New methods of financing your business in the united states a strategic analysis

NEW METHODS OF FINANCING YOUR BUSINESS IN THE UNITED STATES A Strategic Analysis 9374_9789814632645_TP.indd 30/12/15 2:58 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis OTHER WORKS BY FREDERICK D LIPMAN International Strategic Alliances: Joint Ventures Between Asian and U.S Companies (2nd Edition) Whistleblowers: Incentives, Disincentives and Protection Strategies The Family Business Guide: Everything You Need to Know to Manage Your Business from Legal Planning to Business Strategies International and U.S IPO Planning: A Business Strategy Guide Executive Compensation Best Practices Corporate Governance Best Practices: Strategies for Public, Private, and Not-for-Profit Organizations Valuing Your Business: Strategies to Maximize the Sale Price Audit Committees The Complete Guide to Employee Stock Options The Complete Guide to Valuing and Selling Your Business The Complete Going Public Handbook Financing Your Business with Venture Capital How Much Is Your Business Worth Going Public Venture Capital and Junk Bond Financing b1952_FM.indd ii 30-Dec-15 1:18:11 PM NEW METHODS OF FINANCING YOUR BUSINESS IN THE UNITED STATES A Strategic Analysis Frederick D Lipman Blank Rome LLP, USA World Scientific NEW JERSEY • LONDON 9374_9789814632645_TP.indd • SINGAPORE • BEIJING • SHANGHAI • HONG KONG • TA I P E I • CHENNAI • TOKYO 30/12/15 2:58 PM Published by World Scientific Publishing Co Pte Ltd Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE Library of Congress Cataloging-in-Publication Data Lipman, Frederick D New methods of financing your business in the United States : a strategic analysis / by Frederick D Lipman pages cm Includes bibliographical references and index ISBN 978-9814632645 New business enterprises United States Finance Small business United States Finance Business enterprises United States Finance I Title HG4027.6.L56 2015 658.15'224 dc23 2014035529 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Copyright © 2016 by World Scientific Publishing Co Pte Ltd All rights reserved This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the publisher Limit of Liability/Disclaimer of Warranty: While the publisher and authors have used their best efforts in preparing this book, they make no representatives or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor authors shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA In this case permission to photocopy is not required from the publisher In-house Editors: Sandhya Venkatesh /Dipasri Sardar Typeset by Stallion Press Email: enquiries@stallionpress.com Printed in Singapore Dipa - New methods of financing your business.indd 31/12/2015 9:39:32 AM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis To my partners at Blank Rome LLP who permit me to continue to write books b1952_FM.indd v 30-Dec-15 1:18:11 PM b1816 MR SIA: FLY PAST b1816_FM This page intentionally left blank b1816_FM.indd vi 10/10/2014 1:12:39 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis ACKNOWLEDGMENTS The author would like to acknowledge the contributions to this book of the following attorneys, librarians, and paralegals at Blank Rome LLP, namely: Yelena M Barycher, Carol Buckalew, Jennifer J Daniels, Esq., Jonathan Scott Goldman, Esq., Cheryl Halvorsen, Nicholas C Harbist, Esq., Abraham J Kwon, Esq., Christopher A Lewis, Esq., William H Roberts, Esq., and John P Wixted, Esq Dr Jeffry Rubin, my good friend and tennis partner, made an excellent suggestion for marketing securities offerings under SEC Rule 506(c) I want to acknowledge the work of Barbara Helverson, my Administrative Assistant, who served as the typist and initial editor of this book vii b1952_FM.indd vii 30-Dec-15 1:18:11 PM b1816 MR SIA: FLY PAST b1816_FM This page intentionally left blank b1816_FM.indd vi 10/10/2014 1:12:39 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis CONTENTS Acknowledgments vii Introduction xi Part I: New Financing Methods Chapter Chapter Chapter Chapter Chapter Part II: Crowdfunding Marketing the Public Offering Under Rule 506(c) Technical Requirements to Satisfy SEC Rule 506(c) Enhanced Regulation A Summary of U.S Financing Sources and Choices Strategic Considerations Chapter Chapter Chapter Chapter Chapter 10 Valuing a Business Strategic Considerations Advanced Planning to Raise Capital Roll-Ups and Acquisitions Negotiating with a Professional Investor Appendices