Preparing Your Company for an Upcoming IPO

There are two questions asked of IPO Village on a daily basis. The first question asked is “How is a Crowdfunded IPO different from a standard IPO (Initial Public Offering)?”, this question normally comes from potential investors in our upcoming IPO offerings. It is also a very common question from the press requests we get from the “Tech” community.
This one is fairly simple to answer, Crowdfunding an IPO utilizes the power of social media to eliminate many of the expenses companies (and investors) incur in the standard IPO process. By taking an offering directly to the crowd, the IPO Village model can save companies (and investors) around 23% of the “mark-up” and costs associated with going public. Much of this is the profit shared by Underwriters and Investment Bankers. Two entities that bring very little to the table as far adding value, actually they don’t bring anything to the table. They simply eat and run.

The second question, one that is asked by companies interested in bringing their company to the public markets and common among the “Financial” press takes a much more detailed explanation. “What steps need to be taken in order to take my company public through IPO Village?”

Daniel Hirsch, Managing Partner at First Line Capital, has provided us with what we feel is the most comprehensive guide to bringing a company public anywhere online. This “check list” covers the necessary steps to raising capital in the public markets.


The Beginning


  • Appoint someone to manage the relationships and serve as a point of contact for the various parties. There are a lot of professionals that will need to work with the company to make an IPO possible. These include; attorneys, accountant, auditors, consultants and various members of the company. Swift, effective communication will save many problems and delays along the way.


  • The company business plan and executive summary should be completed. They do not need to be overly lengthy or flashy but they do need to provide an accurate past and present view of the company along with supportable projections of the future.


  • As the company will be raising capital, a comprehensive “Use Of Proceeds” along with a “Plan of Operations” which spells out how, when and to what purpose the invested finances will be used.


  • Financial records for the past three years (or since inception) must be in good order and in an electronic system (seems obvious but……).


Getting Started


  • Retain an Investment Banking Firm.


  • Retain an attorney who specializes in dealing with SEC filings. Would be wise to do a search on the attorney on the SEC website as well on the internet.


  • Retain an auditor. The auditor must be PCAOB certified. You can check the PCAOB website for all of its members and you can see if the auditor has had issues in the past.


* When hiring a legal firm and an auditing firm, make sure that you retain ones that best fit your company. If you are a small company it may be unwise and impractical to use large firms. The same is true for a large company using small firms.


The Nitty Gritty (also known as Due Diligence Material) –


  • Have all basic corporate documents prepared. These include:


1.         Certificates or articles of incorporation and by-laws for the Company, as currently in effect.


2.         Minutes of meetings (or written consents in lieu of meetings) of the stockholders and Board of Directors of the Company, and of each committee of the Board.


3.         List of states and countries in which the Company is qualified to do business.


4.         Corporate organization chart including title, function and responsibility.


5.         Any agreements among the Company and any or all of the stockholders.


  1. Any other agreements that define or limit the rights of the stockholders, including, without limitation, preemptive rights, restrictions on transfer, voting rights and proxies.


  • Financial and tax documentation that must be prepared:


1.         Most recent unaudited financial statements.


2.         Summary of operating results for each of the last three fiscal years.


3.         Any financial projections.


  1. All federal, state, local and foreign tax returns for the last three years.


  1. All consents, waivers or other agreements with taxing authorities.


  1. All information concerning any significant claim asserted by any taxing authority against the Company.


  1. Litigation files and settlement documents (if any) relating to any tax litigation, whether in court or as part of any administrative proceeding.


  1. Any correspondence with the taxing authorities.


  1. Latest available list and aging of accounts receivable, including collections since aging date.


  1. Description of all contingent liabilities not disclosed in the latest balance sheets provided and any material contracts subject to renegotiation.


  • Bank Financings and other Credit Support Agreements


1.         All bank credit agreements or facilities and other agreements for borrowed money.


  1. Equipment loans to which the Company is a party.


3.         Letters of credit, guarantees, indemnity agreements and other credit support undertakings or contingent liabilities to which the Company or any of its stockholders are a party.


  1. Evidence of any inter-company indebtedness and a list of outstanding loans to or from any officers, directors and employees of the Company.


