Table Of ContentRegulation A+ G
e
How the JOBS Act Creates Opportunities for t
t
y
Entrepreneurs and Investors
·
G
u
p
“This book is a must-read for all entrepreneurs who need to raise capital to grow their t
a
businesses.”
·
—from the Foreword by Bill Hambrecht, Founder and Chairman, WR Hambrecht + Co K
a
p
“We congratulate the authors for bringing together many of the elements needed to l
a
help corporations and their investors take advantage of Reg A+ in a simple and easy- n
to-understand guide.”
—from the Aft erword by David Weild IV, Founder and CEO, Weild & Co.; R
Former Vice Chairman of NASDAQ; “Father” of the JOBS Act
e
g
Discover how to raise money under the SEC’s long-awaited Regulation A+ implementing Title u
IV of the JOBS Act.
l
Regulation A+
a
This ground-breaking book is the authoritative guide to Reg A+ for executives of emerging
t
growth companies, entrepreneurs, fi nancial advisers, venture capitalists, investment bankers, i
o
securities lawyers, and fi nance and MBA students on how to raise up to $50 million a year
through what is in eff ect a new type of IPO unencumbered by the heavy regulation and cost n
of a traditional IPO. Reg A+ lift s many of the constraints on soliciting funds, raising growth
A
capital through public off erings, and trading new stock issues that till now inhibited the
growth of small companies. +
The SEC rules implementing Title III of the JOBS Act by expanding equity crowdfunding to
non-accredited investors and allowing small businesses to raise up to $1 million per year
How the JOBS Act Creates
have been greeted with speculative excitement in the startup space. But investment banking
and stock market heavy hitters such as Bill Hambrecht and David Weild believe that Reg A+
Opportunities for
will have a much greater economic impact than the crowdfunding rules and will launch a
revolutionary period of growth, innovation, investment returns, and job creation.
Entrepreneurs and Investors
Paul Getty, Dinesh Gupta, and Robert Kaplan pool their experience as serial entrepreneurs,
―
investors, and lawyers to show readers in very practical terms how to take maximum
advantage of the powerful provisions of the Reg A+ that
Foreword by Bill Hambrecht
• permit companies to raise up to $50 million—a tenfold increase over the old Reg A limit of Afterword by David Weild IV
$5 million and fi ft y times the crowdfunding limit
―
• allow companies to market IPOs to more people than just accredited investors
• make it easier to get the word out on off erings
Paul M. Getty
• exempt companies under certain conditions from onerous and costly reporting and
compliance requirements, such as Sarbanes-Oxley
Dinesh Gupta
Robert R. Kaplan, Jr.
ISBN 978-1-4302-5731-8
52999 US $29.99
Shelve in:
Business/Entrepreneurship
User Level:
9781430257318 Beginning–Advanced www.apress.com
Regulation a+
How tHe JoBS Act creAteS
opportunitieS for entrepreneurS
And inveStorS
Paul M. Getty
Dinesh Gupta
Robert R. Kaplan, Jr.
Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs
and Investors
Copyright © 2015 by Paul M. Getty, Dinesh Gupta, and Robert R. Kaplan, Jr.
This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part
of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations,
recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission
or information storage and retrieval, electronic adaptation, computer software, or by similar or
dissimilar methodology now known or hereafter developed. Exempted from this legal reservation are
brief excerpts in connection with reviews or scholarly analysis or material supplied specifically for the
purpose of being entered and executed on a computer system, for exclusive use by the purchaser of
the work. Duplication of this publication or parts thereof is permitted only under the provisions of the
Copyright Law of the Publisher’s location, in its current version, and permission for use must always
be obtained from Springer. Permissions for use may be obtained through RightsLink at the Copyright
Clearance Center. Violations are liable to prosecution under the respective Copyright Law.
ISBN-13 (pbk): 978-1-4302-5731-8
ISBN-13 (electronic): 978-1-4302-5732-5
Trademarked names, logos, and images may appear in this book. Rather than use a trademark
symbol with every occurrence of a trademarked name, logo, or image we use the names, logos, and
images only in an editorial fashion and to the benefit of the trademark owner, with no intention of
infringement of the trademark.
The use in this publication of trade names, trademarks, service marks, and similar terms, even if they
are not identified as such, is not to be taken as an expression of opinion as to whether or not they are
subject to proprietary rights.
While the advice and information in this book are believed to be true and accurate at the date of
publication, neither the authors nor the editors nor the publisher can accept any legal responsibility
for any errors or omissions that may be made. The publisher makes no warranty, express or implied,
with respect to the material contained herein.
