| There is something very important to know when | | | | But...if you don't want to go public but still want to |
| you're raising capital for your business: Under the | | | | advertise your securities offering to private money |
| Securities Act of 1933, to sell securities you must | | | | investors, there is another route you can take: you |
| register them with the SEC or meet an exemption. | | | | can offer your securities under a Regulation A |
| Don't worry. It sounds a lot scarier than it really is. | | | | Exemption. |
| An exemption from securities registration doesn't | | | | Here's a breakdown of what you can do under a |
| mean that you get off scot free - you still have to | | | | Regulation A exemption: |
| make sure that you file the proper paperwork with | | | | - Raise up to $5 million within a 12-month period |
| the SEC and your state (if applicable). However, | | | | - You can advertise the sale of your security |
| operating under an exemption from registration does | | | | - You can "test the waters" - this means you can |
| mean less paperwork, lower filing fees and less | | | | advertise before your offering statement is accepted |
| ongoing reporting requirements. In other words: | | | | by the SEC or states' security boards and collect an |
| It's a good idea to raise private money using an | | | | interest list (but you can't take any money until you |
| exemption from securities registration. | | | | file the paperwork) |
| I know for some real estate investors, getting | | | | - The securities are not "restricted" and are freely |
| private money to buy real estate under an | | | | tradeable |
| exemption isn't feasible. The most common reasons | | | | - No audited financial statements |
| for this: you want to... advertise using general | | | | - No on-going reporting requirement so long as there |
| solicitations to meet investors, you want to raise a | | | | are less than 500 shareholders and the assets of the |
| ton of capital (multiple millions) or you want to cross | | | | company do not exceed $10 million Before you run |
| multiple state lines for private investors or projects. | | | | out and start your Regulation A offering immediately, |
| Going Public | | | | consider the following: |
| If you can't or don't choose to raise capital for your | | | | - You must have a specific business plan for raising |
| business under an exemption, then you are looking at | | | | the capital (no vague capital raising for broad |
| going public. Here's what "going public" means: | | | | 'investment' purposes) |
| - * Highly Involved registration process ( I'll cover this | | | | - If you "test the waters," you may not accept |
| in a later article, but suffice to say there are multiple | | | | money until the SEC staff completes its review of |
| steps involved that encompass SEC and FINRA | | | | the filed offering statement and you deliver |
| guidelines) | | | | prescribed offering materials to investors |
| - Having audited financial statements | | | | - Time: the SEC and state securities regulators don't |
| - Filing quarterly and annual reports, and other forms | | | | move as quickly as you'd like them to |
| when material information develops, such as form 8-k | | | | - More expensive than a private offering (such as |
| filings | | | | Regulation D) Compare and contrast your capital |
| - You can sell your securities via publicly traded stock | | | | raising options in multiple scenarios (going public, |
| markets (OTCBB and Pink Sheets) | | | | Regulation A, Regulation D exemption, etc.). Consult |
| - You can use broker/dealers to underwrite your | | | | with your securities attorney before you move |
| offering (giving you a potentially huge market) Keep | | | | ahead with any kind of securities offering. My job is |
| in mind that I'm condensing this for your benefit - | | | | to arm you with information, ideas and techniques |
| there's a lot more that I will go into in a later post. | | | | and it's your securities attorney's job to make sure |
| Going public is not for the faint of heart - but it could | | | | your particular situation (every single one is different |
| very well be the boon you need to raise big time | | | | - I know it sounds cliche, but it is true) is in |
| private money and gobble up bargain distressed real | | | | compliance with the securities laws. |
| estate deals, notes or other investments that you | | | | I've had most of my private money raising success |
| would not otherwise get. | | | | using Regulation D and Intrastate offering |
| One of the biggest reasons real estate investors | | | | exemptions. I work as hard as I can to keep things |
| want to go public is so they can advertise their | | | | under Reg. D, so as to streamline my capital raising |
| securities offering. If you want to hit the broadcast | | | | process and get private money in play faster. You |
| waves with your business and your offering, you can | | | | must choose the securities offering type that best |
| do this when you go public without having to fear | | | | matches your business, your investors and the |
| that you'll get a cease and desist letter from the | | | | regulations of your state. Remember, don't be |
| SEC. Of course, there are limitations as to what you | | | | intimidated by the securities laws for private money, |
| can say/how you can say it, but you still have a | | | | you just have to take it one bite at a time and have |
| pulpit to pitch private investors where you'll be heard | | | | good advisors in your corner. |
| far and wide. | | | | Now, go forth and GET THE MONEY! |
| Staying Private - Which Exemption to Use? | | | | |