FAQ’s

Frequently Asked Questions

What is Equity Crowdfunding?

Equity crowdfunding allows people to invest in an early-stage, private company (a company that is not listed on any stock exchange) in exchange for equity (shares, or a percentage of ownership) in that company. This is different from rewards-based crowdfunding like seen on Kickstarter, GoFundMe or Indegogo where people can contribute money to campaigns in exchange for perks.

Reg CF Equity Crowdfunding (also known as Title III): Startups raising $100k up to $5M in seed capital fit the newly expanded REG CF Equity Crowdfunding. This means that main street investors (both accredited and non-accredited individuals) worldwide can now buy shares in your company. You can raise up to $1,070,000 with non-audited financials and anything above that up to $5-million requires audited financials.

There is no immediate liquidity as shares are locked up for a 12 month period.

Effective date – May 16th, 2016.

Reg D (Accredited) Equity Crowdfunding (Title II): Startups raising $3M and above fit the existing style of equity crowdfunding, raising capital from accredited (wealthy) investors. RED D 506c allows the use of “General Solicitation.

Effective date – Sept 23rd, 2013

Reg A+ Equity Crowdfunding (Title IV) : Successful mid-stage companies, corporate spin-outs (think management buyout), and low risk, large upside startups – fit Reg A+ platforms. You can raise up to $75M per year using Reg A+. Shares can be liquid immediately after the offering, and Reg A+ can be used to take companies public and list on the NASDAQ or NYSE.

Effective date – June 19th, 2015.

What are the detiails of the Reg A+ Offering

Generally speaking, a Reg A+ offering:

  • will cost less and require less management attention than a traditional IPO;
  • shares can be listed on a national securities exchange;
  • can be marketed to retail investors who are not “accredited investors”;
  • will get “free press” for the company and its products through the public marketing process; and
  • can be an efficient, and long-term capital access vehicle for growing companies.

To get started, issuers should have some capital and management capacity available to invest in the offering. While Reg A+ does allow issuers to use capital raise proceeds to pay offering costs, we recommend that the issuer have a sufficient war chest to kick-start the marketing and professional service teams. While the amount of starting capital can vary for each issuer, we believe several hundred thousand dollars may be required to get the offering out of the gate.

Below are some of the factors to consider to determine if a Tier 2 offering is right for your company.

Timeline. A fair estimate of the time from commencement to completion of a Reg A+ offering is about 4-6 months. Timing might be quicker if (i) the issuer has audited financials and (ii) some of the processes can run concurrently or overlap. Broken down, an issuer should consider the following elements and allocate an appropriate resources for each:

  • 1-2 weeks to prepare materials and develop a list of potential investors to test the waters;
  • 2-4 weeks for the “road show” to solicit indications of interest;
  • 3-4 weeks to prepare and file an offering statement on Form 1-A. Some issuers who are committed to the process begin preparation of the offering statement concurrently with the road show;
  • 6-10 weeks for coordination with the SEC staff to receive, review and respond to staff comments. This period could be longer or shorter depending on the complexity of the offering materials, whether or not the filing is made confidentially or publicly, and the coordination with the professionals who prepare the disclosures and financial statements;
  • 1 week to coordinate sales under the qualified offering statement and for the marketer to file a Form 211 Application. As discussed below, depending on the amount of subscriptions and whether or not the issuer plans to list on a national exchange, the offering may be conducted on a continuous basis over a period of six to twelve months (subject to the annual offering limit). During this period, the issuer will apply for a stock ticker and other listing requirements; and
  • 3-4 weeks to apply for listing on the OTCQX / OTCQX premier and to engage a Designated Advisor for Disclosure (“DAD”) as required by the exchange.