5.         Financing or other credit agreements with trade creditors relating to trade payables.


6.       Any correspondence relating to the Company’s non-compliance with any loan agreement or any other credit arrangement.


  • Regulatory and Litigation Matters


1.         All notices, information requests, filings, licenses, permits, consents or approvals and certificates obtained or required to be obtained from governmental authorities and agencies and all similar approvals held or required to be held in connection with the operation of the business of the Company, including all correspondence in connection therewith.


2.         Any settlement agreements, consent decrees, court or administrative judgments or orders.


3.         Any complaints, court papers and correspondence relating to any litigation, arbitration or investigations (or threatened litigation or investigations) by which the business of the Company may be affected.


4.         Letters to the independent auditors from lawyers with respect to the lawyers’ work on matters for the Company.


5.         Description of any facts which may give rise to any litigation, arbitration or administrative proceedings involving the Company or its stockholders.


  • Contracts and Agreements


1.         Customer and other sales contracts.


2.         Supplier and other purchase contracts, service contracts, distribution contacts, requirement contracts, take-or-pay contracts, sale and lease back agreements, construction contracts, etc., and any agreement with any government or government agency.


3.         A list of the major suppliers and amounts purchased from any such supplier during the last three years.


  1. Advertising, promotional and marketing arrangements and contracts.


  1. Agreements with independent agents, sales representatives or    others.


  1. Agreements with independent consultants.


  1. Fiduciary and agency agreements, outstanding powers of attorney and letters of authorization regarding the signing of purchase orders, contracts or other instruments.


  1. Joint venture or cooperation agreements.


9.         Any agreements restricting the ability of the Company to compete against others or in which third parties agreed not to compete with the Company.


10.      All agreements and plans entered into by the Company relating to the acquisition of or merger with, a business or an interest in any business, whether by acquisition of shares, assets or otherwise. If any significant portion of the business assets were acquired from a third party, copies of each acquisition agreement and any related agreements and schedules.


11.      Agreements (other than employment agreements) between the Company and any director, officer, employee or stockholder of the Company, any relatives or affiliates thereof, or any other entity in which such director, officer, employee, stockholder, relative or affiliate had or has an interest.


  1. Commitments for capital expenditures.


13.      All documents (whether or not recorded) purporting to create liens, security interests or other encumbrances on all property owned or leased by the Company.

14.        All written, and a list of all oral, license contracts and agreements.


15.      All other agreements that provide for material commitment by or for the Company.


  • Employee Matters


1.         Employment and termination agreements with current and former employees of the Company.


2.         Profit sharing plans and agreements.


3.         Deferred compensation plans and agreements.


4.         Union contacts and collective bargaining agreements and a description of any past labor disputes.


5.         Employee benefit plans including retirement, pension, savings, death or disability and other health benefit and welfare plans.


6.         Stock option and stock purchase plans.


7.         Internal Revenue Service or Department of Labor determination letters with respect to each pension and retirement plan.


8.         Actuarial reports and other documents from actuaries relating to any of the above plans and agreements rendered.


9.         Documentation of any audits, investigations or reviews being conducted by the IRS, DOL or PBGC with respect to any plan and any administrative proceedings in connection therewith.


10.      Employee handbooks and other letters or statements of policy as to working conditions, benefits, etc.


11.      Standard forms of employee trade secrets, non-disclosure and confidentiality.


12.      Description of all other benefits not included above involving any Company personnel.


  • Real and Personal Property


1.         Real property deeds and title policies with respect to any real property owned by the Company.


2.         Surveys, title reports, appraisals and related title documents.


  1. Real property leases.


  1. All leases and subleases for equipment or other personal property.


  • All insurance policies (including general liability, director and officer liability, life and health, fire and casualty, worker compensation, etc.).


  • Intellectual Property


1.         Schedule of patent registrations and applications identifying each patent by title, registration (application) number, date of registration (application), and country.


