Is Your Company Eligible for Registration Exemption Under Regulation A+?

Under the Securities and Exchange Commission's (SEC)'s newly-adopted final rules for an updated and expanded Regulation A (called Regulation A+), as required by Title IV of the Jumpstart our Business Startups (JOBS) Act, private companies will be permitted to make exempt public offerings of up to $50 million within any 12-month period. But not every company will be eligible for the exemption. Here's a brief look at who is eligible.

Location Eligibility

Exemption from registration will be limited to United States and Canadian companies. The issuer must be organized and have its principal place of business in either country. No other foreign companies will be eligible for exemption under Regulation A+.

Companies Ineligible

Regulation A+ exemptions would not be available to:

• Investment companies (including "business development companies")
• Companies that are already SEC reporting companies
• So-called "blank check" companies that don't have a business plan, or whose plan is simply to merge with or acquire another as-yet-identified company
• Certain companies issuing interests in mineral rights, gas, or oil
• Any company that has been subject to any order from the SEC under Section 12(j) of the Exchange Act (revoking registration for public trading) within the last 5 years
• Any company that has not, for the preceding two years, filed reports as required by the rules
• Any company that is disqualified as a "bad actor" because of past actions by the company or its controlling persons.

New Filing Requirements

As before, all offerings under Regulation A must be made through a Form 1-A offering statement filed with the SEC. Regulation A+ eliminates the possibility of automatic qualification and requires SEC staff review and formal notice of qualification for all offering statements. As before, a company can "test the waters" by soliciting indications of interest in the securities before qualification of the offering.

New Tier Structure

Regulation A+ establishes two new "tiers" of offerings. Tier 1 covers securities offerings up to $20 million, up from $5 million, within any 12 month period, and retains many of the pre-existing requirements from Regulation A. Tier 2 now allows offerings up to $50 million a 12-month period. Under Tier 2, however, companies must adhere to more rigorous reporting requirements.

Since the 1930s, Regulation A has provided rules under which a company could publicly offer and sell a limited amount of securities to potential investors and be exempt from the process of registering the offer. The use of this exemption under Regulation has been diminishing as other Securities Act exemptions have become available or companies simply chose to register their offers. In adopting Regulation A+ the SEC seeks to revive Regulation A as a middle path - for companies that are eligible - that provides advantages over private offerings without the full cost and burdens of registration.

Reg A+ a bit too much for you? Take a look at Rule 506(c) which lets you generally solicit investors so long as you verify that actual investors are accredited investors. At VerifyInvestor.com, we have developed confidential, reliable and simple processes to make it easy for you to comply with federal laws. Visit VerifyInvestor.com or call us at 818-925-6701.

Is Crowdfunding for You? If So, Which Type?

Crowdfunding platforms helped individuals and companies around the world raise $16.2 billion in 2014, according to research firm Massolution. Crowdfunding likely grew out of microfinance, or microlending, which has been around for centuries as a way to help people climb out of poverty. The first microlending website appeared in 2005, the first US peer-to-peer lending site in 2006, and in 2009, Kickstarter launched as a new way to fund creative projects.

Projects now range from social causes to app development, and everything in between. The JOBS Act has declared that crowdfunding should be an option for businesses in the U.S. You’re not alone if you are wondering if there’s a type of crowdfunding that might help you raise much-needed capital for your business.

Equity Investment
Equity crowdfunding, as the name suggests, allows investors a share of equity in exchange for their investment. While the JOBS Act has opened the door to equity crowdfunding, the SEC hasn’t yet walked through it, and its corresponding rules aren’t expected to be adopted until late 2015. Once that happens, small or emerging businesses will be able to raise up to $1 million in capital from the general public via crowdfunding platforms, without triggering other federal securities laws.

Royalty Based
Also tied up in the wait for SEC regulations, royalty-based crowdfunding provides investors with an opportunity to earn a percentage of future revenue. For entrepreneurs, this can be attractive because they don’t have to give up equity; for investors, it is attractive because they could earn back more than their original investment.

