Post on 16-Aug-2015
© Kendrick Law Practice * 678.739.8109 * www.kendricklaw.net Page 1
Guide to Crowdfunding: Under the
federal JOBS Act and in the State of
Georgia
What You Need to Know
Last Update: June 2013
DISCLAIMER: By downloading and reading this Guide, you understand and agree to the following:
That this is just a guide to crowdfunding on the federal level and in the State of Georgia ONLY
and no other U.S. territory or State.
That Kendrick Law Practice is not authorized to practice law in any other U.S. territory or state.
That access to this guide does not create an attorney-client relationship between you, your
business or others with access to the guide and the Firm unless there is a signed retainer
agreement on file with the Firm.
That is just a general guide to explaining crowdfunding and does NOT represent all of the legal
requirements and procedures to legally execute a crowdfunding campaign.
Kendrick Law Practice, LLC
3035 Stone Mountain Street, #630
Lithonia, GA 30058
678.739.8109
dkendrick@kendricklaw.net
www.kendricklaw.net
© Kendrick Law Practice * 678.739.8109 * www.kendricklaw.net Page 2
Crowd. Capital. “Unaccredited Investors”.
Crowdfunding is a way for businesses to raise capital for their business by soliciting “the crowd”,
whomever they may be, for money. Think of it sort of like Groupon in that it is a business offering
“something” in exchange for a large group of people giving money to the business.
In the context of this guide, crowdfunding is the newest way for business owners to raise capital by
exchanging a piece of ownership in their company (equity) in exchange for capital from family, friends
or, in the case of Georgia and federal crowdfunding, from total strangers through general solicitation.
Now NOTE: There are 2 ways to crowdfund: On the federal level under the federal JOBS Act and on
the state level under the IGE (Invest Georgia Exemption).
TIP: Your Crowdfunding Campaign is only as good as your “crowd” or access to people to invest in
your business. Build the RIGHT team to find the RIGHT crowd with the RIGHT campaign to get the
RIGHT results.
Example of Crowdfunding under the IGE (in Georgia)
Example No. 1: ABC Corp. is a Georgia based and registered business and has launched a
crowdfunding campaign to raise $100,000 for equipment badly needed for its
medical practice. [There are steps in between] but ABC Corp. solicits strangers
through a portal and asks that 10 individuals give $10,000 in exchange for 1%
equity in his company. ABC Corp. is giving up 10% equity (1% equity x 10
individual investors) and retaining 90% equity.
What is Crowdfunding?
June 2013
© Kendrick Law Practice * 678.739.8109 * www.kendricklaw.net Page 3
How was it BEFORE the
federal JOBS Act
Time Consuming & Expensive.
Before the federal JOBS Act, business owners had
to file what’s called a “REGULATION D
EXEMPTION” with the Securities and Exchange
Commission (“SEC”) in order to be exempted
from registering with the SEC and being highly
regulated. But get a “Regulation D” exemption, a
business (1) had to sell to “accredited investors”
(those making over $200,000 a year) or (2) if
selling to “non-accredited investors”, the limit was
35 investors that could not be generally solicited or
(3) the investors had to be “sophisticated” which
meant they participated in the stock market to a
certain degree.
June 2013
© Kendrick Law Practice * 678.739.8109 * www.kendricklaw.net Page 4
Federal JOBS Act
Offer securities (equity) to an
UNLIMITED no. of investors that can be
“NONACCREDITED”/”UNSOPHISTICA
TED” investors
General solicitation is allowed
Raise up to $1M a year ($2M Cap);
Emerging companies can raise up to $50M
Accept capital of:
o $2,000 or 5% of annual income
from those making LESS than
$100,000
o 10% of net worth or annual income
from those making MORE than
$100,000
DISCLAIMERS: There are still…
o Reporting obligations depending on
the amount of money you want to
raise
o This is not for EVERY business.
CHANGES NOW: A Tale of 2 Ways to Crowdfund
June 2013
Georgia “Blue Sky” Regulations
The federal Securities Act of 1933 has an exemption
under SEC regulations for INTRASTATE (within
state) offerings. In 2012, the GA Commissioner
came up with the rule called the “Invest Georgia
Exemption” (“IGE”).
A Few Things to Know
1. MUST BE A: (a) Georgia based (b) "for profit"
business, (c) registered to do business in Georgia
that is (d) not an investment firm.
