Ready To Raise Funds With Reg A+? Use These Tips To Succeed
Reg A+ is gaining momentum, with 100+ filings, 31 qualified by the SEC, seeking an average $23M goal. The aggregate capital being sought is now $1.5 Billion. Use the tips below to help make your Regulation A+ offering work optimally.
1. Don’t Underestimate The Importance of Consumer Appeal. Broad marketing is not only allowed, it will be vital in securing the interest you’ll need to get investors on board. You should get the right kind of comprehensive marketing agency in place immediately (which can be surprisingly cost effective when your company is a great “fit” for Reg A+). We have selected such agencies.
Reg A+ is unlikely to be right for your company if your products do not appeal to consumer investors, even if the fundamentals are strong, simply because the cost of reaching investors that are attracted to a purely financial return is far higher than for attracting consumer investors. Investors looking for a great return are more likely to wait for Reg A+ to develop a proven track record before acting.
2. Consider this method for raising your up front cash: Angel or VC investors that invest in your company to pay for the cost of the Regulation A+ offering can sell their shares in the Reg A+ offering, as a reward for them putting up the capital. The percentage of their shares which you offer to make liquid is up to you, the company, to choose. Of course, you can not guarantee that the Reg A+ offering will succeed or that it will reach its maximum. And no more than 30% of an offering can be from selling insiders. Typically there will be a step up in valuation from the Angel/VC round, which can be motivating to the VC or Angel (accredited) investors. There are no Rule 144 holding period restrictions on this transaction.
3. Be sure your offering pitch is truly compelling, and plan to launch with high impact marketing. Remember, this is not just about logic and the quality of your team and company; it is about the emotional appeal you create (and your personal credibility). Keep your video short and engaging so the audience watches every second and comes away wanting more. Build momentum rapidly with front loaded effort. Early traction builds success for the whole campaign.
4. Rewards can help. A lot. In Reg A+ you can offer awards (similar to those on Kickstarter). If you have attractive rewards you can offer, that will likely help.
5. Don't be fooled by the amount of your TestTheWaters(TM) reservations. Know ahead of time that casually made reservations will overstate the true investment potential on hand. Manhattan Street Capital will conservatively compress them down to know where you really stand.
6. Don't expect rapid results. This is a process that takes time. Your Reg A+ funding will take 4-6 months to complete, perhaps the shortest possible time is 90 days if you start the SEC filing and the marketing simultaneously - which I generally do not recommend. The set-up for your TestTheWaters(TM) offering and comprehensive marketing campaign will usually take six weeks.
7. Be careful to keep your valuation at a sensible level. One problem in raising capital from consumer investors is that you may be able to get a valuation that is too high, as they tend to be less valuation sensitive than seasoned angel investors. Yes, you heard that right – you could get more money for less stock in the near term by pushing for the highest valuation possible. But if the valuation isn’t sustainable, your investors will hate you later. You want happy investors who will spread the word about your products and strengthen your brand, for the greatest long term success.
8. Investor due diligence matters. Manhattan Street Capital will help you to be selective about which investors you accept, above and beyond the SEC requirements. Do full due diligence to reduce the risk of future lawsuits and to make for a smoother journey with thousands of shareholders.
With this guidance in hand, you are on the first step to dynamic funding success.
Check the FAQ for more details: http://www.manhattanstreetcapital.com/manhattan-faq-page
TestingTheWaters™is a trademark of Manhattan Street Capital.
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital marketplace 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.