Reward Based
Under this model, entrepreneurs pre-sell a service or product without incurring debt or giving away equity. Typically used to fund the launch of a new offering, reward-based crowdfunding has been used to help fund things like software development, cool new apps, inventions, and scientific research.

Debt Based
Also sometimes called peer-to-peer lending, this type of crowdfunding is easier and less costly than a bank loan for many entrepreneurs. It’s also easier for an investor to buy into because there is a promised repayment with a small return. This type of platform is suitable for those with an established customer base and stable cash flow, which will ensure you’re able to make the debt repayments.

Donation crowdfunding projects are used for political campaigns, charities, or social causes - rarely for entrepreneurial endeavors.

Debt Crowdfunding Explained

Debt crowdfunding offers an opportunity for small businesses, including startups, to explore peer-to-peer loans without jumping through the hoops required for possible bank financing (often only to be turned down) that also come with high interest rates.  

How to Qualify
There are wealthy investors willing to offer loans at interest rates below what a bank would charge.  In some cases, they’ll make private loans that the bankers wouldn’t make.  There are still qualifications you’ll have to meet, however. You will still need to demonstrate creditworthiness, though the threshold will differ from the banks and will vary platform to platform, and creditworthiness isn’t the only factor at play in obtaining debt crowdfunding.  

Investors
There is some evidence to suggest that investors actually prefer debt-based crowdfunding to other platforms, with a recent survey showing more than 75 per cent of the funds invested going to debt-based crowdfunding sites. These numbers indicate that investors like the certainty of having their initial outlay repaid, with interest representing a small return.

How It Works
There are many lending portals up and running in North America, and they all have different processes and requirements. Expect some common elements, of course, and be ready to outline the purpose of the funds you’re looking for and how much, your credit profile and financial situation. Beyond that, there’s a lot of variety, so do your research on which ones best suit your circumstances, and then ensure you meet the portal’s specific required criteria before you start submitting your application.  Generally, you present your case for a loan online and investors decide whether they want to invest.

Promotion
Social presence is still a key factor in debt-crowdfunding, so promotion is still important. Market research will help you identify which channels you should focus on in order to attract attention from the right investors and/or consumers, if that applies.

Debt Crowdfunding History
Early forms of debt crowdfunding include microlending and microfinance, which have been around for a long time typically as a way to lend small amounts to low-income individuals that can help raise them out of poverty.  In the last decade, thanks to the Internet, debt crowdfunding has gained considerable widespread traction. The first microlending website, kiva.org, appeared in 2005. In 2006, Prosper.com was the first to launch a peer-to-peer lending site in the U.S.  LendingClub.com followed shortly thereafter in 2007, and this alternative funding method continues to gain in popularity.

Future
Ever since the passage of the JOBS Act, lending portals and crowdfunding sites have exploded in popularity.  It seem as if there are a few new sites popping up each week.  It’s an exciting world out there and investors are funding deals.  So what are you waiting for?  Get your deal listed!

3 World Trade Center Rebuilds With Crowdfunding

Five thousand dollars is all you need to own a little piece of this big Lower Manhattan real estate development project. The high profile 3 World Trade Centre (WTC) deal is just one of a growing number of real estate investment opportunities through a crowdfunding portal.

The Firm Behind the 3 WTC Deal
Fundrise co-founder, Dan Miller, calls it “proof of the power of crowdfunding”, and he appears to be right. Fundrise is the real estate crowdfunding portal where you can find the WTC offering. The Washington D.C.-based firm is using new securities laws to make it possible for more regular people to invest in a real estate deal, and technology is allowing them to distribute – or democratize - the investment, thereby challenging the traditional model, where, as Miller has been noted to say, the banks act like “country clubs” and control tightly who gets in.

