11
Sunday
Mar. 2018

Reg A+ Finding the Clear Path

It’s not news to many people around the capital markets that the number of publicly listed and traded companies have dramatically shrunken over the last few decades. Fewer firms are going public. Public companies are going private. Mergers and acquisitions also eliminate public companies.

 Launched in 2017 via the JOBS Act, Reg A+ enables two game-changing possibilities: 1) everyone can invest in private companies (not just rich “accredited” investors) and 2) firms can remain private or IPO directly to an exchange and be publicly traded.        

The benefits of Reg A+ are huge.

First, it levels the playing field for investors of all sizes and experience. With Reg A+, the 92% of the American population that was discounted before as not rich or sophisticated enough to invest in these offerings now have the opportunity to invest, as long as the amount they want to invest is in an appropriate proportion to their income.

For companies seeking capital, Reg A+ can be an alternative to standard venture and growth capital funding routes. Entrepreneurs that have surpassed reasonable milestones for revenue and potential profit can gain funding from their customers and investors with similar attributes or affinities. They can reach out to institutions (a whole different set of expertise) and wealthy people too. A key to what makes this regulation innovative is that we can do all of this with no prior relationship with that prospective investor — this is what is called general solicitation.

Thanks to innovations in technology, investors can invest directly online through a new breed of broker-dealers, documenting and executing the entire transaction, simplifying the process for all parties and spawning a new industry in which I am proud to participate (through an investment in www.Capital2Market.com).

Reg A+ is a breakthrough step in assisting companies and investors to discover each other. It’s easier than ever for investors to learn about new investment opportunities, see their SEC filings (yes there is paperwork and compliance), company videos, presentations and websites to learn the story and see financials to make informed decisions whether or not to invest.

Our goal is to digitally introduce brilliant, growing companies that are full of potential and pass our criteria (everyone still has to do their own homework to make an investment decision) to institutions, and, based on data profiling, highly likely retail investors. We pass on more companies than we accept. We work with clients we believe will be successful, who are a good potential investment and have a prospective investor group large enough to make the offering have a high probability of success. We look at their business structure, their potential for long-term, sustained growth, as well as their customer and fan base.

We have seen other agencies take companies that are too small, that are not profitable enough, and don’t have enough revenue, through the process. We recognize that these companies may have potential, but also may not be ready (read suitable) for this type of offering.

We are an investor acquisition firm (a small, specialized subset of marketing that requires expertise beyond making videos and purchasing media). We acquire investors and intermediaries for money managers, ETF issuers, mutual funds, real estate, private equity, and more every day. Most marketing cannot be precisely measured. Agencies entering this space are swiftly learning that raising capital or assets has precise measurement.

The only goal of one of these campaigns is to raise the capital. KPIs such as awareness, opens, clicks and engagement, at the end of the process, are ultimately meaningless. Issuers need to empower and trust their agencies toward achieving success without second-guessing every step of the process. The only measure of success is oversubscribing the offering. That is why agencies need the right client to match to a specifically calculated pool of highly likely prospective investors, not just fans. Oversubscription — this is what we sign-up to accomplish.

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