Appendix Appendix Appendix Appendix 35 55 71 93 101 103 115 129 137 149 171 SEC Regulation D Form D to be Filed Under SEC Regulation D Form C Under the Securities Act of 1933 Form 1-A Regulation A Offering Statement Under the Securities Act of 1933 Index 173 201 213 243 287 ix b1952_FM.indd ix 30-Dec-15 1:18:12 PM b1952 278 New Methods of Financing Your Business in the United States: A Strategic Analysis New Methods of Financing Your Business in the United States: A Strategic Analysis (2) The financial statements prepared pursuant to paragraph (b), including (b)(7), need not be audited If the financial statements are not audited, they shall be labeled as “unaudited.” However, if an audit of these financial statements is obtained for other purposes and that audit was performed in accordance with either U.S generally accepted auditing standards or the Standards of the Public Company Accounting Oversight Board by an auditor that is independent pursuant to either the independence standards of the American Institute of Certified Public Accountants (AICPA) or Rule 2-01 of Regulation S-X, those audited financial statements must be filed, and an audit opinion complying with Rule 2-02 of Regulation S-X must be filed along with such financial statements The auditor may, but need not, be registered with the Public Company Accounting Oversight Board (3) Consolidated Balance Sheets Age of balance sheets at filing and at qualification: (A) If the filing is made, or the offering statement is qualified, more than three months but no more than nine months after the most recently completed fiscal year end, include a balance sheet as of the two most recently completed fiscal year ends (B) If the filing is made, or the offering statement is qualified, more than nine months after the most recently completed fiscal year end, include a balance sheet as of the two most recently completed fiscal year ends and an interim balance sheet as of a date no earlier than six months after the most recently completed fiscal year end (C) If the filing is made, or the offering statement is qualified, within three months after the most recently completed fiscal year end, include a balance sheet as of the two fiscal year ends preceding the most recently completed fiscal year end and an interim balance sheet as of a date no earlier than six months after the date of the most recent fiscal year end balance sheet that is required (D) If the filing is made, or the offering statement is qualified, during the period from inception until three months after reaching the annual balance sheet date for the first time, include a balance sheet as of a date within nine months of filing or qualification b1952_Appendix-04.indd 278 30-Dec-15 1:00:03 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis Form 1-A Regulation A Offering Statement Under the Securities Act of 1933 279 (4) Statements of comprehensive income, cash flows, and changes in stockholders’ equity File consolidated statements of income, cash flows, and changes in stockholders’ equity for each of the two fiscal years preceding the date of the most recent balance sheet being filed or such shorter period as the issuer has been in existence If a consolidated interim balance sheet is required by (b)(3) above, consolidated interim statements of income and cash flows shall be provided and must cover at least the first six months of the issuer’s fiscal year and the corresponding period of the preceding fiscal year (5) Interim financial statements Interim financial statements may be condensed as described in Rule 8-03(a) of Regulation S-X The interim income statements must be accompanied by a statement that in the opinion of management all adjustments necessary in order to make the interim financial statements not misleading have been included (6) Oil and Gas Producing Activities Issuers engaged in oil and gas producing activities must follow the financial accounting and reporting standards specified in Rule 4-10 of Regulation S-X (7) Financial Statements of Other Entities The circumstances described below may require you to file financial statements of other entities in the offering statement The financial statements of other entities must be presented for the same periods as if the other entity was the issuer as described above in paragraphs (b)(3) and (b)(4) unless a shorter period is specified by the rules below The financial statement of other entities shall follow the same