Tag Archives: JOBS Act

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Investor Solicitation 3.0 – Start-Ups Squared Away w Investor Offering Documents

You’re an emerging fund manager, an entrepreneur vying to create a real estate development platform or you’re a fintech guru aiming to alter the current payment processing landscape with Ethereum that didn’t get the memo titled  “If you don’t have properly-pared Investor Offering Documents that comply with securities regulator regimes, you’re not likely to pass Go and collect $200, and certainly not the $2mil or even $20mil that you think you need to fund your business.”

For entrepreneurs  seeking capital, whether for a fintech initiative that envisions an “ICO”,  a real estate development project, a fund formation or any other unique, innovative or disruptive company, the investor solicitation “rules of the road” beyond initial stage “friends and family round” include a properly prepared business plan and fully ‘squared-away’ investor offering documents. Without these basic elements, capital formation campaigns will get stuck in neutral. More likely, without having the proper document file, inclusive of a offering circular, offering memorandum and/or offering prospectus that complies with securities industry regulatory regimes and local securities laws, those capital raising goals will get totally grounded.

(via Broker Dealer LLC-re-published with permission)

Private Placement Offerings Surge as Demand for Offering Memorandum Document Experts Follows Along

Whether due to improving economic conditions in the US as well as various other parts of the world, or due to technology advancements that serve as the catalyst to innovative products and services that solve legacy business challenges, the global private placement marketplace is surging. With this new era of entrepreneurship, the need for investor offering memorandum experts is likewise cascading. In Wall Street parlance, the demand for such experts is nearly “over-subscribed,” meaning the supply of capable professionals who specialize in preparing fully-compliant investor offering documents is being stretched thin. But, at least one firm within the professional services sector is addressing the investor documentation needs of forward-thinking business enterprises and they are situated neatly within the “curl of the wave”-all you need to find them is a search engine and the right key words/phrases.

Operating under the web banner OfferingMemorandum.com, the firm behind this portal is NY-based Broker Dealer LLC and with footprints in various cities across the global financial services ecosystem, they are leading the pack by making it simple and easy for broker-dealers*, captive business advisors and corporate lawyers for companies of any size and located in nearly every geographic location of the world to engage local securities law professionals and investor offering document experts who specialize in preparing preliminary offering memorandums, red herrings and final offering prospectus documents that conform to financial industry best practices and comply with local regulatory guidelines that govern investor solicitations. (*For various reasons, registered broker-dealers do not prepare the investor offering memorandum or an offering prospectus, and it is therefore incumbent on the Issuer to provide the investor offering documents.)

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Ryan Gorman

Prospectus.com

According to Ryan Gorman, a PR-IR-Corporate Communications expert who works with many startup companies, “While some capital markets  professionals will attribute the continued spike in private placement issuance to the ‘Trump Bump”,others will credit the evolution of the JOBS Act [the US legislation spearheaded by former President Obama intended to make the regulatory steps more simple for small companies in the US to raise capital], global macro gurus point to the rising economic tides in various regions of the globe. That said, nobody disputes the number of new companies and latter-stage funding initiatives for small, medium and large companies remains in an unobstructed uptrend.

Private Placement offerings are surging and direct IPOs are gathering steam. But, for those seeking to raise capital for a start-up or to fuel expansion for a fast-growing business, any entrepreneur worth his salt knows their first step is preparing a cogent business plan, then consolidating that blueprint into a short-form ‘pitch deck’ and once prospective investors have expressed interest in the investment opportunity, the enterprise seeking capital (aka “Issuer”) provides the investor with an offering memorandum or an offering prospectus. Simple as this process might sound, offering memorandum preparation is non-trivial and is typically performed by securities attorneys who specialize in investor offering documents. Also known as an “OM”, the offering memorandum is perhaps the most critical document, as it frames the terms and conditions of the investment, and when prepared within the context of best practices, the offering memorandum is the document that both Issuer and Investor can hang their hats on. Somewhere in the mix, the enterprise that seeks funding (also known as the Issuer) might engage a registered broker-dealer to serve as a placement-agent aka underwriter for the financing round, or the Issuer may already have identified investors and has determined there is no need to engage a broker-dealer.

*Registered broker-dealers generally serve as a placement agent or underwriter for a capital raise, but typically defer to the Issuer to provide them with the investor offering documents, as such it is the obligation of the Issuer or their corporate counsel to create an offering memorandum or a prospectus. In most instances the Issuer will engage their law firm to prepare these documents, and increasingly, law firms that do not have a securities law practice will outsource or sub-contract to firms that dedicated to this type of work. As the number of private placement offerings and direct IPOs via Regulation A+ continues to grow, portals such as OfferingMemorandum.com and Prospectus.com provide a unique solution.

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AIG To Offer Equity Crowdfund Insurance

(RaiseMoney.com) -It takes a life-long pioneer in the insurance industry to know best when to grab first mover advantage whenever a new landscape appears, as evidenced by Tuesday’s announcement from New York-based global insurer AIG, which says it will be the first to offer crowdfund insurance for investors in equity crowdfunding deals. Below extract is courtesy of coverage by WSJ reporter Leslie Scism.

(WSJ) American International Group is giving crowdfunding a try. Not to raise money for startups, but to help allay investors’ concerns about being ripped off as they invest in small businesses through this new type of funding.

aig-crowdfund-insuranceThe New York company is set to launch what it is calling “Crowdfunding Fidelity,” an insurance product developed to protect investors on equity crowdfunding platforms against fraud.