Managing Director: Welmoed Spahr
Acquisitions Editor: Robert Hutchinson
Developmental Editor: Matthew Moodie
Editorial Board: Steve Anglin, Pramilla Balen, Louise Corrigan, James DeWolf, Jonathan
Gennick, Robert Hutchinson, Celestin Suresh John, Michelle Lowman, James Markham,
Susan McDermott, Matthew Moodie, Jeffrey Pepper, Douglas Pundick,
Ben Renow-Clarke, Gwenan Spearing
Coordinating Editor: Rita Fernando
Copy Editor: Kezia Endsley
Compositor: SPi Global
Indexer: SPi Global
Cover Designer: Friedhelm Steinen-Broo
Distributed to the book trade worldwide by Springer Science+Business Media New York,
233 Spring Street, 6th Floor, New York, NY 10013. Phone 1-800-SPRINGER, fax (201) 348-4505, e-mail
[email protected], or visit www.springer.com. Apress Media, LLC is a California LLC
and the sole member (owner) is Springer Science + Business Media Finance Inc (SSBM Finance Inc).
SSBM Finance Inc is a Delaware corporation.
For information on translations, please e-mail [email protected], or visit www.apress.com.
Apress and friends of ED books may be purchased in bulk for academic, corporate, or promotional
use. eBook versions and licenses are also available for most titles. For more information, reference our
Special Bulk Sales–eBook Licensing web page at www.apress.com/bulk-sales.
Any source code or other supplementary materials referenced by the author in this text is available to
readers at www.apress.com. For detailed information about how to locate your book’s source code, go
to www.apress.com/source-code/.
Apress Business: the unbiased Source of Business
information
apress business books provide essential information and practical advice,
each written for practitioners by recognized experts. Busy managers and
professionals in all areas of the business world—and at all levels of technical
sophistication—look to our books for the actionable ideas and tools they
need to solve problems, update and enhance their professional skills, make
their work lives easier, and capitalize on opportunity.
Whatever the topic on the business spectrum—entrepreneurship, finance,
sales, marketing, management, regulation, information technology, among
others—apress has been praised for providing the objective information and
unbiased advice you need to excel in your daily work life. our authors have no
axes to grind; they understand they have one job only—to deliver up-to-date,
accurate information simply, concisely, and with deep insight that addresses
the real needs of our readers.
it is increasingly hard to find information—whether in the news media,
on the internet, and now all too often in books—that is even-handed and
has your best interests at heart. We therefore hope that you enjoy this
book, which has been carefully crafted to meet our standards of quality and
unbiased coverage.
We are always interested in your feedback or ideas for new titles. Perhaps
you’d even like to write a book yourself. Whatever the case, reach out to us
at [email protected] and an editor will respond swiftly. incidentally, at
the back of this book, you will find a list of useful related titles. Please visit
us at www.apress.com to sign up for newsletters and discounts on future
purchases.
The Apress Business Team
Contents
foreword vii
About the Authors ix
Acknowledgments xi
introduction xiii
chapter 1: introduction 1
chapter 2: overcoming challenges to Going public 19
chapter 3: Benefits of regulation A+ 31
chapter 4: Limitations and Business Line considerations 67
chapter 5: the Key elements of a reg A+ offering 85
chapter 6: raising the capital through an underwriter 107
chapter 7: post-ipo Activities 119
chapter 8: Secondary Markets and regulation A+ Securities 133
chapter 9: final thoughts 147
Afterword 157
Appendix A: current Legal Authority 159
Appendix B: current Guidance from Sec 197
Appendix c: public Statements of commissioners at
open Meeting to Adopt regulation A+ 217
Appendix d: otcQX/otcQB Listing requirements and
on-ramp Guides 241
Appendix e: offering Statement exemplars 251
Appendix f: Blue Sky 253
Glossary 259
index 271
Foreword
this book is a must-read for all entrepreneurs who need to raise capital to
grow their businesses.
the launch on June 19, 2015, of “Regulation a+”—the colloquial shorthand for
the SeC rules that amend, expand, and replace Regulation a of the Securities
act of 1934 as mandated by Congress under title iV of the JoBS act of
2012—marks the most powerful positive change in the securities industry
since 1934.
During more than 40 years in the venture capital industry, i have personally
been close to the growth challenges faced by smaller firms, and i have assisted
many companies to raise public and private capital. During the past 20 years
i have witnessed a steady decline in the number of new companies that have
been able to successfully access the public markets and seen the number of
iPos and publicly listed firms decline in the united States relative to other
countries. in recent years i concluded that the increasing obstacles faced by
small companies to raising growth capital had reached a crisis, and i felt it was
time to change the regulations responsible for the slow-down.
i decided to get personally involved by helping to architect the required
changes to allow small companies to regain the ability to raise capital not
only from larger funds and wealthy investors but also from small investors. it
was critically important that smaller companies be enabled to provide more
liquidity and tradability in the shares they sell to their investors than they
could by selling the currently popular Regulation D securities. over the course
of several years, i worked with numerous people, including u.S. senators
and congressmen, to help craft title iV of the JoBS act as the platform for
Regulation a+. i believe Regulation a+ as constructed by the SeC will play a
crucial role in helping small companies raise the necessary capital to grow
their businesses and in reinvigorating this stalled sector of the u.S. economy.