audit requirement as paragraph (b)(2) of this Part F/S (i) Financial Statements of Guarantors and Issuers of Guaranteed Securities Financial statements of a subsidiary that issues securities guaranteed by the parent or guarantees securities issued by the parent must be presented as required by Rule 3-10 of Regulation S-X (ii) Financial Statements of Affiliates Whose Securities Collateralize an Issuance Financial statements for an issuer’s affiliates whose securities constitute a substantial portion of the collateral for any class of securities being offered must be presented as required by Rule 3-16 of Regulation S-X b1952_Appendix-04.indd 279 30-Dec-15 1:00:03 PM b1952 280 New Methods of Financing Your Business in the United States: A Strategic Analysis New Methods of Financing Your Business in the United States: A Strategic Analysis (iii) Financial Statements of Businesses Acquired or to be Acquired File the financial statements required by Rule 8-04 of Regulation S-X (iv) Pro Forma Financial Information If financial statements are presented under paragraph (b)(7)(iii) above, file pro forma information showing the effects of the acquisition as described in Rule 8-05 of Regulation S-X (v) Real Estate Operations Acquired or to be Acquired File the financial information required by Rule 8-06 of Regulation S-X Instructions to paragraph (b) in Part F/S: Issuers should refer to Ride 257(b)(2) to determine whether a special financial report will be required after qualification of the offering statement If the last day that the financial statements included in the offering statement can be accepted, according to the age requirements of this item falls on a Saturday, Sunday, or holiday, such offering statement may be filed on the first business day following the last day of the specified period As an alternative, an issuer may — but need not — elect to comply with the provisions of paragraph (c) (c) Financial Statement Requirements for Tier Offerings (1) In addition to the general sales in paragraph (a), provide the financial statements required by paragraph (b) of this Part F/S, except the following rales should be followed in the preparation of the financial statements: (i) The issuer and, when applicable, other entities for which financial statements are required, must comply with Article of Regulation S-X, as if it was conducting a registered offering on Form S-l, except the age of interim financial statements may follow paragraphs (b) (3)-(4) of this Part F/S (ii) Audited financial statements are required for Tier offerings for the issuer and, when applicable, for financial statements of other entities However, interim financial statements may be unaudited b1952_Appendix-04.indd 280 30-Dec-15 1:00:03 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis Form 1-A Regulation A Offering Statement Under the Securities Act of 1933 281 (iii) The audit must be conducted in accordance with either U.S Generally Accepted Auditing Standards or the standards of the Public Company Accounting Oversight Board (United States) and the report and qualifications of the independent accountant shall comply with the requirements of Article of Regulation S-X Accounting firms conducting audits for the financial statements included in the offering circular may, but need not, be registered with the Public Company Accounting Oversight Board PART III — EXHIBITS Item Index to Exhibits (a) An exhibits index must be presented at the beginning of Part III (b) Each exhibit must be listed in the exhibit index according to the number assigned to it under Item 17 below (c) For incorporation by reference, please refer to General Instruction III of this Form Item Description of Exhibits As appropriate, the following documents must be filed as exhibits to the offering statement Underwriting agreement — Each underwriting contract or agreement with a principal underwriter or letter pursuant to which the securities are to be distributed; where the terms have yet to be finalized, proposed formats may be provided Charter and bylaws — The charter and bylaws of the issuer or instruments corresponding thereto as currently in effect and any amendments thereto Instruments defining the rights of securityholders — (a) All instruments defining the rights of any holder of the issuer’s securities, including but not limited to (i) holders of equity or debt securities being issued; (ii) holders of long-term debt of the issuer, and of all