(Pictured above: Live participants in the Minority Access to Capital, Inc. Feb. 24th meeting)
I had such a WONDERFUL time speaking with investors and entrepreneurs about private capital—which is a vital subject for entrepreneurs but can often be complicated. Below are the details from my presentation! I hope you see you all at our March 10th meeting which will be a continuation of this topic.
Text of Presentation: Intro to Private Capital by Dar’shun Kendrick (2.24.16)
- INTRO TO PRIVATE CAPITAL Prepared Specifically For: Minority ATC (Access to Capital) February 24, 2016 Dar’shun Kendrick, Esq./MBA Kendrick Law Practice, LLC
- The Numbers • $17.B in angel investing in 2009 to 57,255 businesses • $4B inVC funding in 1982 Almost $300B in 2007 • $1.6T in private equity overall from 2000-2009 • Quarter before last saw MOST private equity investment in a quarter since early 2000s
- What is private capital? • Hedge funds • Venture Capital • Leveraged Buy outs • Angel investors • F & F • Convertible notes
- What is NOT private capital? • Rewards based crowdfunding • Grants • Publicly held companies • Traditional loans
- The Securities Act of 1933 vs. 1934 1933 • Created out of Great Depression • Established the SEC (Securities and Exchange Commission)- http://www.sec.gov • Regulates initial offerings 1934 • Regulates on going reporting requirements • Has fraud provisions that apply to 1933 Act, i.e. initial offerings
- 2 Options when selling “securities” Register (IPOs, stock exchanges, etc.) OR Find an exemption (Either to “securities” or transaction) *Some issuers cannot use an exemption
- Parties Involved in an Exemption • The almighty S.E.C. • Broker-Dealers (Investment Act of 1940) • Investors (institutional, angels,VCs, family and friends, family offices) • Issuer (Company raising funds) • FinancialTeam: Lawyers, accountants, business consultants, etc.
- What does DK do? Issuer > Broker-Dealer > Investors > DK > Issuers/Investors AND Issuers/SEC
- Ways to Raise $$Through an Exemption • Mini-IPO (Regulation A+) of $20- $50MM • Regulation D (3 rules) • Equity based crowdfunding
- So can you just start raising money (in exchange for equity) from investors, including family and friends?
- PIECE OF ADVICE Hire a knowledgeable securities attorney.
- Pitfalls • Corporate form set up has to be specific and in a certain order • “Time triggers” for solicitation • Agreements that you will need to have to investors (limit on the secondary market, unregistered security disclaimer, risk disclaimer, PPM, etc.) • Financials required to be provided to investors • Founder protections to be discussed (Dilution and bad math caused a company who thought they owned 66% of a company to go down to less than 10%) • M & A strategy needed for an exemption that allows for “general advertising” under a Reg. D exemption • State “blue sky laws” requirements • REMINDER: The S.E.C. can recommend CRIMINAL PROSECUTION to the Department of Justice, like the I.R.S.
- Thank you! Dar’shun Kendrick, Esq./MBA Kendrick Law Practice http://www.kendricklaw.net (678) 739-8109 Find us on social media.
*Here is an audio version of the above presentation. The first 30 minutes is MATC business meeting.**
I hope you can join me March 10th for continuation of this topic.
If you CANNOT make our March 10th meeting, set your calendar for March 24th and sign up for our enewsletter here.
I am Dar’shun Kendrick, Private Securities Attorney and Owner of Kendrick Law Practice, helping businesses raise capital the LEGAL way. We work with “for profit” companies seeking to raise $250,000 or more through private securities (equity and/or debt) that have a line item budgeted for legal services. We do NOT find investors or introduce companies to investors; that is the job of “broker-dealers” and we are prohibited under federal securities law from doing so. I have 2 B.A.s from Oglethorpe University, a law degree from the University of Georgia and an M.B.A. from Kennesaw State University.
We are ONLY authorized to practice law in Georgia and therefore any legal advice in this blog only pertains to Georgia based businesses. Please visit us online to sign up for a time to discuss services or for our famous 10 point Business Legal Consultation for 1 hour.
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