How the Deal Works
Fundrise is underwriting the deal and funding the project on its own balance sheet. Investors are buying the bonds as senior secured debt instruments. There is a projected five per cent tax-free return over five years. Fundrise generally claims that all of its real estate crowdfunding deals include 10 to 20 per cent capital junior from the real estate company in the first loss position.</p>

Want In? There’s Still a Catch
It’s not quite as easy as grabbing the wad of cash from under your mattress. To be eligible for this opportunity, investors must be accredited (Are you? We can help you get accredited.) Under SEC rules, that means an individual must have earned income of more than $200,000 in each of the preceding two years, and a net worth of over $1 million.

About Real Estate Crowd Funding
The number of real estate crowdfunding firms continues to grow, and it is changing the real estate investment landscape. Developers have new ways to finance their projects. Socially minded investors have new ways to support their communities. And smaller investors now have a way in.

About 3 World Trade Center
WTC is expected to be the 3rd tallest tower on the Lower Manhattan site, with 80 stories and 2.5 million square feet of office space. Completion is scheduled for 2018.

Advertising for Investors – 4 Things to Know Before You Start

So you are ready to seek out investors. If this is your first time looking for a capital infusion from the crowd, there are a few things to know.

The Rules

The JOBS Act and SEC’s Rule 506(c) of Regulation D allow issuers – companies seeking investment capital, like you – to offer securities through “general solicitation”, including advertising, as long as a couple of key conditions are met:

• The investors you accept money from must be accredited, and

• You take reasonable steps to verify that your investors are accredited.

So, advertise away.

The Need vs. Readiness

A common mistake many entrepreneurs make is that they think they are ready to seek out investors, when in fact they are not. You may need to attract investment if you’re going to ______ (fill in the gap with grow/expand/survive/launch the next product/service/app), but that doesn’t mean you’re ready.

The Messages

If you embark on a campaign to attract investors before you are ready, you run the risk that your language, among other things, will trip you up. When you need investment, you may find yourself saying things like this:

• I’ve run out of the money I had

• I can’t/won’t invest any more of my own money

• I haven’t found any other investors, so I’m looking to you.

On the other hand, when you have done your homework and are truly ready for investment, you’ll be saying things like this:

• I know my customers, market and product/service and I’m ready to take my business to the next level. Now, I’m looking for a partner to help me get there.

• I’ve looked into a variety of sources for capital, and because you seem to be the best match, I’m interested in working with you.

The Advertising

Know what kind of investor you are looking for, and what kind of an investor may be looking for you. That will help tell you where to find them. Sites like Patch of Land or Crowdfunder help bring together investors and entrepreneurs, but there are many others out there. There’s social media (a must today), newsletters, newspapers, investor magazines, and even billboards. Once your research is done, and your budget is set, you’ll be able to put together a campaign to give you the greatest opportunity for success.

Want to Start Your Own Business?

Are you intimidated by popular TV shows that only show entrepreneurial aspirations being achieved by those with access to six and seven figure funding sources? Don’t feel that unless you’re in the same league as Donald Trump, you will never get your idea off the ground or make it profitable.

It doesn’t matter if you weren’t president of the small business club at school, or if you didn’t make enough money mowing lawns to buy your first car at age 16 - it’s never too late to unleash your entrepreneurial instincts. Here’s why:

Easier Access to Funding

Once you have a workable idea, backed by a solid business plan, it has never been easier to secure investment funding for your startup business. Unlike in the past, when strict rules were in place, governing who you were allowed to solicit for investment and how much you could ask for, today’s entrepreneur has greater than ever access to individual investors looking to invest in new ideas and new companies. Though at the moment, most private investors still need to be accredited, the process of raising capital is generally more accessible to all.

Easier Access to Global Markets

The Internet has opened up worldwide markets to even the most humble startup entrepreneur. Even as a one-man-show, if you have a website and a strong presence on a variety of social media platforms, you can expose your products or services to a person living across the street or across the world with equal ease. It is now possible to sell anything to anyone, anywhere.