subsidiaries for which consolidated or unconsolidated financial statements are required to be filed b1952_Appendix-04.indd 281 30-Dec-15 1:00:03 PM b1952 282 New Methods of Financing Your Business in the United States: A Strategic Analysis New Methods of Financing Your Business in the United States: A Strategic Analysis (b) The following instruments need not be filed if the issuer agrees to file them with the Commission upon request: (i) instruments defining the rights of holders of long-term debt of the issuer and all of its subsidiaries for which consolidated financial statements are required to be filed if such debt is not being issued pursuant to this Regulation A offering and the total amount of such authorized issuance does not exceed 5% of the total assets of the issuer and its subsidiaries on a consolidated basis; (ii) any instrument with respect to a class of securities that is to be retired or redeemed before the issuance or upon delivery of the securities being issued pursuant to this Regulation A offering and appropriate steps have been taken to assure such retirement or redemption; and (iii) copies of installments evidencing scrip certificates or fractions of shares Subscription agreement — The form of any subscription agreement to be used in connection with the purchase of securities in this offering Voting trust agreement — Any voting trust agreements and amendments Material contracts (a) Every contract not made in the ordinary course of business that is material to the issuer and is to be performed in whole or in part at or after the filing of the offering statement or was entered into not more than two years before such filing Only contracts need be filed as to which the issuer or subsidiary of the issuer is a party or has succeeded to a party by assumption or assignment or in which the issuer or such subsidiary has a beneficial interest Schedules (or similar attachments) to material contracts may be excluded if not material to an investment decision or if the material information contained in such schedules is otherwise disclosed in the agreement or the offering statement The material contract filed must contain a list briefly identifying the contents of all omitted schedules, together with an agreement to furnish supplementally a copy of any omitted schedule to the Commission upon request (b) If the contract is such as ordinarily accompanies the kind of business conducted by the issuer and its subsidiaries, it is made in the ordinary course of business and need not be filed unless b1952_Appendix-04.indd 282 30-Dec-15 1:00:03 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis Form 1-A Regulation A Offering Statement Under the Securities Act of 1933 283 it falls within one or more of the following categories, in which case it must be filed except where immaterial in amount or significance: (i) any contract to which directors, officers, promoters, voting trustees, securityholders named in the offering statement, or underwriters are parties, except where the contract merely involves the purchase or sale of current assets having a determinable market price, at such market price; (ii) any contract upon which the issuer’s business is substantially dependent, as in the case of continuing contracts to sell the major part of the issuer’s products or services or to purchase the major part of the issuer’s requirements of goods, services or raw materials or any franchise or license or other agreement to use a patent, formula, trade secret, process or trade name upon which the issuer’s business depends to a material extent; (iii) any contract calling for the acquisition or sale of any property, plant or equipment for a consideration exceeding 15% of such fixed assets of the issuer on a consolidated basis; or (iv) any material lease under which a part of the property described in the offering statement is held by the issuer (c) Any management contract or any compensatory plan, contract or arrangement including, but not limited to, plans relating to options, warrants or rights, pension, retirement or deferred compensation or bonus, incentive or profit sharing (or if not set forth in any formal document, a written description) is deemed material and must be filed except for the following: (i) ordinary purchase and sales agency agreements; (ii) agreements with managers of stores in a chain organization or similar organization; (iii) contracts providing for labor or salesperson’s