2.         Schedule of trademark (service mark and trade dress), service mark, trade dress, logos and trade name registrations and applications identifying each mark, trade dress or trade name and including date of registration (application), registration (application) number, status (that is, registered, renewed, abandoned, Section 8 and 15 affidavits, submitted, etc.), and country or state where registered.  In those instances where registration has not been sought, identify the mark, trade dress or trade name, and its date of first use anywhere in the United States.


3.         Schedule of copyright registrations and applications identifying each copyright by title, registration number, and date of registration.


4.         Manual or other written document detailing the procedures for maintaining the secrecy of trade secrets.


5.         A schedule setting forth all material licensing agreements, merchandising agreements (naming the Company or a subsidiary as licensee or licenser), or assignments relating to patents, technology, trade secrets, trademarks (service marks), trade dress, and copyrights.


6.         Communications to or from third parties relating to the validity or infringement of patents, technology, trade secrets, trademarks (service marks), trade dress, or copyrights of the Company.


7.         Studies or reports relating to the validity or value of the Company’s patents, technology, trade secrets, trademarks (service marks), trade dress, and copyrights, and the licensing or merchandising thereof.


8.         Agreements pursuant to which any patent, copyright, trademark, service mark, or trade name has been sold or transferred by or to the Company and evidence of recording thereof.


9.         Statutory invention registrations, patents, patent registrations and patent applications (including all reissues, divisions, continuations and continuations-in-part) and all improvements to the inventions covered in each such registration, patent or application.


10.      All documents relating to the right to obtain any of the foregoing.


Putting It All Together

  • Creation of the registration statement (usually an S-1). This is done primarily by the attorney, accountant and auditor with input from the company. This is the document that gets filed with the SEC.


  • Board of Directors approve registration statement.


  • Hire a transfer Agency


  • Attorney files registration with the SEC. Normally, the SEC will come back for some clarifications or edits to the document. The attorney generally serves as point to the SEC. Corrections are then made and the registration resubmitted.


  • Obtain SEC approval.


  • Have a market maker agree to file a 15c211 with FINRA.


  • As with the SEC, FINRA may have some questions regarding the 15c211. They may respond with questions that the market maker will answer.


  • Once FINRA approves, a stock symbol will be provided.


  • The market maker will establish a bid and ask on the stock.


  • Investor relation campaign begins.

Company should continually put effort into investor relations to make the company and its stock a know to potential investors.


Crowdfunded IPO’s at IPO Village are Global

A person in Germany is on the internet looking for a place to invest some money and comes across an Initial Public Offering (IPO) at IPOVillage for a small company in Texas. The person looks at the prospectus and thinks to himself, “I sure wish I could participate in that IPO.”

He can. Anyone, anywhere who has a few dollars, pounds, yen, pesos or almost any currency can participate in an IPO run through IPOVillage.

While this is a fictitious example of an investor, the basic idea is fact. Anyone, anywhere with an internet connection and money can invest in an IPO through IPOVillage.

Somewhere in Australia, a small company wants to raise capital to expand its operation but is not entirely sure how to do it. The company owner finds IPOVillage and wonders if his company can go through this economical IPO process and be listed on NASDAQ.

He can.

IPOVillage is taking crowdfunding to the masses on a global scale.


Now a company anywhere in the world can take it’s IPO stock offering direct to the public. The company doesn’t have to negotiate through a stock exchange. The lawyers and institutional investors who reap huge rewards on IPOs at the expense of the company and the final investors are now cut out of the picture.

The investor benefits by getting the IPO stock at a much better valuation. What is the IPO price? That’s determined by the issuing company not an underwriter. Stock prices are not artificially inflated by the lawyers and investment banks.

The very people who will help the company grow and become a success will also reap the rewards of that success.

The company offering the IPO benefits by getting all the money from the IPO. The lawyers and banks do not get a cut of the stock sale. That means more money for the company to invest in expansion and improvement.

It does not matter where the company is located or where the investor is located. All that is needed is a company that has properly filed and been approved by the SEC. IPOVillage connects companies to investors around the world.


Currency conversion is not Global Crowdfunding IPOa problem. IPOVillage offering companies accept PayPal, WePay, major credit cards and bank wire transfers. Each one of these payment programs converts currency at current market rates.