Starting Businesses is Cheaper than Ever

Many businesses can be started from home, with one person, a computer and an Internet connection. Investment funding will undoubtedly be necessary at some stage as the demands of your business grow, but you can get started on a shoestring.

Less Pressure to Take Risks

While there is an element of risk attached to starting up any kind of business, it is less than it used to be because businesses are much cheaper to start. Failure, therefore, is less expensive. Many entrepreneurs used to work for other people, and realized that that is not risk-free either – redundancy could happen to anyone at any time.

There has never been a better time to start your own business. Learn more about how to ensure your investors are accredited investors by visiting VerifyInvestor.com

We Can’t All Be Silicon Valley Startups – Unglamorous Ideas Need Investment Too

“We can’t all be heroes, because somebody has to sit on the curb and clap as they go by.”

This famous quote from U.S. showman and social commentator Will Rogers can be applied to the business of starting a business. Because such a large percentage of startup investment dollars are channeled into the more “glamorous” areas such as technology and healthcare, many more “boring” bread-and-butter ideas fail to attract the investment they need. And yet studies show that it is often these businesses that are the most profitable.

Financial information company Sageworks, for example, recently surveyed the financial statements of over 1,000 private companies with annual revenue of less than $10 million, and discovered that “boring” accounting firms were making the most profit.

These types of service-related companies are quite often at the top of the profit margin list. Virtual assistants, for example, are becoming very popular as many small online and brick and mortar companies, who are unable to afford a full-time employee, make use of a virtual assistant.

Master the Mundane

There are literally millions of business owners who make a lot of money by selling unglamorous products or offering routine, everyday services. The secret of mastering the mundane is to offer something that your customers can’t or won’t do themselves, and can’t get done anywhere else.

Love What You Do

The success of any business really relies on what you can personally bring to the table. If you do something you love and are therefore passionate about what you do, it follows that you will also be knowledgeable, committed and tenacious. If, on the other hand, you’re unsure, or half-hearted about your business, this will undoubtedly show in your results.

Embrace the Everyday

So if you want to start a business, don’t overlook the unglamorous areas. If you look around, you’ll see that good business ideas are everywhere – from your garage to your car to your friends and neighbors. Identifying a viable business opportunity is often as simple as finding out what common problems are out there affecting large numbers of people, and finding a way to provide solutions to those problems.

Are you looking for investment for your business, no matter how unglamorous it may seem? Or do you want to become an accredited investor in order to offer funding to a startup business? If the answer is yes to either, go to VerifyInvestor.com.

Top 5 Recommendations for your Startup

Investors know that to accurately gauge the health of a startup business, they need to look at how much time the managers of that startup spend on evaluating risk. They determine how much effort goes into containing bad risks, and how much energy is invested in actively seeking out new and calculated risks that are anticipated to end in a positive result for the business.

Investors like to see a certain element of risk taking in a potential investment. They tend not to fund overly conservative business plans, but nor will they invest in a wildly risky one. They want to see homework done, and they need to see commitment. This indicates business intelligence on behalf of the entrepreneur, which is a positive indicator for the future success of the startup.

How Do I Avoid Bad Risk?

In business, as in many things, there are no guarantees, but a lot can be learned from the experience of other entrepreneurs and business experts. Some general rules of thumb include:

• Solve Existing Problems

It’s risky to create solutions for problems that don’t yet exist. You won’t have any customers. Aiming to meet a significant customer need that already exists is a less risky option.

• Create an Idea with Legs

One good product or service, with no plan for a line extension or additional services, will very soon be outstripped and outgrown by your competitors. Mitigate the risk of competition by planning to continuously upgrade and innovate. Do this from the outset, as part of your proactive business plan.

• Don’t Go It Alone

It’s natural to want to be the best in your field and to make sure you eliminate all competition. However, when you forge partnerships with others of like mind, the sharing of resources and the economies of scale help to make risk less unpredictable.