bonuses or payments to a class of securityholders, as such; (iv) any compensatory plan, contract or arrangement that pursuant to its terms is available to employees generally and that in operation provides for the same method of allocation of benefits between management and non-management participants Plan of acquisition, reorganization, arrangement, liquidation, or succession — Any material plan of acquisition, disposition, reorganization, readjustment, succession, liquidation or arrangement and any b1952_Appendix-04.indd 283 30-Dec-15 1:00:03 PM b1952 284 10 11 New Methods of Financing Your Business in the United States: A Strategic Analysis New Methods of Financing Your Business in the United States: A Strategic Analysis amendments thereto described in the offering statement Schedules (or similar attachments) to these exhibits must not be filed unless such schedules contain information that is material to an investment decision and that is not otherwise disclosed in the agreement or the offering statement The plan filed must contain a list briefly identifying the contents of all omitted schedules, together with an agreement to furnish supplementally a copy of any omitted schedule to the Commission upon request Escrow agreements — Any escrow agreement or similar arrangement which has been executed in connection with the Regulation A offering Letter re change in certifying accountant — A letter from the issuer’s former independent accountant regarding its concurrence or disagreement with the statements made by the issuer in the current report concerning the resignation or dismissal as the issuer’s principal accountant Power of attorney — If any name is signed to the offering statement pursuant to a power of attorney, signed copies of the power of attorney must be filed Where the power of attorney is contained elsewhere in the offering statement or documents filed therewith, a reference must be made in the index to the part of the offering statement or document containing such power of attorney In addition, if the name of any officer signing on behalf of the issuer is signed pursuant to a power of attorney, certified copies of a resolution of the issuer’s board of directors authorizing such signature must also be filed A power of attorney that is filed with the Commission must relate to a specific filing or an amendment thereto A power of attorney that confers general authority may not be filed with the Commission Consents — (a) Experts: The written consent of (i) any accountant, counsel, engineer, geologist, appraiser or any persons whose profession gives authority to a statement made by them and who is named in the offering statement as having prepared or certified any part of the document or is named as having prepared or certified a report or evaluation whether or not for use in connection with the b1952_Appendix-04.indd 284 30-Dec-15 1:00:03 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis Form 1-A Regulation A Offering Statement Under the Securities Act of 1933 285 offering statement; (ii) the expert that authored any portion of a report quoted or summarized as such in the offering statement, expressly stating their consent to the use of such quotation or summary; (iii) any persons who are referenced as having reviewed or passed upon any information in the offering statement, and that such information is being included on the basis of their authority or in reliance upon their status as experts (b) All written consents must be dated and signed 12 Opinion re legality — An opinion of counsel as to the legality of the securities covered by the Offering Statement, indicating whether they will when sold, be legally issued, fully paid and non-assessable, and if debt securities, whether they will be binding obligations of the issuer 13 “Testing the waters” materials — Any written communication or broadcast script used under the authorization of Rule 255 Such materials need not be filed if they are substantively the same as materials previously filed with the offering statement 14 Appointment of agent for service of process — A Canadian issuer must file Form F-X 15 Additional exhibits — (a) Any non-public, draft offering statement previously submitted pursuant to Rule 252(d) and any related, non-public correspondence submitted by or on behalf of the issuer (b) Any additional exhibits which the issuer may wish to file, which must be so marked as to indicate clearly the subject matters