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The Future of The Private Capital Markets: Equity Crowdfunding

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After months of anticipation, the SEC has finally opened up registration for online platforms that intend to legally solicit offerings through equity crowdfunding (Regulation CF). For the first time in 80 years, all Americans will have equal access to invest in private companies. Individuals can look forward to investing through online equity crowdfunding platforms as early as mid-May 2016 (pending SEC approval). However, Title III does not completely eliminate the regulatory barriers to investing or raising capital. Here are some important details you should consider leading up to the equity crowdfunding implementation...

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The Future of The Private Capital Markets: Equity Crowdfunding

  1. 1. THE FUTURE OF THE PRIVATE CAPITAL MARKETS –– EQUITY CROWDFUNDING
  2. 2. Vincent Bradley CEO & Co-Founder @FlashFunders Two Things About Me: I’m a problem solver I’m a competitor Follow Me @vincentmbradley
  3. 3. 1   JOBS Act & Reg CF 2   Impact – why this all matters? AGENDA 3   FlashFunders
  4. 4. April 5, 2012 – Jumpstart Our Business Startups Act (JOBS Act) May 16, 2016 – Reg CF Launches January 29, 2016 – Reg CF Rules Set (Title III) June 19, 2015 – Reg A+ (Title IV) September 23, 2013 –General Solicitation (Title II)
  5. 5. REWARDS CROWDFUNDING EQUITY FUNDING EQUITY CROWDFUNDING Platforms Kickstarter, Indiegogo FlashFunders, AngelList FlashFunders Who Can Play? Everyone Accredited Investors Only Everyone Regulatory? None Reg D Reg CF What Are You Buying? Prototype of Product Securities / Ownership Securities / Ownership Average Transaction $70 $58,000 $100 Projected Average Offering Size $10,000 $350,000 $350,000
  6. 6. Regulation Crowdfunding (Reg CF) Launches: May 16, 2016 þ  Allows a company to publicly fundraise up to $1m þ  Everyone can play (230M Americans) þ  Low cost mass market funding option þ  Limit on investment amounts þ  Financial Review and SEC Filing before offering
  7. 7. Raising $100K or Less The issuer must provide financial statements certified by the principal executive officer of the issuer to be true and complete in all material respects. Raising $100K to $500K The issuer must provide financial statements reviewed by a public accountant that is independent of the issuer. Raising $500K to $1M The issuer must provide audited financial statements from a public accountant. However, the SEC has provided a limited one-time exclusion from the audit requirements for issuers conducting their first Reg CF offering provided that the issuer does not have audited financial statements available at the time. Reg CF – Company Audit Requirements
  8. 8. Form C SEC requires every Issuer to file a Form C and receive approval prior to soliciting any investments under Reg CF. Once approved, the Issuer has to wait 21 days (cooling off period) before taking in any investments. Advertising Notices 1)  A statement that the issuer is conducting an offering, the name of the intermediary through which the offering is being conducted and a link directing the investor to the intermediary’s platform; 2)  Terms of Offering o  the amount of securities offered; o  the nature of the securities; o  the price of the securities; and o  the closing date of the offering period 3)  Factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, phone number and website of the issuer, the e-mail address of a representative of the issuer and a brief description of the business of the issuer. Reg CF – SEC Filing & Advertising Requirements
  9. 9. Self certification is accepted “accreditation” method. $100K or Less Greater of $2,000 or 5% Lesser of Annual Income or Net Worth $100K or More 10% of annual income or net worth Not to exceed $100K per investor Investor Annual Income Investor Net Worth Calculation Investment Limit $30,000 $105,000 Greater of $2,000 or 5% of $30,000 ($1,500) $2,000 $150,000 $80,000 Greater of $2,000 or 5% of $80,000 ($4,000) $4,000 $150,000 $100,000 10% of $100,000 ($10,000) $10,000 $200,000 $900,000 10% of $200,000 ($20,000) $20,000 $1,200,000 $2,000,000 10% of $1,200,000 ($120,000), subject to $100,000 cap $100,000 Reg CF – Investor Limits
  10. 10. Public forum to allow for commentary on offering page FINRA Registered Funding Portal Reg CF – Platform Requirements
  11. 11. What Can Companies do to Prepare for Reg CF? ¨  Launch a successful Kickstarter or Indiegogo Campaign ¨  Prepare great content (Video, Marketing Images, etc.) ¨  Build your base – who are you going to market to? ¨  Get your legal in order (C-Corp, clean cap table, corporate governance set-up)
  12. 12. Impact – why this all matters?
  13. 13. More than 120 private technology companies are now valued at over $1 billion Companies Are Staying Private for Longer than Ever Before
  14. 14. Almost All Returns Are Now Private!!! Source: Andreessen Horowitz 2015
  15. 15. Only 8.5 million of the 230 million American adults in the United States qualify as “accredited” and therefore have had access to private company investing. 230 Million 8.5 Million
  16. 16. The future of capital formation – FlashFunders.
  17. 17.     FlashFunders is the Best Reg CF Platform for Entrepreneurs! þ  Complete Fundraising Management þ  Investor CRM þ  Access to Our Growing Investor Network þ  Shareholder Services þ  End-to-End Regulatory Compliance
  18. 18.     Robbie Miller Director of Investor Relations | FlashFunders robbie@flashfunders.com Dylan Satin Startup Relations Manager | FlashFunders dylan@flashfunders.com For additional information, please contact us: You can also visit FlashFunders to learn more: www.flashfunders.com

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