Marketing. Unlike IPOs, there is no “quiet period” for Reg A+ offerings; see “Testing the Waters” below. Issuers can test the waters before or after filing the Offering Circular with the SEC. A good marketing program will introduce potential investors to the company, its brand, its products and market potential. A good marketing program also keeps potential investors involved and interested in the company’s future and follows the company’s progress towards stated goals, but remains unobtrusive. Each communication to potential investors must be carefully crafted to provide value so that the prospect feels like they are being educated about why your company deserves the prospect’s interest, support and precious capital. Having a great public relationship firm, investment banker and/or client relationship management (“CRM”) system is key to marketing of your Reg A+ offering. After investing in developing your investor pool, it is important to stay in regular and efficient contact, via email, webinars, and social media, so those dollars are not squandered. The focus, frequency and modes of contact for your marketing program will depend on your target audience and differing sales channels.

Testing the Waters. Reg A+ allows an issuer to “test the waters” for interest in its offering before making a substantial investment in in the process. This allows investors to provide indications of interest in an offering before the company can actually accept the investment. Despite indications of interest, however, issuers cannot rely on those subscriptions until the effective date of the offering and the investors can rescind or modify their indications up until closing; issuers refer to those indications as “soft circled” investments. To test the waters, the issuer and its representatives usually meet with potential investors on a road show (in person or more often virtually) to ask them how much if at all they would invest if the issuer completes the offering.

Exchange or Platform Trading. Companies that successfully complete a Tier 2 offering may list their securities on the NYSE or Nasdaq, if they otherwise meet the exchange’s listing standards. Listing on an exchange, however, does come at an increased cost due to exchange listing and maintenance fees, as well as the cost to comply with the exchange’s increased disclosure requirements. Like an IPO, Reg A+ shares that are listed on an exchange are not subject to a lock-up period so investors can trade the securities immediately after purchase.

Offering Circular. Issuers in Reg A+ offerings file Form 1-A (containing the Offering Circular) with the SEC. The Offering Circular contains information about the issuer’s financial results and business, among other details. The Offering Circular can be filed and amended confidentially to gain SEC feedback before releasing it to the public. The final Offering Circular then must be filed with the SEC and released publicly at least 21 calendar days before qualification.

Continuous Offerings. Reg A+ permits a continuous offering where not all the stock offered is sold upon qualification. To maintain a continuous offering, the issuer must keep its annual and semiannual reporting current throughout the offering period. In addition to new issue securities, an issuer can also include in the continuous offering: (i) securities offered by selling shareholders (up to an annual cap); (ii) securities offered under an employee benefit plan; (iii) securities issued under outstanding options, warrants, or rights, or for securities issued upon conversion of other outstanding securities; and (iv) securities pledged as collateral to lenders, if reasonably expected to be offered and sold within two years from the initial qualification date. Note that issuers in a continuous offering cannot sell stock into the market in an “at the market offering.” “At the market” means selling securities at the current trading price as if the issuer were an ordinary shareholder holding free trading stock. All sales in a continuous offering must be negotiated and closed off market.

Zero Dollar Minimums. Under Reg A+, an issuer may set a zero capital raise minimum. This way, the issuer may still close on subscriptions even if it does not meet applicable exchange minimum listing capital or investor count requirements. Issuers should be aware, however, that several Reg A+ offerings have failed because investors, particularly institutional investors, conditioned their subscription on the issuer’s listing. Furthermore, if an issuer discloses that it intends to list on an exchange at the conclusion of an offering and does not do so, it may need to release any subscriptions and provide updated offering materials to reflect the change in expected liquidity of its securities.

Form 1-A Compared to Form S-1. Reg A+ provides a limited-offering exemption from registration under the Securities Act of 1933, as amended (the “1933 Act”) and the Securities Exchange Act of 1934, as amended (the “1934 Act”). Like a traditional IPO on Form S-1, Reg A+ issuers are required to provide audited financials and on-going financial and business disclosure. Reg A+ securities are also unrestricted, freely tradeable and can be quoted over-the-counter or listed on exchanges. Traditional IPOs can be expensive and time-consuming but allow for an unlimited capital raise. Reg A+ offerings are less expensive and easier, but are limited to $75 million in a 12-month period.