to which they refer SIGNATURES Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of _, State of _, on _(date) b1952_Appendix-04.indd 285 30-Dec-15 1:00:03 PM b1952 286 New Methods of Financing Your Business in the United States: A Strategic Analysis New Methods of Financing Your Business in the United States: A Strategic Analysis (Exact name of issuer as specified in its charter) By (Signature and Title) This offering statement has been signed by the following persons in the capacities and on the dates indicated (Signature) (Title) (Date) Instructions to Signatures: The offering statement must be signed by the issuer, its principal executive officer, principal financial officer, principal accounting officer, and a majority of the members of its board of directors or other governing body If a signature is by a person on behalf of any other person, evidence of authority to sign must be filed with the offering statement, except where an executive officer signs on behalf of the issuer The offering statement must be signed using a typed signature Each signatory to the filing must also manually sign a signature page or other document authenticating, acknowledging or otherwise adopting his or her signature that appears in the filing Such document must be executed before or at the time the filing is made and must be retained by the issuer for a period of five years Upon request, the issuer must furnish to the Commission or its staff a copy of any or all documents retained pursuant to this section The name and title of each person signing the offering statement must be typed or printed beneath the signature b1952_Appendix-04.indd 286 30-Dec-15 1:00:03 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis INDEX A 1933 Act, xii, xvi, xviii, 3, 5, 20, 33, 38, 50, 55, 64–65, 69–70, 79, 84, 88–89, 93, 95–98, 168 1934 Act, 19–20, 23, 29–30, 48 Accounting and Review Services Committee, 25–26 accredited investors, xi–xvi, xviii, 3, 5–6, 21, 28, 31–33, 35–49, 55–59, 62–64, 71, 80, 84, 100, 115, 118, 131, 175, 177, 182, 190, 193 acquisitions, xv, 120, 125, 142, 144–145 advertising, 28, 79, 115 affiliate, 17, 50, 174, 179 American Institute of Certified Public Accountants, 25, 278 Angel Capital Association, 95 angel investors, xi, xiv–xv, 17, 93–97, 115, 149, 156–157 angel offering, 130 annual income, 5, 74, 83, 256 anti-dilution clauses, 153 Apple Inc, 94 auctions of companies, 143 audited financial statements, 25, 73–74, 82, 96, 129, 135, 146, 182–183, 236, 278, 280 B bad actor, 56, 66, 100, 195, 251 Bad Boy rule, 20 beneficial owner, 24, 59, 84, 178, 223, 272 beta factor, 107 board of directors, 87, 122, 129, 150, 219, 275 broker-dealer, 29, 37, 81, 131, 194 business day following, 56 C Capital Asset Pricing Model, 107 CircleUp.com, 39 common mistakes in roll-ups, 145 common stock, 6, 78, 94, 116, 150, 153–161, 163–166, 228 Compaq, 95 comparable company method of valuation, 110 comparable transaction method of valuation, 111 ConfidentCrowd.com, 39 consolidations, 123, 162 consolidator, 138 control, xv, 5, 67, 86, 110, 114, 119, 123, 145, 150, 177, 224 Control Premiums, 123 287 b1952_Index.indd 287 13-Jan-16 12:19:52 PM b1952 288 New Methods of Financing Your Business in the United States: A Strategic Analysis Index Court Injunctions and Restraining Orders, 68 Criminal Convictions, 67 crowdfunder, 7, 17 crowdfunding, xii–xiv, xvii, xix, 3–5, 7–9, 11–12, 14, 17–32, 35, 37, 41–42, 44, 65, 73, 98, 100, 103, 115, 118, 215–218, 220, 224, 235, 240, 242 crowdfunding broker, 19 Crowdfunding Industry Report, crowdfunding platforms, crowdfunding portals, 39, 44 crowdfunding sites, 7, 9, 17 D debt securities, 23, 36, 52, 98, 228, 242, 250, 259, 276, 281, 285 definition of venture capital, 115 Digital Equipment Corporation, 95 dilution, 4, 89, 157–158, 165, 260 direct public offering, xiii, 37, 81 discount rates, 104, 121 Dodd–Frank Act, 66 Do Not Call, statutes, rules, and registries, 47–48 drag-along, 167 drag-along clause, 118, 163 drag-along rights, 151, 163 E EDGAR access codes, 26 eligible companies, xii, 72 emerging growth companies, xvii, 80, 82, 135 entrepreneurs, xi, 16, 78, 94, 116, 121, 131–134, 138 b1952_Index.indd 288 equity dilution, xv, 105, 117, 121, 122, 137, 150 exclusivity syndrome, 40 F Facebook, 7, 8, 36, 95, 97, 121 family businesses, 78, 125 FBSciences Holdings, Inc, 36–37 federal and state securities, 56 Federal Express, 95 Final Orders of Regulators, 68 Financial Industry Regulatory