In announcing the new coverage Tuesday morning, AIG noted that there have been few instances of fraud in the sector so far. But it said its new product would help to build investor trust to ensure underlying issuer trustworthiness.

“As a sector still in its infancy, equity crowdfunding platforms are only as strong as the confidence they instill in their investors,” said Lex Baugh, AIG’s president of liability and financial lines, in a news release.

The coverage isn’t available to protect against just any crowdfunding project. So-called equity crowdfunding offers investors stakes in a company. Earlier this month, new U.S. rules kicked in under which ordinary investors—not just wealthy individuals, or so-called accredited investors—can participate in such offerings. The fundraising option originates from the 2012 Jumpstart Our Business Startups Act, or JOBS Act.

AIG will sell the coverage only to those portals it has determined have adequate processes in place to check out backgrounds of the businesses they allow to sell equity stakes, Mr. Baugh said.

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What’s Next? Independent Equity Research for Crowdfund Deals

(RaiseMoney.com)-Minneapolis-based Stratifund, which models itself as a modern day version of a traditional Wall Street “independent equity research firm” has become the first such firm to plant its flag on the crowdfunding beachhead and bring objective analysis to crowdfund deals. Led by a cadre of Wall Street-trained wonks and crowdfund industry thought-leaders, including company advisors who who helped frame the JOBS Act, Stratifund seeks to bring objectivity as well as analytic expertise to help individual investors across the nascent stage equity crowdfund ecosystem.

Much like contemporary independent research firms focused on listed equities, Stratifund offerings are available via an online portal that enables subscribers to receive what is otherwise private placement offering analysis for a monthly subscription rate of $9.99.

Alex Thaler, Stratifund co-founder and co-CEO, said his company will “bridge the gap” for everyday investors as they decide if they should purchase securities from an issuer raising capital online. The service is launching just as the interest in online investments is beginning to rise.

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Stratifund co-Founders Thaler, Snover and Julkowski

“We give each investment a rating based on our proprietary algorithm, and back it up with a user-friendly report that highlights key areas that influence a start-up’s position,” stated Thaler.

Stratifund states it does not take any remuneration from any of the companies it rates. The service will be monetized by a small subscription fee that allows individuals access to an unlimited number of reports alongside educational material. Stratifund does not take any funding from the start-up companies it rates, instead relying on nominal subscription fees from investors for unlimited access to deal reports and educational materials.

“Our business model allows us to stay completely independent and objective,” said Marc Snover, Stratifund co-CEO and co-Founder. “We pour an enormous amount of research into every deal report, and we think the pricing structure provides tremendous value to investors. We’re not investment advisors; our only goal is to publish independent research that provides as much information as possible in an approachable, convenient platform so everyday investors can make decisions with confidence.”

To continue reading the story from RaiseMoney.com, please click here

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What’s Next: ETFs For Crowdfunding Industry?

This post was written by Pete Hoegler, Washington DC-based Social Media Savant for The JLC Group. 

Three years after the JOBS Act was passed, it seems that Washington is back for more–a curtain call if you will–making it easier for small ventures to raise capital.

The House Financial Services Committee in early June floated a draft bill that would allow the creation of “venture exchanges” tailored to the needs of small companies looking to raise money. In many ways, the success of the JOBS Act hinges upon the creation of such markets. A healthy secondary market created liquidity that is critical to building investor confidence and creating a robust alternative to the global markets that today are dominated by enormous corporations.

The new proposed “venture exchange” laws are aimed at increasing access to early stage investors in private startups and small businesses (some of which could be JOBS Act enabled investors), as a lack of liquidity was a concern voiced by some surrounding the new laws for equity crowdfunding with non-accredited investors.

Investors in technology startups, for example, are likely to have to hold their position in any one investment for an average of 7 years. Creating opportunities for selling private stock in a start-up investment sooner through venture exchanges has the potential to reduce some of the early stage investment risks.

Where or How is there a link between Crowdfunding and Exchange-Traded Funds? Well, those following the creative finance wizards from the world of exchange-traded products can speculate the next  innovation will be ETFs comprised of non-public companies that were funded via crowdfunding platforms..and those companies will be labeled “pre-emerging start-ups” and there will be ETFs for each category of ‘project.’

While the underlying components might not necessarily be easily-traded by the universe of market-makers who profit by arbitraging the cash index vs. the underlying constituents, the advent of ETMFs, a structure that Eaton Vance hopes to bring to market and is based on a “non-transparent” construct (meaning the investor has no idea what the underlying constituents are), Crowdfunding ETFs could create markets that allow early investors who invested via equity crowdfunding to hedge their bets far before any kind of liquidity event like a public offering (IPO) might take place, spelling an opportunity for liquidity for those early investors.  Just like the current ETF landscape, these crowd-funding indexes would be themed according to industry sector and/or product categories.

OK, some of the wonks who are reading that last tongue-in-cheek idea might be rolling their eyes. That said, given the creative juices that flow from the capital markets, we’re willing to bet that at least one of the current innovators in the ETF world grabs on to this idea and such products will be introduced within the next 18-24 months. Oh, it was our idea…

The number of IPOs has gone from an average of 311 from 1980-2000 down to an average of 99 IPOs each year from 2001-2011 so opening up other alternatives for liquidity will de-risk the growing number of startup investments happening online.

This is yet another step towards reforming our capital markets. The first step was to enable access, and was addressed by Titles II, III & IV of the JOBS Act. So regardless of your opinion on this matter, the summer is shaping up to be an interesting time for equity crowdfunding investors, accredited and non-accredited alike.