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Funding Your Startup
With a DPO
Brian Beckon
V.P. Cutting Edge Capital
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.
Investing on Wall Street
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?
Investing in Community
Communities With Vibrant Small
Enterprises Thrive
Members are:
Healthier
More Open and
Friendly
More Engaged in
Civics and
Community
Capital Raising Options
Institutional loans
- Requires strong financials
- Usually requires personal guarantees or
collateral
Donation/reward-based
crowdfunding
- Contributors can’t get their money back or any ROI
- No return on investment
- Good option for small amounts
Securities-based
investment
- Highly regulated
- Get help from a securities lawyer
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
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
• Rule 506(c) under JOBS Act
Allows advertising and general solicitation
All investors must be accredited
Must independently verify accredited
status
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
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
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!)
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!
Successful
DPO’s
Massachusetts Worker
Cooperative (conversion from
sole proprietorship)
Offering non-voting preferred
stock
Raised $500,000 from
Vermont and Massachusetts
residents in 2 months
- Worker Owned
Cooperative
- Start up Green
Waste
Composting
Business
- Raised
$340,000 in a
Direct Public
Offering
CERO Cooperative
Green City Growers
- Urban Rooftop
Farming business
- Raising $300,000
from MA Residents
- Leveraging existing
community
connections to run a
successful capital
raising campaign
Farm Fresh to You
- Created a
“Green Loan
program” for
CSA members
- Offering
renewed twice
- raised over a
million dollars
(and counting)
Where do you find DPO’s?
DPO Marketplace
DPO Marketplace
Online Investment Tool
Summary of CEC Services
Q&A
Contact:
brian@cuttingedgecapital.com

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Cec idea to_ipo_webinar-4

  • 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.
  • 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?
  • 6. Communities With Vibrant Small Enterprises Thrive Members are: Healthier More Open and Friendly More Engaged in Civics and Community
  • 7.
  • 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!
  • 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?
  • 26.
  • 27.
  • 29.
  • 30. Summary of CEC Services