Authority (FINRA), 19, 52, 87, 245, 258 Form, xv, 22, 52, 186, 215–219, 235, 237, 241, 243–244, 255–256, 258 Form 1-A, ix, 81–82, 89, 182, 243, 245–247, 249, 251, 253–255, 257, 259, 261, 263, 265, 267, 269, 271, 273, 275, 277, 281, 283, 285 Form 1-A Regulation A, 243 Form 1-K, 90 Form 1-SA, 90 Form 1-U, 90 Form 1-Z, 90 Form 1040, 194 Form 1099, 62, 194 Form C, 21–23, 26–27, 213, 215–216, 218 Form C-AR, 22, 27, 213 Form C Offering Statements, 25 Form C — Offering Statements and Amendments, 21 Form C-TR, 22, 26, 213 Form C-U, 22, 213 Form D, xvi, xix, 36–37, 42, 50, 55–56, 66, 70, 186–189, 201 13-Jan-16 12:19:52 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis Index Form W-2, 62, 194 friends and family, 94 full-ratchet, 165 Fundable.com, 39 FundersClub, 39 funding portal, xii, 5, 8, 17, 22, 27–28, 31, 33, 40, 43, 237–239 G Genentech, 95 general advertising, xvi–xix, 38, 41–42, 66, 98, 100, 185–186, 190 general solicitation, xv–xviii, 21, 32, 36, 38, 40–41, 57–59, 66, 99–100, 115, 185–186, 190 Goldring, Damian, 11 Google, 95 gourmet potato salad, 14 GrowVC.com, 39 H Hard Rock Hotel, 37–38 Harter, Steven, 143 hurdle rate, 104, 133 I illiquidity discount, 117 immediate family member, 24, 231, 272 income, xiv, 133, 139, 141, 167, 265–267, 279 individual investor, 6, 56, 83 initial public offering (IPO), ii, xiii–xiv, xviii, 49–50, 80, 90, 93–94, 97, 104, 115, 121, 130–131, 133–134, 137, 142–145, 149, 168–169 institutional investors, xvi, 56, 76–77 integration, 181 b1952_Index.indd 289 289 Intel, 94–95 intermediary, 5–6, 18–19, 22, 27–28, 31–32, 213, 226 international, 32 internet website, 5, 46 IRS Form 990, 61 issuer, xviii, 4–6, 18–29, 31–32, 40, 48, 50, 53, 72–73, 77–78, 80, 84–89, 99–100, 173–177, 179–195, 197–199, 213–229, 231–237, 240–247, 250–255, 257–277, 279–286 issuer repurchases, 230 J job creation, xvii JOBS Act, xii, xv–xix, 4, 8, 10, 12, 17–19, 30, 48, 55, 72, 80, 88, 96, 98 Jumpstart, xii, 18 K Kickstarter, xiii, 7–10, 12–17, 31, 39, 43, 121 L Ledecky, Jonathan, 143 legend, 65, 186, 216, 225, 255–256, 259 Leverage Buyout Analysis, 112 liquidation preference, 155, 160, 164 liquid market, 50, 52, 83 Luckey, Palmer, 7, 121 M Manner of sale, 32, 51 Marcus Licinius Crossus, 95 market capitalization, 97, 110 marketing strategies, 41 13-Jan-16 12:19:52 PM b1952 290 New Methods of Financing Your Business in the United States: A Strategic Analysis Index Mars, Veronica, 9, 14 Microsoft, 95 middle-market, xviii, xix, 37, 43, 49, 86, 96–97, 104, 107 Migicovsky, Eric, 10 N Nasdaq, 86 Nature of investors, 32 net worth, xi, xiv, 5–6, 43, 57, 59, 62–63, 74, 83, 93, 176, 194–195, 256 New York Stock Exchange (NYSE), 38, 86, 138 non-accredited investors, xviii, 31–32, 36, 49–50, 55, 60, 65, 71, 73–74, 83, 100, 188 non-affiliate, 51–52 non-reporting issuers, 51–52, 86 Notre Capital Ventures, 143 O Oculus Rift, 7–8, 39 offering circular, 40–41, 56, 82, 89, 244–245, 256–260, 277, 281 offering statements, 23 OTC Bulletin Board, 29, 52, 77, 79, 86–87 P Pebble Watch, 4, 7, 10, 28 pledge, 11, 14 poof roll-ups, 143–144 post-offering reports, 50, 82, 86, 90 preemption, 75, 99–100 preferred stock, 6, 94, 116, 122, 150–151, 153–156, 158–165, 168–169, 228, 251, 276 b1952_Index.indd 290 preliminary offering circular, 81, 255, 259 pre-money value of a business, 103 private companies, 39, 72, 76–78, 117, 120, 140 private equity funds, xiv–xv, 39, 93–96, 120, 125, 140, 143, 148, 150 private placement, xiv, xvi, xviii, 60, 89, 96–97, 116, 131, 180 Private Placement Section 4(a)(2), 99 professional team, xv, 129–130 promoter, 19, 24, 28, 140, 143–144, 188, 195, 231, 237, 253–254, 258, 260, 272, 275, 283 public companies, 20, 30, 51, 84, 86, 109–110, 120, 123, 126–127, 138, 142 Public Company Accounting Oversight Board, 25, 74, 82, 96, 278, 281 public offering, xiv, 35, 41, 49, 70, 76, 119, 121, 133, 168–169, 192, 260 Public Trading Market, xii, xiii, 29, 50, 52, 72, 81, 83, 86, 91, 117–118 Q qualified institutional buyers, 80 qualified issuers, 32 R Realty Mogul, 37–39, 43 reasonable inquiry, 65, 186 Rebuilding the IPO On-Ramp, xvii recreational investors, 94 redemption price, 159–160 13-Jan-16 12:19:52 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis Index redemption right, 151, 165 redemption rights as a control mechanism, 162 referred stock, 157 registered broker, 5, 17, 22, 27–28, 31, 38, 43, 64 registered broker-dealer, 63 registration rights, 151, 168 Regulation 227.201, 22 Regulation 227.202(a), 