Venture Capital & Private Placements
Venture Investors Partner with Entrepreneurs
Entrepreneurs backed by VCs have a competitive advantage. Venture capital partners provide strategic and operational guidance, connect entrepreneurs with investors and customers, sit on company boards, and hire employees.
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With a startup, daily interaction with the management team is common and critical to the company’s success.
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VCs are experienced partners who are 100% invested in their portfolio companies.
Risk Capital for High-Growth Businesses
Venture capital supports new ideas that:
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Could not be financed with traditional bank financing.
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Threaten established products and services in a corporation or industry.
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Typically require five to eight years (or longer!) to reach maturity.
A unique institutional investor asset class. Venture capitalists create partnerships with pension funds, endowments, foundations, and others to make high-risk, long-term equity investments into innovative young companies to:
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Conduct research
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Expand workforces
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Build out new facilities
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Focus on long-term value growth activities
Reg CF
Raise from both accredited and non-accredited (retail) investors
No audit needed to start
Typically early-stage companies
A great low-cost option; easy to roll into a subsequent Reg A if you hit the $5M offering max
Non-voting: Structure ensures large numbers of early-stage investors don't become a burden to the company, and keeps founders in control before and after conversion.
Founder friendly: Reg CF investors are consolidated under a single share class in your cap table before and after conversion, while the ongoing administration of shareholders is handled by the Transfer Agent.
12(g) exempt: Using our registered Transfer Agent exempts issuers from additional reporting requirements from their Reg CF under 12(g) while total assets are less than $25M.
Reg A
Raise from both accredited and non-accredited (retail) investors
Audited financial statements required
Typically mid-stage or growth-stage companies. The only way to raise up to $75M from retail investors; great for companies with a large number of customers & followers
Reg A is typically best for those startup companies who are entering the growth stage, and owe a large part of their success to their early adopters. By pursuing a Reg A offering, a company is inviting its users to share in that success. Inviting early adopters to become shareholders, you effectively turn users into brand evangelists.
Research shows that customers who have a vested interest in the future of a business are more likely to recommend that company to others and increase the amount they spend with the company. Reg A raises are $3M-$75M and require a marketing investment to drive results.
Reg A+ typically works best for those that have a large and engaged user base and the ARR to prove it. Also called a ‘mini-IPO’ a Reg A+ raise has less demanding disclosure requirements than a traditional public offering but companies must first file with the SEC and receive qualification prior to launching an offering.
Reg D
Raise from accredited investors only
Minimal disclosure required
Typically established companies
The most common private placement structure; great for companies targeting an existing base of accredited investors
Rule 506(b)
Pre-existing Relationships: Offers under this rule can only be made to investors with whom the issuer has a pre-existing substantive relationship.
Accredited Investors: The securities can be sold to an unlimited number of accredited investors and up to 35 non-accredited investors who meet certain sophistication requirements.
No General Solicitation: The issuer may not use general solicitation or advertising to market the securities.
Rule 506(c)
Accredited Investors Only: All investors must be accredited, and the issuer must take reasonable steps to verify that investors are accredited, which might include reviewing financial statements, tax returns, or obtaining written confirmation from a lawyer, CPA, or registered investment advisor.
General Solicitation Allowed: Unlike Rule 506(b), Rule 506(c) allows issuers to broadly solicit and advertise the offering, provided that all the investors in the offering are verified as accredited.
