All Eyes on the Crowdfund Texas Conference

The coming Crowdfund Texas conference (http://www.crowdfundtx.com/) in Austin, on January 8th, 2013 is another perfect example of how crowdfunding is rapidly becoCrowdfund Texas Conferenceming a mainstream investment strategy. Attracting some of the biggest names and companies in both old and new finance.

When the organizers asked me to attend and be interviewed for the documentary being filmed at the conference (Crowd of Angels), I knew I was very interested in attending. This is just the kind of boost crowdfunding needs. I couldn’t be more excited to be representing IPO Village at this prestigious event.

When I looked over the list of featured speakers, I knew I had to attend. While I have not met all the speakers, I am familiar with most of them. All have a solid foundation in investing and all are strong supporters of crowdfunding. These people would be at home in any big Wall Street financial giant, but they have chosen pursue direct-to-the-public investing.

A few of the speakers to pay close attention to are:

Rodney Sampson co-founded Multicast Media Networks (Streamingfaith.com) in 2000, Intellect in 2002, Intellect Inspire in 2006 and Legacy Opportunity Fund in 2007. Currently, Sampson is building Opportunity Fund, a US based “super” growth fund and crowd funding platform designed to provide underserved and underrepresented communities access to investment opportunities traditionally reserved for accredited and institutional investors. He also serves on the boards of a publishing company, a merchant investment bank, Community Development Corporation (CDC) and the Crowdfunding Professional Association.

One of four ladies on the speaker roster, Kim Wales is the founder of Wales Capital and a board member and founding member at Crowdfund Intermediary Regulatory Advocates and a governing board member and founding member at Crowdfunding Professionals Association. Kim’s work in these voluntary regulation agencies is vital. While crowdfunding rules under the Jumpstart Our Business Startups (JOBS) act will eventually come down from the SEC, voluntary regulation of the industry will keep federal hands off this investment.

Brian Meece is the founder of crowdfunding website RocketHub.com . He is going to bring direct experience in overseeing crowdfunding efforts to this conference. Businesses that enable crowdfunding investors to step up with their money is integral to the crowdfunding industry. I look forward to sharing notes with Meece.

Scott Purcell is a heavyweight for this conference. According to Wikipedia, “Purcell was the founder of Epoch Networks, which was the fourth commercial internet backbone ever, raised in excess of $100 million in venture capital and was at one time was the largest privately held internet service provider in the United States. He also served as a Board Member of the internet industry associations trade group, CIX the Commercial Internet eXchange. In the formative years of the industry he was appointed by CIX to serve as the government liaison, working with the Clinton administration and the FCC on a variety of internet and telecom related legislation and issues.” He’s also started a number of other companies and brings massive experience of raising money for various projects to the table.

There are a number of other speakers of equal importance to the world of crowdfunding at the conference, but space limits how many I can discuss here. I can certainly say this crowdfunding conference will absolutely be a huge boost to this industry. The media coverage and the later release of the documentary will bring more people into this exciting investment world.

Although I will be not presenting at the conference, please feel free to introduce yourself and bring any questions you may have about IPOvillage.com and Crowdfunding NASDAQ IPO’s.

If you are serious about crowdfunding, this conference will have something for you.

Look Forward to Seeing You There!!
Howard Orloff
Managing Director / Mayor
IPO Village

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.

 

2013 IPO / Crowdfunding Market Forecast

2013 Crowdfunding / IPO Market Forecast

As the global economy continues to show signs of improvement, the market for Initial Public Offerings (IPO) is expected to jump by double digits in 2013.

IPOVillage.com and First Line Capital are expecting 15 to 17 percent growth in the number of NASDAQ IPO’s in 2013. The growth is being spurred by the JOBS Act – Jump-Start Our Business Start-Ups – and an improving economy.

We are seeing a steady increase in investors interested in IPOs at IPO Village. Now that investors are bringing cash to the table, businesses are going to find a way to get to the capital and put it to work.

First Line Capital is reporting an increase in interest of companies wanting to go public as well. First Line is in a rare position to see IPOs well before the public is aware of a company issuing stock for the first time. First Line is an investment banking consulting firm which guides companies through the IPO process to raise capital in the public markets. First Line is major force in the direct-to-public IPO marketplace.

First Line could not comment on deal specifics, but the number of deals in discussion is up and rising.

First Line recently partnered with IPO Village to provide support and consulting services to companies which need assistance in setting up their IPO. Because First Line is so intimately involved with the public IPO process, it begins working with companies months ahead of an IPO. Work begins up to a year before the company starts the SEC review process.