22 Regulation A, xiii, xv, xvii–xix, 65, 67, 69–73, 76–80, 82–86, 88–89, 99, 103, 117–119, 125, 137, 168, 182, 192, 197, 240, 251, 255–256, 258, 282, 284–285 Regulation A Tier 1, 98 Regulation D, xiv, xvi, 33, 64, 96–98, 100, 173–175, 178, 181, 186, 200–201, 228 Regulation S, 53, 74, 98, 174, 181–182, 189, 216, 236, 244, 247, 255–256, 264, 277–281 Regulation Section 230.255, 80 reporting issuers, 51, 86 repurchase, 23–24, 71, 140, 162, 169, 242, 276 restricted securities, 50–51, 99–100 restrictions on issuers, 32 restrictions on resale, 29, 32 retail crowdfunding, 3, 39 retirement plans, 58 Rockefeller, John D., 139 Roll-Ups, xv, 120, 137–140, 142–144, 148 rule(s), xiii, xix, 4–5, 16, 18, 26, 33, 38, 42, 45, 47–48, 50, 56, 66, 69, 71, 75, 81–82, 90, 117, 124, 144, 161, 174, 189, 197, 239, 244, 251, 256, 262, 277, 279 b1952_Index.indd 291 291 Rule 3a4-1, 29, 48, 81 Rule 15c2-11, 87, 91 Rule 504, 33, 100 Rule 505, 64, 100 Rule 506(b), xvi, xviii, 21, 38, 41–42, 60, 63, 71, 73, 79, 95, 98, 100, 115, 174, 194 Rule 506(c), vii, ix, xii–xiv, xvii–xix, 3, 6, 21, 28, 31, 33, 35–38, 40, 42–45, 47–53, 55–57, 59–67, 69–71, 79–80, 83, 86–87, 95, 98, 100, 115, 117–118, 194 S safe harbor, xvi, 29, 33, 48–50, 53, 96–98, 181 sale, ii, xiii, 3, 5–9, 12, 17–19, 21, 23–24, 33, 36, 41, 48–49, 51–53, 55, 57–60, 63–64, 66–73, 75–79, 81, 84, 86–90, 94, 99–100, 104, 108–111, 113, 119, 121–124, 131, 133–134, 140–141, 143–144, 154–157, 160, 162–165, 173–178, 180–200, 215–216, 218, 228, 230, 237–238, 243, 253–254, 256, 258–259, 261–262, 264, 266–267, 269, 274, 280, 283 Schedule K-1, 62, 194 SCiO, 7, 9, 11–14, 17, 28, 44 SEC Cease-and-Desist Orders, 69 SEC Disciplinary Orders, 68 SEC Reg Section 230.257, 85 SEC Regulation, 28–29 SEC’s crowdfunding, 12 SEC Stop Orders, 69 Section 3(a)(11) of the 1933 Act, 33, 98–99 Section 3(b) of the 1933 Act, xviii, 20, 98, 189–191 13-Jan-16 12:19:52 PM b1952 292 New Methods of Financing Your Business in the United States: A Strategic Analysis Index Section 4(a)(2) of the 1933 Act, xvi, 95–97, 174, 186, 192 Section 12(j) of the 1934 Act, 85 Section 501(c)(3) of the Internal Revenue Code, 61, 175 Securities Act of 1933, ix, xii, 173, 197, 218, 243, 245 Securities Exchange Act of 1934, 18, 48, 175, 180, 197, 220, 250, 262, 271–272 securities lawyer, 23, 27, 40, 53, 129–131, 160 seed financing, 94 Sharon, Dror, 11 start-up companies, xix, 37–38, 49, 104 state crowdfunding, 33 state securities laws, xii, xvi, xvii, xix, 56, 66, 70, 72, 99, 132 stock options, ii, 151, 153, 157–159, 169 strategic, ii, xiv, xv, 101, 114–115, 121 Sun Microsystems, 95 Suspension or Expulsion, 69 T tag-along, 151, 167 tag-along clauses, 124 target offering amount, 18, 22, 25–26, 214, 225 Technion, 11 testing the waters, 79–81, 99, 285 Tier 1, xiii, xv, xviii, 71–74, 76, 81, 84, 86, 89, 99, 243, 251, 270, 272, 277 Tier offering, 76, 78, 81, 83–84, 86, 88–90, 98, 137, 140–149, 243, 251, 256, 280 traditional U.S IPO, xv–xviii, 49, 70, 76–77, 79–80, 82–83, 96–97, b1952_Index.indd 292 116–117, 125, 135, 137, 139–142, 146–147, 160 transaction costs, 140 troubled company acquisitions, 144 trust, 30, 58–59, 138, 175, 177–179, 227, 258, 273, 282 Twitter, 36, 97 U unemployment, xii, xvii–xviii Use of Proceeds, 56, 85, 89, 188, 226, 230, 262–263 U.S Postal Service, 46, 69 U.S Securities and Exchange Commission (SEC), xi–xiv, xvii–xix, 4–7, 9, 11, 15–22, 27–30, 32–33, 35–36, 38, 42, 49–51, 53, 55–56, 58–63, 66–70, 72–73, 75–77, 79–91, 96, 131, 145–146, 168, 214, 217, 224, 227 V venture capital agreement, 153, 158, 161, 168 verification, xii, xv, 36, 38–39, 41, 55, 57, 60–61, 63–64, 71, 100, 193, 195 verify, xviii, 55, 60–64, 185, 193–194 W WealthForge LLC, 38 websites, 45 weighted average, 151, 165 weighted average anti-dilution clause, 156–157 weighted average cost of equity, 107 “Wish I was Here”, 13-Jan-16 12:19:52 PM ... b1952_Ch-01.indd 30-Dec-15 1:01:08 PM b1952 New Methods of Financing Your Business in the United States: A Strategic Analysis New Methods of Financing Your Business in the United States: A Strategic Analysis. .. Your Business in the United States: A Strategic Analysis New Methods of Financing Your Business in the United States: A Strategic Analysis on -the- wrist notification center.17 The founder of the. . .NEW METHODS OF FINANCING YOUR BUSINESS IN THE UNITED STATES A Strategic Analysis 9374_9789814632645_TP.indd 30/12/15 2:58 PM b1952 New Methods of Financing Your Business in the United States: