latest news from
Regulation D Resources

In this high tech age many efficiencies are derived from keeping electronic records. When executing an offering – there is a trend towards electronic signatures and archiving all data and forms in digital form. We support this, and in fact our own 506(c) Investor Portals offer clients the option of electronic docu-sign for subscription agreements or a PDF download of the agreements for manual signature.

One benefit of keeping manual hard copy records in the issuers primary office is having them readily available if needed for a State regulator review. While rare, it is possible for a State regulators office to inquire about an offering, the investors that are participating, and SEC and State filings executed. Having these documents in hard copy form, in the issuers office and readily available, makes the review process for a regulator efficient.

While it would certainly be possible to access the documents from the portal, we feel it is also prudent to keep hard copies in the primary office and thus readily available if needed.

When sending high grade PPM materials to investors (such as the RDR Presentation Grade PPM) it is important that these materials arrive in perfect shape and present a professional impression of your company.  Most of our clients send the Presentation Grade PPM along with a two pocket presentation folder that holds the investor introduction letter and copies of any subscription documents that may be included for execution.

These materials can be damaged, bent, and basically appear less than perfect if sent using a normal mylar mailer or even a bubble-wrap protected mailer.   Not only do you want those materials arriving crisp and in perfect condition – but if the investor decides they are not interested you want a return of those materials in perfect shape so you may re-use them with other potential investors.

Our solution?  Book delivery boxes!  Not only will the PPM arrive in a protective cardboard shell – it will also provide an impression that important and valuable materials are enclosed and ensure those materials arrive in perfect shape!

Many business owners and entrepreneurs are very savvy about managing a sales oriented contact management campaign. Multiple contact methods, social media engagement, and proper follow-up are all part of executing a proper sales contact management campaign.

Any company executing a Regulation D 506(c) offering should be deploying the same tactics used in sales contact management to maintain contact with and successfully close interested investors. Not all investors make an immediate investment decision and many may have multiple investment opportunities they are considering. Thus, it is important to have a solid contact management system in place to track investor interest, engage in multiple contacts, stay updated on the investor’s interest level, and provide management multiple opportunities to close the investor.

Using a contact management software system, or an Excel spreadsheet with reminders for contact methods and timeframes can be very helpful in managing dozens and potentially hundreds of investor contacts and working towards successfully closing those investors.

Investor relations is a very important aspect of post-offering operations. Every company executing an offering should prepare for the processes and methods of engaging in investor relations. Since most Regulation D offerings involve less than 75 investors – the task of keeping those investors updated and informed is not as complicated as a public company with thousands, or tens of thousands, of shareholders and investors.

One efficient and technologically savvy method of investor relations is to dedicate a portion of the issuer company’s website to the task of investor relations. Many companies will create password protected portals within their corporate websites that allow investors who provide proper credentials to access updates about the company’s operations, quarterly reports, and other news and information pertinent to investors. E-mail has also made investor relations more efficient with e-mailed monthly or quarterly updates executed with ease.

While the task of investor relations is important, technology has made that task more efficient and effective. Companies planning on executing an offering of securities to investors should give some thought to how they plan on keeping investors updated on the company’s operational progress.

A substantial number of offerings that we execute each year are for Investment Fund entities (real estate, hedge, energy, etc.) and these Fund entities have managers or management entities receiving various forms of fees and compensation.

Using real estate as an example – a Real Estate Investment Fund might have the following fees payable to management:

• Fund Management Fee
• Syndication Fee
• Asset Acquisition Fee
• Asset Disposition Fee
• Property Management Fee
• Carried Interest Compensation

While these are normal fees for a Real Estate Investment Fund – an issuer should avoid instituting fee arrangements and compensation plans that are overly complex or complicated. We have seen third party prepared offerings with carried interest compensation tiered over eight different return on investment performance benchmarks which is, in our opinion, too complex for the average investor and not warranted.

Keeping fee structures simple and understandable for the average investor, and ensuring any related party fees such as property management are “market rate”, is an important part of engaging investors effectively and providing an appropriate confidence level for investing.

First impressions are very important when dealing with potential investors for your company and offering. Investors who are contemplating investing into your business or project must have the confidence that the company’s business plan will be executed properly and that the primary executives are “hands-on” and active in managing the operations of the company.

There are many facets to providing investors a high level of confidence in the skill of the management team. Certainly having a professional high quality securities offering developed is of critical importance. Management knowledge of the content of those materials, and the terms of the offering is equally important. Managers or principals who are dealing with investors must know the terms of the securities offering in order to provide investors a level of confidence. Nothing will turn off an investor faster than an executive officer of the company not knowing key offering terms such as a planned preferred dividend or the conversion rate of preferred shares to common shares in a convertible preferred equity offering.

At Regulation D Resources – we make sure our clients fully understand the terms of the offering and the metrics used to set those terms. Our clients are intrinsically involved in that process and therefore fully understand the terms of the offering and the basis for those terms.

Welcome to a new feature for the Regulation D Resources (“RDR”) blog – the “QuickTip”!  Each week we will debut a new “QuickTip” regarding Regulation D offering preparation and execution.

Today’s QuikTip:  The Business Card PPM

Promotion of your offering should always be at the forefront of any communication with a potential accredited investor. Business meetings, personal events, and any other daily interaction with other people can prove to be an opportunity to promote your offering and raise capital. We have seen significant capital raised on golf courses (for example) with the issuer principal interacting with a member of a foursome playing 18 holes of golf or discussing their business in the clubhouse with an interested party.

So how best to deliver a PPM on a golf course?  Simple!  Print some of your business cards with a URL and password on the back.  The URL will lead to a password protected page of your corporate website that houses the PPM (via flip book or PDF download) and may also provide some relevant offering information and company operational data. The password protects access and allows only qualified people that have been invited the capability to access the PPM. Once clients get used to having a “PPM in their back pocket” – they can network very effectively in any situation where they are in contact with other business professionals or personal contacts that may have an interest in becoming an investor.