viii Foreword
the authors have done an excellent job of compiling and interpreting all the
relevant materials to produce a very useful guide to Regulation a+, explaining
its beneficial features and the practical considerations and techniques for
putting them to best use in a variety of businesses. this is a complete guide
for entrepreneurs who need to evaluate their new range of options for raising
capital to grow their businesses. Chapters 1 and 2 review and evaluate the
various options for capital formation and what may or may not work for a
particular situation. Chapter 3 details the various elements of Regulation a+
and compares them to the corresponding elements of the other options in
terms of benefit, cost, and time for funding. Chapter 4 examines the applications
and limitations of Regulation a+. Chapters 5 through 8 provide all the details
small companies need to use Reg a+ to raise capital and manage stock
listings if they choose to allow secondary stock transactions. the final chapter
summarizes the appropriate uses and applications of Reg a+. the appendices
contain reference material from the SeC and other relevant sources. the text
is illustrated by numerous tables and charts.
i congratulate the authors of Regulation A+: How the JOBS Act Creates
Opportunities for Entrepreneurs and Investors on their timely creation of this
authoritative and accessible guide designed to assist the millions of u.S.
entrepreneurs who are now eligible to capitalize on the rich opportunities for
small company growth afforded by Reg a+.
—Bill Hambrecht
Founder and Chairman, WR Hambrecht + Co
About the Authors
paul M Getty has been an active venture
capitalist with technology investment firms
Venture navigation and Satwik Ventures. He
also is a co-founder of First guardian group, a
national real estate investment and management
firm that has completed over $800 million in
transactions. His prior operating experience
spans over 25 years as a serial entrepreneur
and executive officer in firms that resulted in
investor returns of over $700 million through
multiple successful iPos and M&as. Paul is
a frequent speaker on investment topics at
industry conferences. He is also the author of
The 12 Magic Slides (apress, 2013). Paul is a licensed real estate broker and
holds Series 63 and Series 22 securities licenses. He has an MBa in finance
from the university of Michigan, with honors, and a bachelor’s degree in
chemistry from Wayne State university.
dinesh Gupta co-founded Satwik Ventures
(www.satwikventures.com), a seed-stage
technology venture fund in 2000. Satwik Fund
has invested in over 25 early stage start-up
technology companies. Dinesh has served
on the boards of several of these companies.
these companies received co-investments in
excess of $1 billion from major Silicon Valley
VC funds and many had successful exits via
iPos and mergers. Dinesh also co-founded
First guardian group with Paul getty. He is a
licensed estate professional and holds Series 63
and Series 22 securities licenses. Dinesh has an
MBa in marketing and finance from Santa Clara university, and a bachelor’s
degree in mechanical engineering from the university of Delhi, india.
x About the Authors
robert r Kaplan, Jr is currently managing
partner of Kaplan Voekler Cunningham &
Frank PlC, based in Richmond, Va. Rob has
been referred to as the guru of Reg a+ due
to his involvement and influence in bringing
about new changes that will have a dramatic
impact in rekindling investor interest in
alternative investments. He is a leading speaker
on Regulation a+ and has been featured
in numerous financial publications and on
syndicated tV/radio shows. He holds a J.D.
from Marshall-Wythe School of law, College
of William and Mary, and an a.B. from College of
William and Mary.
Acknowledgments
this book was conceived almost three years ago but stalled due to the SeC
not finalizing the rules for implementation of Regulation a+ until June of 2015.
During this journey so many people helped, inspired, and contributed to this
book. We are grateful to all them.
to Dan Zinn and Cromwell Coulson, otC Markets group, David Dobkin,
aSMZ Capital, and Steven nelson, Continental Stock transfer and trust, for
making valuable contributions to Chapter 8 on secondary trading of Reg a+
Securities.
to David Weild iV and edward Kim of Weild & Co, for providing very insightful
data and inputs on reasons for the decline of publicly financed firms in the
u.S., plus adding valuable charts and content.
to Kate Mitchell for spearheading important efforts to raise awareness of
capital formation issues to members of congress and also for allowing use of
presentation materials.
to Rita Fernando and Robert Hutchinson of apress, for their excellent work
in editing the entire book in addition to patiently working with us on this
project over three years.
to erik Carlson, Jason Hogin, and laura ede, our colleagues at First guardian
group, for reviewing and editing the final content.
to t. Rhys James of Kaplan Voekler Cunningham & Frank, for his valuable
assistance in the preparation of portions of this book.
lastly, thanks to our wives Jan getty, usha gupta, and Kristen Kaplan, for
inspiring us to share our life experiences with entrepreneurs and help them
to achieve their dreams, thereby revitalizing the u.S. economy.