• Use Investment Wisely

Lots of initial startup money does not reduce risk, and it’s not a guarantee of success. Try to fund your initial phases with inside money, using investor funding to expand and accelerate growth.

• Embrace Risk

Change is necessary and risk is essential. Investors know that more is learned from failure than from success.

Accredited investors who appreciate the risks entrepreneurs take with their businesses are your most likely source of capital. To learn more about accredited investors, visit VerifyInvestor.com.

Are There Any Original Ideas Left? Creating New Startup Businesses from Old Ideas

Whether it's a media presentation, a marketing effort, or a product or service, most of these concepts consist of taking an original idea and extending it, adding new elements, and presenting it as something brand new. The finished product is not in fact "brand new", but a variation of previously conceived ideas.

This is why, if you're an entrepreneur, trying to come up with a new, original and unique idea may not be necessary. And even if you do actually stumble upon a brand new idea, it doesn't mean it's worth turning into a business. Sometimes, there's a good reason why new ideas haven't been translated into business propositions!

Doing something that's never been done before ends in success only in a very small percentage of cases. Most successful businesses are built by taking an old idea and making it new. There are many ways in which this can be achieved, but two of the most important are:

Narrow Your Focus

If you try to be everything to everybody, you end up losing focus and diluting your key talents. Focus on one key performance area, and get that absolutely right. As a general rule of thumb, the more you expect people to spend on a product or service, the more likely they are to demand specialized, focused expertise.

Create Combinations

Most "new" ideas are actually combinations of old ideas. This strategy works by taking the best parts of two or three different business ideas and combining them to create a new concept.

One of the earliest examples of this is wireless telegraphy. All the components used by Marconi in his "magic box" had already been thought of, or invented by, other people. Marconi's success came when he combined those ideas into something completely new.

The iPod is a great modern example of this strategy. MP3 players were already in existence when the iPod was first launched in 2001, so as a concept, the iPod was nothing new. It just took the best elements of existing products, added a few unique features, and suddenly a brand new device was born.

If you're looking for accredited investors for your "new from old" business idea, visit https://VerifyInvestor.com.

The Latest Trends in Early Stage Startup Investment

General opinion seems to be that there has never been a better time to be an entrepreneur. Venture capital funding in 2014 reached almost $24 billion - its highest levels in 13 years.

However, this doesn’t necessarily mean that early startup companies are having an easier time of securing investment. Most of the capital invested is going to more established companies with more proven track records.

It’s true that there is a bigger pot than before available for start up companies, but there is still a significant disparity between the percentage going to early stage businesses and that earmarked for later stage investments.

In order to tap into the larger, but still comparatively small, pool of investment funding, early stage startups should take note of some of the emerging trends that are influencing investment.

The Numbers are Growing

The late 20th century trend that saw the marketplace dominated by massive corporates is starting to give way to the rising popularity of smaller companies. It’s a trend that’s taking place across a wide number of industries – from the high tech startups of Silicon Valley to the car industry – and is expected to set the tone for a while yet.

Startups are Becoming Cheaper to Get Off the Ground

It is cheaper than ever before to start a business. The main reason for this is that technology and infrastructure are cheaper and easier to come by. The increasing availability of white-label solutions and apps for all sorts of business administration functions – such as accounting, user testing, etc. – have greatly simplified procedures and reduced costs.

The effect of this phenomenon is that failure costs less. This means more entrepreneurs will have the courage to try out their ideas on the markets.

Investors are Becoming Easier to Reach

Angel investors are better organized than ever before, and are more readily accessible to entrepreneurs. In the past, entrepreneurs had to tap into their personal networks in order to try and reach investors. Now, however, online communities such as AngelList, provide a platform for startups to post their business ideas in the hope of matching up with an investor who likes their business.

To learn more about accredited investors, and why you may need to verify them, visit VerifyInvestor.com.