With 20 years of experience in helping small to large companies go public, First Line has an extensive network of corporations around the globe who have staged IPO’s. Their reputation is also attracting new companies to the IPO marketplace.

SMALL COMPANIES TO SURGE IN 2013

“The [JOBS] act … allows ‘emerging growth companies,’ with less than $1 billion in annual revenues to submit their documents to the SEC for confidential reviews and wait until 21 days before their IPO roadshow to make a public filing,” Wall Street Journal Senior Editor Emily Chasan reports in her blog.

Clearly, JOBS is going to have a significant and long lasting impact on the future of business and industry in the United States. Here at IPOVillage.com, we are already seeing an uptick in the queries about companies raising money through an IPO. We attribute this directly and indirectly to JOBS.

THE EFFECT OF THE JOBS ACT

The JOBS Act has eliminated many of the barriers for small companies to go public. It’s just that simple.

“The Jumpstart Our Business Startups (JOBS) Act, passed by the U.S. Government in April, provides opportunity for small companies by easing regulations and allowing unaccredited investors to participate in ‘crowdfunding’ to raise capital,” wrote MSN Money reporter Trefis . “Small-to-midcap companies are usually reluctant to go public because they are discouraged by the legal, marketing and accounting costs involved, as well as the requirement to disclose quarterly financial and business information, which poses a competitive threat to their operations. The JOBS Act, however, considerably reduces the regulatory burden on emerging companies and makes it easier for them to go public.”

The idea that crowdfunding is the driving force behind new IPOs is being supported by others. Writing in Forbes, Devin Thorpe lists a number of reasons why crowdfunding is going to seriously take off in 2013.

By taking an IPO through a crowdfunding route, a small company accomplishes several things:

• It minimizes the expense of attorneys who charge hefty fees to guide an IPO.

• It sidesteps institutional investors who buy IPO stock at a discounted rate and turn around and sell it at a profit.

• It avoids the hyperbolic publicity buildup as seen when taking an IPO through underwriters and lets the public participate in pre-IPO pricing.

A BETTER ECONOMY

As the global economy gradually improves and the US market with it, smart business owners are looking at expanding their reach. To do that, they need capital and one of the best ways to do that is to sell stock.

Small business is the backbone of the nation, providing the bulk of jobs and re-investment into the economy. Anything that can help small business compete and perform better simply has to lead to a better economy. In the passage of the JOBS act, Congress recognizes this.

“Because of its critical importance to job creation and economic growth, the small business community is a prized constituency in Washington, D.C.,” wrote John Kinney for Baker-Donelson. “The JOBS Act could give small long term care companies an additional source of start-up funding and expansion at a time of market uncertainty.”

The JOBS act and crowdfunding as offered by IPOVillage and First Line Capital allow small and startup businesses to access capital they would otherwise not be able to reach.

“Crowdfunding enables small or start-up businesses that may not have access to traditional methods of capital financing to raise capital via the Internet and social media, typically from small-dollar investors,” write Nicole Jumper and Joel Buckberg for Baker-Donelson.

PAST IPOS

Because smaller companies are typically not going public with a big splash in the major markets, tracking them will have to wait until the SEC closes the IPO books for 2012.

However, IPO growth in 2012 slowed compared to 2011, according to Ernst and Young. The report “Sharp decline in global IPO deal value and volume” also suggests an upswing in 2013. Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young, said in the release: “Several large IPO deals are expected by end of 2012 and the market continues to be opportunistic and selective. We expect more volume in first half of 2013. Industries to watch include technology, consumer products and industrials sectors.” The whole article may be read here.

The last time IPO rose by any significant extent was in 2010 according to the report “Global IPO Markets” by Forbes.

In 2009, Forbes counted 577 IPOs. In 2010, that number more than doubled to 1,393, an increase of 141 percent. 2011 showed a very slight decline to 1,225 and the numbers for 2012 are still coming in.

Renaissance Capital is tracking US-based IPOs. Through Oct. 26, they report 121 companies went public for the first time.

NASDAQ reported 86 IPOs since the beginning of the year as of Oct. 26. More were in the pipeline. Interestingly the NASDAQ reports also reports the worst IPO performances are dominated by tech and internet stocks. NASDAQ’s report is only for IPOs handled in that exchange.

NOT JUST FOR SMALL COMPANIES

While the JOBS Act is aimed at small and startup companies, taking an IPO through crowdfunding can be done by any size business. Even the Internet giant Twitter can go through crowdfunding to go public.