Funding a Startup with Direct Public Offering

1. Funding Your Startup
With a DPO
Brian Beckon
V.P. Cutting Edge Capital

2. Our Mission:
At Cutting Edge Capital, our mission is to
create a New Economy that is more inclusive,
equitable and democratic.
We do this by helping businesses and
nonprofits raise capital from their community
in a way that aligns with their mission and
strategic goals.

3. Investing on Wall Street

4. Accredited Investors
At least $1 million in net worth
excluding primary residence
or
$200,000 in annual income
$5 million for entities
is this what an
accredited
investor really
looks like?

5. Investing in Community

6. Communities With Vibrant Small
Enterprises Thrive
Members are:
Healthier
More Open and
Friendly
More Engaged in
Civics and
Community

8. Capital Raising Options

9. Institutional loans
- Requires strong financials
- Usually requires personal guarantees or
collateral

10. Donation/reward-based
crowdfunding
- Contributors can’t get their money back or any ROI
- No return on investment
- Good option for small amounts

11. Securities-based
investment
- Highly regulated
- Get help from a securities lawyer

12. Securities law: A trap for the
unwary
General rule: Any offering must be
either registered or exempt
Must comply with both federal and
state laws

13. Private placement under
Rule 506(b)
Must have pre-existing substantial relationship
Up to 35 non-accredited investors
Cost goes up if any non-accredited investors
VC firms and institutional investors typically
look for companies with potential for 10x
Investors are likely to dictate terms of
investment, may seek control & board seat

14. • Rule 506(c) under JOBS Act
Allows advertising and general solicitation
All investors must be accredited
Must independently verify accredited
status

15. Exempt investment crowdfunding
Exemptions adopted in about 25 states
SEC rules expected within a month
Laws vary widely
Typically limited to $1 million
Per-investor limitations
Some states require intermediary, no direct contact
No regulatory review provided

16. Direct Public Offering
(DPO)
Exempt at federal level
Registered at state level (except for nonprofits)
Allows for advertising and general solicitation
Open to accredited and unaccredited investors
Amount potentially unlimited, depends on strategy
Entrepreneur is in complete control of offering

17. Who Can Do a DPO?
 Any type of entity
 Early stage or mature
 Raises from $250,000 to $50 million
 Any industry
 Any state
 Need a compelling story (but our marketing
partner can help write it!)

18. How does it work?
• We review corporate structure
• Select type of security to offer
Debt
Preferred stock
Common stock
Revenue share
• Select legal compliance strategy
Intrastate
Rule 504
Regulation A
Nonprofit
• Prepare offering documents
• Register offering with state securities regulators
• Launch your offering!

19. Successful
DPO’s

20. Massachusetts Worker
Cooperative (conversion from
sole proprietorship)
Offering non-voting preferred
stock
Raised $500,000 from
Vermont and Massachusetts
residents in 2 months

21. - Worker Owned
Cooperative
- Start up Green
Waste
Composting
Business
- Raised
$340,000 in a
Direct Public
Offering
CERO Cooperative

22. Green City Growers
- Urban Rooftop
Farming business
- Raising $300,000
from MA Residents
- Leveraging existing
community
connections to run a
successful capital
raising campaign

23. Farm Fresh to You
- Created a
“Green Loan
program” for
CSA members
- Offering
renewed twice
- raised over a
million dollars
(and counting)

24. Where do you find DPO’s?

25. DPO Marketplace
DPO Marketplace

28. Online Investment Tool

30. Summary of CEC Services

31. Q&A
Contact:
brian@cuttingedgecapital.com