Thursday, June 4, 2009

Advertise without Going Public

Often times, a company trying to raise money from investors will have a hard time raising money from their current network. It’s at this point they call me and say

“Can we advertise?”

Generally speaking, no.

Under Regulation D of the Securities Act of 1933, which governs private offerings, does not allow any type of general solicitations. It also is restrictive of the type of investors that may invest in your company, and the amount of money you may raise.
So, if you have a private placement memorandum, and no one is biting, what is a company to do to get investors without going public? I have been suggesting the Small Conditional Offering under Regulation A.

A Regulation A filing will allow you to do advertising without going through the usual rigors of a public filing. Some of the features:
1.) A company can raise up to $5,000,000 in a 12 month period.
2.) In “test the waters” states, company’s may even advertise their securities (with the appropriate disclaimer) before they have even filed with the SEC.
3.) No audit is needed.
4.) There is no restriction on the type of investor you may solicit (i.e. accredited vs. unaccredited)
5.) There are no ongoing reporting requirements.

However, as with everything in life, there are some drawbacks:
1.) They are complicated. The review process of a Regulation A filing can be just as arduous as a regular public filing.
2.) You need an attorney to file. These aren’t easy filings and it’s best to not go it alone Further, a Regulation A filing requires the opinion of an attorney even though it does not require audited financial statements.
3.) There is no telling how long it will take to get through the SEC channels. Also, you have to get it through each state in which you want to advertise. This may be easier if you are able to do “regional review” and hit many states at once.
4.) Regulation A filings are paper filings. So, anytime you receive a round of comments from the SEC, corrections must be made and sent through the mail. This is unlike any other type of filing which uses the “EDGAR” system.

Interested in doing a Regulation A offering? I am not trying to be overly suggestive, but I know an attorney you could call…..


  1. Jillian, I think this is a great posting. How do you suggest investors who may not have the funds to pay your fees immediately get set up to do at least one project safely so they can use the money from that to get your help?

    I was at the Commercial Property Summit Sherman Ragland put together (where you spoke) in MD.

    Thank you for answering my question.


  2. Jillian and Dave:
    Perhaps we could develop an online presentation of the Items that would be on interest to investors. This would be advantageous and a win-win situation scheduling issues and monetary gains.
    Think about it!

    Neal McDowell