Foreign companies who place their offerings on IPOVillage will be approved for trading on NASDAQ. This means the companies receive US dollars, which is the world’s reserve currency and accepted in every major trading market in the world.

Currency conversion in today’s world is as easy as buying IPO stock through IPOVillage.

A GLOBAL VILLAGEThe Internet has opened the world to the world and that includes investing. IPOVillage is a global investing community and a destination for companies anywhere in the world which need more operating capital.

IPOVillage can work with most any company, from a few employees in one location to thousands of employees scattered across the planet. IPOVillage welcomes all investors no matter where they are from or how much money they have to invest.

It’s what we do.

Upcoming IPO on Track despite SEC delays on the JOBS Act

More delays in the rule making process for the JOBS Act (Jumpstart Our Business Startups Act) is not having any effect at IPO Village.

A crowdfunding initial public offering in the first quarter of 2013 is still on schedule. We don’t anticipate any delays either.

JOBS and the lack of getting it fully in place, has not had any negative effect on crowdfunding. It may, in fact, be just enough to get some companies to take a second look at crowdfunding. While the JOBS Act is supposed to make investing in a small business easier, it is not absolutely necessary. Crowdfunding an IPO is in no way impacted by the JOBS act, as going public utilizing the crowd is legal under current SEC rules.

IPO Village is moving ahead with the abovementioned IPO and is in negotiations with other companies.


The news that SEC chairman Mary L. Schapiro is stepping down is having a ripple effect – to use the water analogy, it’s more like excellent surfing waves than a ripple – on JOBS. JOBS was signed into law in April has yet to be fully enacted by the SEC. The JOBS Act is supposed to make it easier for small businesses to generate operating and investment capital. The Security and Exchange Commission is charged with developing the rules to implement this law.

The SEC is already running behind on getting rules in place, states a report in the Washington Post. “The agency appears to already be behind schedule, as several regulatory questions concerning investor education and fraud protection remain unanswered,” wrote J.D. Harrison.

A business waiting on the JOBS Act rules to be in place before raising capital through an equity crowdfunding offering may be waiting a while. This leadership issue absolutely will delay the already-behind rule making process. How long the delay will be remains to be seen, but with the gridlock in Congress and a likely fight over who the new permanent SEC Chairman will be, it could be well over a year before we see any rules.


There is no need to wait. The JOBS Act is not necessary for a small company to go public and generate new capital for its growth. Crowfunding an IPO can be started at any time. The coming IPO at IPO Village (info here – Sign-up with no obligation to receive the companies name and begin your due diligence) was started knowing the JOBS Act rules were still being developed and might not be ready in time for the public announcement.

Any company waiting for the JOBS Act rules to be in place might wind up behind the economic recovery curve. That’s not a place to be for a growing business. With ready investors on hand and a need to meet future demands, there’s no need to wait for JOBS. IPO Village can handle an IPO for almost any size company right now. For a free company  evaluation – click here

Crowdfunding an IPO does several things that benefit a business:

1) It puts the investment opportunity directly in the hands of the public, the people who make a small business a success. Giant Wall Street investment firms are not involved.

2) It’s cheaper for the business. The expenses of hiring high-dollar investment advisers is gone.

3) It puts more money into the business. There is no selling stock at a discount to institutional investors or an underwriter. The public buys stock directly from the company.


Adding to this not-quite confusion at the nation’s top financial oversight agency is a decision by President Obama to put current SEC Commissioner Elisse Walter to pro tempore chairman. She’ll be able to hold the post through the end of December 2013, at which time a permanent chair must be appointed.

Because this is top-end rule making, the SEC must have a chairman, and a permanent chair, to oversee the deliberations and final rules creation. A pro tem chairman is not likely to want to invest significantly in the process knowing a new chairman may have different ideas.

Another monkey wrench in the plans is the nomination process. Depending on how the Republic Party feels about the president’s nomination for permanent chair, it could take a while to get someone into that seat.

Implementing JOBS fully could be well more than a year away. Businesses that need to raise investment capital now have to decide: Can you wait a year or more? If the answer is no, then consider a crowdfunding IPO.