visit.
We had a, we had a day last week, two weeks ago, where seven out of 10 of the investors made their investment on the first visit in an offering. You know, you're dealing with optimists when that's happening, right. So, we got to protect them and they are looking at this in a very different way than the reg D investors. And they're easier to reach because they never had this before. Okay. Regulation A+ process has been out there for five and a half years like this company, which I launched because of Regulation A+, but still so few people know about it, right? How many divisions of major companies that, where they'd like to raise capital, know that they could use Regulation A+ to do it. And our planning now very, very few it's taken ages to get the awareness up. It still is. It's where, where at the gestation phase, still with Regulation A+, even though it's accelerating nicely.
Would it be possible to do a private placement under reg D? Yes. You can do right. DS in parallel with a Regulation A+ in the, you know, whether or not all of the investors are required to approve a transaction. Depends on how you write the share class, the rules of the share class. So that's optional.
Know, having a lot of investors doesn't have to create a nightmare, but if you'd had it set up that way, then you would have to go to a lot of investors. But again, they are optimists. Can I cover that? What a SPAC is in the current rules? So, a SPAC is, it is where a company makes it's a special purchase acquisition vehicle where, uh, it goes public on the expo, through an [inaudible] to a major exchange. And as the equity NYC raises money through that public offering with the express intent to buy stuff, to buy companies, they don't have to be terribly specific, but they like to be reasonably specific because if they're specific on a, on a zone like electric vehicles, it's interesting. It makes it easier to raise the money. And if they have a management team that resonates, it fits that, then they that's another advantage, same thing in a Regulation A+ offering, right?
So, then what do they do? They have usually they limit themselves to, they have to deploy the money they raised in two years. That's the norm. And that, that point, the investors in the fund or in the fund in the company, this back entity, uh, are not required to transition over to the new entity. They're not alive. They're not required to be a part of that combination with the other company or companies that are being acquired. But essentially that's, it, it's a perfect, it's a vehicle built exclusively to buy other companies. It has no actual operating business history, uh, typically, and it has no particular plan to build its own technology or its own products, which is different than what I've said here clearly about Regulation A+ This company discloses a Regulation A+ investor DNO insurance policy. Having the policy, isn't going to help raise the money, but having the policy is going to make it easier on management, uh, to feel like they're less at risk. I, I, I'm not quite sure if I'm missing something. If the insurance is, is, is ensuring the investor, that might be a tad expensive, but if it's true, then that would make it easier to raise the money. Yeah. Good question. With reference to acquiring plans. If you are overtly planning to buy a company, then you must get audits of that company. It typically in your Regulation A+ if you have a general intention to raise money and buy companies, but you are not yet ready to do so then you don't of course, right? If you, if you literally, if you plan, you raise the Regulation A+ money, but your initial intent is to buy that company over there. And that's a part of the plan then you must have, or what it's on that company too, because otherwise it would be silly. So that's a sequence of facts as she writes sequence a plan, we're okay. On time. And it would drive up the audit cost significantly available.
The SPACs as such are not a part of the Regulation A+ rules. They're not, I said that front ended in this call. Um, thank you for that compliment. I really appreciate it. It would be, that's the thing that's missing here, right? Is the interactivity here. I am talking to my computer screen, you know, I could, I can imagine I have an audience and make the same presentation. Probably wouldn't be a good, because I know you're their Regulation A+ was back or available. Yeah. Legion, Legion isn't really that it isn't, it isn't. It was misleading to me when I first read it. So, their initial filing was a spec. Well, yeah, it was a spot where they said, this is what we're going to do. We're going to go buy companies. And then the sec came back and said, ah, this is a blank check company, guys. You can't do that. And then they amended their filing, uh, and built their own technology and change the change, the description of the offering to be what I've been describing here. So, it started out that way, but it didn't survive past the first set of comments from the sec.
It seems that setting up a SPAC without any operations activities would be easier and cheaper than doing a Regulation A+ could be, could be right. Absolutely could be. I don't, you know, it's just, it's a horses for courses thing. You know, if, if you understand the nuances of Regulation A+, which is what I attempted to convey here, then it'll fit in some cases, in other cases, it won't, um, the needs, if some companies will want to use this method and list on the QX and they don't have to have a two-year operating history, right? The inclusion of a genuine plan to build software for this purpose or technology hardware for that purpose, it's not rocket science to do as long as it's actual, right? So, you know, Christ, I've got so many company ideas. It's ridiculous. I just don't have time to do them, but it isn't that difficult to do.
But if you're going to the NASDAQ where you do have to have a two-year history, is it hard to buy a private company that has a legitimate two-year history, especially if you like what they're doing, there's a lot of companies out there that are real, that aren't expensive to purchase, but then it's a matter of, you know, your preference. What do you want to do if you have the clouds and the team, so where you can do a spank via the conventional method or raise megabucks that way. And you are confident that you can succeed with it. And you like the two-year horizon to get it all, to get the major acquisitions done by go for it. Know, I'm not saying Regulation A+ is better. How would I know it depends on your circumstances.
Any more questions? It looks like we're reaching the end of the, Oh, here we go. Can you raise 75 million for a SPAC, from a large company, public investors with the large number of public investors, rather than a smaller list of public investors. Wow. If it's a SPACs bank, then you raise money from whomever's most interested through the underwriter. If you're raising money for a company as we're describing here, which is a non-SPAC, but it's a Regulation A+ that offers some of the same benefits. Then typically you are raising money from a large number of public investors with the benefits that go with that hassle. But the hassle isn't as bad as most companies fear you have the transfer agent for that, you know, for dealing with them on a day-to-day basis for distributing dividends, if you choose to use them for that purpose, that sort of thing.
So, I'm not sure if I answered that question or not, but I, uh, if there are any other questions post them now because we're reaching the end of the, of the session. Um, let's see. We, we are yeah. With 1205. So, this is a good, a good duration. I hope this has been useful for you guys. Um, that's my intention, right? Manhattan street capital. I didn't say anything about it except sort of a little mentions here and there. We help companies raise money, lie Regulation A+, right. The platform is very deep, very sophisticated. We've got a lot of neat functionality in it. And we had vies and how we quarterback our client companies as much as humanly possible. We're selective on the front end. And we aspire to help companies make sizeable raises that are successful by a Regulation A+ for them and successful for the investors. That's the whole goal to be the leading online platform, obviously for Regulation A+ in the UFA, no Regulation A+ as such cannot do a SPAC. Now I said that at the earlier the front end of the conversation, I made that overtly clear, the sec has not amended the Regulation A+ regulations to say, yeah, go for it. Do blank check companies, or SPACs by another name they have not done. So, but if you, this is from Craig, Craig, if you look at the video, when it comes out in a week, you'll see the front end here and the discussion of all the ins and outs of this. So, you know, you'll know where you stand. If you, if you study that, I think I know what I'm talking about. And I, the most important thing here that I want to convey apart from the disclaimers that you already heard it at the front end, I hope. And you know, that are important is that, um, you can't game the sec, right? Whatever you do, it has to be legit. That's a serious thing to bear in mind, you know, gaming of the sec. But if you do this method that I'm recommending and you do it properly, then you aren't gaming the sec, you're following their regulations and you can have great success. I hope that you did. That's my intention for putting on this webinar.
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