Lessened disclosure requirements under the 1933 Act and 1934 Act limited-offering exemptions generally lead to lower fees for legal and audit professionals. The SEC’s review of a registration statement on Form S-1 is typically fulsome and subject to several rounds of comment and responses. The SEC review process for a Reg A+ offering will be generally shorter and less onerous assuming that the issuer has provided all required information. Additionally, these lessened disclosure requirements may result in lower management distraction.

Reg A+ Fee Estimates. Generally, an issuer will employ the following professionals to assist with the preparation and closing of a Reg A+ offering and budget accordingly. Most professional fees are “pay as you go,” potentially with a retainer up front. Therefore the issuer should work closely with the professional service providers to make sure that funds are available as needed to avoid delays in the listing process. As noted above, an issuer should have access to around $200,000 at the beginning of the process and expect all-in cost to be between $275,000 to $450,000, excluding sales commissions. We note, however, that every deal is different and may include complications that cause fee increases.

  • Investment bankers will usually charge an engagement fee, a percentage of the capital raised, and include a budget for out of pocket expenses. Engagement fees generally run between $25,000 to $50,000 and expense budgets run from $10,000 to $25,000, or more if the road show is in-person rather than virtual. Sales commissions generally run between 6% to 10% of the raise – the smaller the raise, usually the greater the commission percentage;
  • Legal fees will usually range between $100,000 to $250,000, which includes securities and tax advice. If the issuer’s strategy includes acquisitions or other transactions, legal fees will be higher;
  • Securities compliance advice to navigate the listing process generally ranges from $40,000 to $60,000. Annual securities compliance maintenance costs average between $35,000 to $50,000;
  • Audit fees and financial statement preparation for the Form 1-A usually fall in the $35,000 to $45,000 range for US dollar based companies. If digital assets or non-US currency review is required, the audit fees will increase – in some cases by 50% or more;
  • Issuers should budget printer costs at between $10,000 to $20,000 for initial filings, several thousand for each revision, and $5,000 to $10,000 per year thereafter; and
  • Exchange listing, DTC fees and DAD should be budgeted at $50,000 to list, and $50,000 per year for maintenance fees.

 

 

What are the benefits of investing in equity offerings?

With any investment, there are always risk and the possibility of losing all of your investment. With the nature of equity crowdfunding, it offers many benefits that investors can’t find anywhere else. Because most offering companies are early-stage startups, you get a chance to be a part of the journey, with the potential to participate in the company’s upside. You’re showing your support early on, which gives you the chance to feel more engaged and as though you are actually a part of the business.

Plus, you can diversify your portfolio, while supporting new ideas as they come to life. If you have ever wanted to be a part of a company’s journey to success, equity crowdfunding could be for you. Investing in an innovative startup gives anyone the opportunity to own a piece of the company and be along for the ride, whether up or down. It’s also a great option for early-stage companies to bring together their communities and engage with their biggest supporters from the very beginning.

Who can invest in equity offerings?

Since the passing of Title III, any American 18 years or older is eligible to invest in an equity offering. International investors can invest as long as they follow their countries’ securities regulations, so we recommend checking local securities laws before investing.

How much does a crowdfunding campaign cost?
REG CF

For a REG CF offering of $5M expect to spend $50,000 or so upfront for equity crowdfunding legal and consulting related services. Digital ad costs vary from project-to-project, but it’s normal to spend 10%-12% of your funding target on digital advertising alone. Social Media, PR, email marketing and othe investor acquisition campaigns will bring in qualified investors.

Expect total costs of a REG CF raise to be around 15 – 20% of your raise.

Timeline: 120-180 days.

Most REG CF portals offer what is known as a rolling close whereby you can set a minimum funding target of let’s say, $100k and once reached, you can begin drawing funds from escrow and redeploying some of the money into future marketing. 

*The typical portal captures and will OWN YOUR data!

REG D

For a Regulation D offering of $5 million, you might spend up to $20,000 for a lawyer, $10,000 for platform hosting fees (optional), up to $20,000 for the build of your marketing stack, plus around $10,000 per million which includes your Digital Advertising costs. If you are raising more it will cost you more. We always advise clients to be prepared to add funds to extend the marketing campaign if the need arises.