2. The cap is $1M in any 12 month period.
3. All funds must be deposited into a bank
authorized to do business in Georgia.
4. Before the use of general solicitation or 25th sale,
a Notice must be filed with the GA Commissioner
with certain requirements.
5. The issuer must inform purchasers that securities
are "unregistered".
6. Can only sell to residents of the State of Georgia
initially and only resale to non-residents after 9
months.
7. Those with income under $200k a year can invest
up to $10k; those with income more than $200k can
invest as much as they want.
© Kendrick Law Practice * 678.739.8109 * www.kendricklaw.net Page 5
1. Tell Your Story. Why are you raising the capital for your business? What is
your unique story behind why you started your business in the first place?
Every business has a story that answers the question “Why”. Remember, facts
“tell” but stories “sell”.
2. Provide value. How will the potential investor benefit from investing in your
product or service, besides the obvious rate of return they will receive? One
item of value is what makes you, as a owner in the business, different than
other owners. Perhaps it’s your connections, charisma, sales experience, or
technical experience. Any additional value will be appreciated and noticed.
3. Argue why your product or service is scarce. If you can convince potential
investors that your product or service is so unique and “one of a kind” that
there is nothing like it being offered, the value of your company increases as
you have more investors wanting to have a part of your company.
4. Create a marketing plan, including a marketing event. You are only as
good as your crowd and if no one knows about your product or service, it
won’t get any investors. Period. It’s important to have a strategy to attract
investors but you may also consider a one time big event that creates an
illusion (or reality) of exclusivity. Investors like it when they are part of the
“in” crowd where others don’t have access.
5. Highlight V.I.P. supporters. Investors, like other people, are susceptible to
peer pressure. If you have an influential, powerful, wealthy or credible
supporter, make sure to highlight those individuals. Investors like to be
around V.I.P. supporters and others of influence and power. This goes back to
creating an air of exclusivity in your product or service.
6. Use your powers of persuasion. Simply telling your story as I suggested in
No. 1 is only half the battle and may “sell” your story but cannot “tell” your
story. Most investors are practical and need hard evidence and facts before
they invest their money. Therefore, make sure you have details and evidence
to support your story.
7. Communicate. Communicate. Communicate. This is an interpersonal skill
that cannot be overstated, especially when it comes to wooing and keeping
investors happy. Your ability to communicate clearly and often reflects on
your position at a leader in your business and investors decide if they want o
work with YOU, regardless of it you have the best business idea. And
remember, this communication does NOT stop after you have the investment.
© Kendrick Law Practice * 678.739.8109 * www.kendricklaw.net Page 6
An
ACCOUNTANT
to keep up with
funds coming in
A trusted
BANKER to
hold the raised
funds and set up
accounts
A
MARKETING
EXPERT to help
formulate your
message to
investors
An INSURANCE
AGENT to
advise on
insurance
products to
mitigate your
risks
A BUSINESS
ATTORNEY to
complete all
paperwork and
agreements and
advice on legal
issues and
procedures
Who You Need to Get Started!
“You are only as good as your crowd.”
A BUSINESS
COACH to
guide you
along the way
on “Best
Practices”
Reach
your
campaign
GOAL!
© Kendrick Law Practice * 678.739.8109 * www.kendricklaw.net Page 7
Kendrick Law Practice
3035 Stone Mountain Street, #630,
Lithonia, GA 30058
Phone: 678.739.8109 | Fax: 678.323.7887
dkendrick@kendricklaw.net |
www.kendricklaw.net
Call us TODAY if you have a few follow up questions or
you are ready to get started with your own
CUSTOMIZED consulting session to learn IF and HOW
to get started with YOUR crowdfunding campaign with
our group of professionals.
Crowdfunding Consultation Services
Here is what YOU can expect from our 1 hour in person consultation. We will help you:
Decide if you QUALIFY to crowdfunding at this time (We have a check list);
Decide if crowdfunding is right for YOUR business at this time (We will give you the PROs and
CONs for federal and state crowdfunding);
Compose a list of “dream team” professionals to make your campaign a SUCCESS (Choose
from our already vetted list of contacts to follow up with);
Receive answers to YOUR questions specific to your business and circumstances;
Come up with a written “action plan” to get started immediately (including legal services).