Expect to budget around 3% -5% of funding goal as total cost of raise.

Timeline: 60-90 days

There is no limit on the amount you can raise using REG D.

*YOU own YOUR data through a self-hosted raise!

Note: The costs of the offering are routinely charged to the investors and recouped by the company when the offering is completed. So, the company has no out-of-pocket costs from the offering when all is said and done.

There are “adjustments” that can be made to some offerings that allow the company to recoup the costs they expended before the full amount is raised. In those cases, the initial legal and marketing costs can be redeployed to provide additional marketing spend to complete the offering.

“Overall, our analysis confirms that Regulation D accounted for significantly more capital raising than Regulation A, with the difference on the order of magnitude of 1000x in a typical year during the examined period.” –  Source: SEC

REG A+

Reg A+ offerings are time consuming and expensive. It can sometimes take 6 months or more for lawyers to prepare the paperwork and for the SEC to review, comment and approve an offering. Legal and accounting fees alone can easily reach over $100,000.

Reg A+ offerings make sense if the company (issuer) is consumer facing (B2C) and are attempting to raise at least $10 million.

Expect total costs, including Digital Advertising, to be in the region of 7% or more of total funds raised.

Timeline: 5 – 9 months.

*The platform/portal operator captures and owns YOUR data!

However, by self-hosting your REG A+ offering, you own your investor data and substantially reduce your cost of raise. 

Crowdfunding is never easy. Preparing well in advance means you have tested and optimized all of your marketing assets and tools ready for launch. This period also helps get those critical funds needed within the first hours or days of launch.

Can I get my own crowdfunding portal?

For companies that are regularly raising capital, we offer portal technology though our partner network. This mean that you own your own data from your marketing efforts. We’ll be happy to walk you through this unique offer.

What do you look for in Companies that you want to work with?

Our crowdfunding process is time-tested and scalable which allows us to achieve your funding goals. We cannot accept every client but if we align, we are ready to engage, offering a high chance of success.

Acceptance Criteria

You are in a Large, Lucrative Market:

We look for companies with substantial upside for investors. Ideal startups and early-stage companies who serve large, multi-billion dollar addressable markets.

You Address a Gap in the Marketplace:

We look for companies which provide solutions to major pain points in large, addressable markets.

You Differentiate from the Competition:

Issuers who acknowledge their competition and understand how to sell into new or established marketplaces are best suited. Additionally, companies need to stand apart from the competition and provide a unique value proposition to their customers.

You are Technology Enabled:

We look for companies that are substantially leveraging technology to provide their business with rapid scalability, significant efficiencies, and great profit potential.

You Have an Experienced & Passionate Team: 

We seek out strong founders and teams that have vision, the substance to get there, and the tenacity to break through brick walls. A track record of successes are especially desirable.

You have Significant Traction: Companies MUST have an MVP (minimum viable product) with enough significant traction in the marketplace to show product-market fit. We prefer companies that are post-revenue but will consider pre-revenue companies with compelling traction partnerships.

Contact us by either emailing info@numeriancap.com or just complete the brief indication of interest on our contact us page.

 

 

Why work with us?

With over 50 combined years of trading, retail, pre-IPO, IPO, PR, investor relations, investor acquisition, marketing and social media experience, we have the know how, partners and contacts to help you reach your campaign and investment goals.

How do I start the process?

The first thing to do is to fill out an Indication of Interest (IOI) on our preliminary intake form HERE and one of our Business Development specialists will review it and get back with you ASAP.  If you wish to be contacted immediately, please put “Call Me Now” in the message field with all of your current contact information.

 

 

What are the costs involved with the programs?

There are no hidden costs such as application fees, or any other costs that are not disclosed. In the event that a broker or a vendor or partner is involved any fees due can paid at the time or a negotiated time in the future.  Depending on the deal and if we are going to manage the Investor Relations portion (which we take a monthly consulting fee to run everything) we do not have any hidden costs.