Tag: capital markets

Why the Private Capital Markets are Outpacing the Public Markets

Posted on by Oscar Jofre

The private capital market has seen considerable growth over the past few years due to geopolitical tensions, inflation, and interest rate hikes. These factors are driving heightened volatility in public markets, and investors are therefore looking for protection in private market deals. The ability for private companies to raise capital with accredited and nonaccredited investors through regulations like RegCF and RegA+ has also added to this growth.

 

Large Pool of Capital

 

The private capital market is also benefiting from a large pool of capital currently available to investors. According to Preqin, global private capital dry powder stood at around $1.96 trillion in December 2022. Dry powder is the cash that has been committed by investors but has not yet been “called” by investment managers to be allocated for a specific investment. This sizable reserve of money, when deployed, will provide an influx of investment into the private markets.

 

Growth & Flexibility

 

Companies are also opting to stay private for longer durations of time. In 2011, companies typically stayed private for five years before going public. As of 2020, this has extended to a time period of 11 years. Remaining private can give companies greater flexibility as they grow their business. They may find it easier to adapt and make changes in the early stages with private capital, before choosing a public route when they are more mature and established. With the ability to earn up to $75 million in 12 months with RegA+, for example, the ability for private companies to raise capital is unprecedented in the sector. 

 

The Shift from Public Markets to Private Capital Markets

 

This trend is likely to continue into 2023 and beyond as investors seek alternatives to the public markets. As such, understanding the implications of this shift from public to private is essential for any investor looking to capitalize on these opportunities. Private companies are looking to stay private longer because:

 

  • It allows them to keep their business strategies under wraps and maintain control over key decisions.
  • They can gain access to more capital at a lower cost compared to public markets, allowing for accelerated growth.
  • The private capital market has more flexible structures and less regulation compared with the public markets.

 

Private vs Public Market Size

 

McKinsey estimates that in North America, private market fundraising grew by 21% between 2020 and 2021. In the United States alone, there were 7,042,866 private companies. In comparison, there were only 4,000 public companies in the United States as of 2020. These statistics highlight the significant impact that businesses have on the world economy, with diverse markets and industries contributing to growth and prosperity.

 

The private capital market is rapidly outpacing the public market and this trend looks set to continue into 2023. As private companies continue to significantly outnumber public companies, the increase of capital raising opportunities will only help this sector to grow.

5 Tips for Frictionless Capital Raising

Posted on by Oscar Jofre

Raising capital can be a tricky process. Fortunately, with the JOBS Act and its exemptions from SEC registration under RegA+, RegCF, or RegD, entrepreneurs can now access capital raising 24/7/365. Here are five tips to help you make the most of this opportunity and enjoy frictionless capital raising.

Use Mobile Apps for Online Investments

Mobile apps are becoming an increasingly popular way to access capital markets and make investments online. When a company raises capital under a JOBS Act exemption, a mobile app can streamline the investment process for investors. For example, the KoreID Mobile App allows investors to manage current and pending investments and reinvest with ease. KoreID allows investors to securely manage their personal information so that they don’t have to reenter the same information each time they go to invest.

Utilize Affinity Marketing

What better way to raise capital than to leverage your existing network of customers? Customers that align with your company’s mission and values can become powerful brand ambassadors when they invest. This type of marketing also helps give potential investors a sense of trust and familiarity, which can be invaluable when it comes to securing investments. By utilizing affinity marketing, you can easily create an affinity network and unlock new capital-raising opportunities.

Seek the Crowd

Over the last year, the amount of venture capital funding has dropped significantly. Instead, online capital formation facilitated by the JOBS Act has become a powerful player in the private capital market. RegA+ and RegCF allow companies to raise capital from the general public, creating a wider pool of potential investors. And, since online capital raising is open 24/7/365, these sources of capital can be a valuable alternative to traditional funding routes.

Have a Plan and Tailor Your Pitch

Before you even consider approaching potential investors, you should always have an airtight business plan in place. This includes your stated objectives, financial projections, and any other details that provide an in-depth look into your venture. Once you’ve mapped out the specifics of your venture, it’s time to start crafting a tailored pitch that resonates with potential investors. Creating a compelling presentation with the right balance of facts, figures, and storytelling can help draw investors in and establish trust. Think about the investors you are pitching to and tailor your pitch accordingly. Are they venture capitalists and angel investors? Or are you targeting family and friends or seeking equity crowdfunding? Each type of investor has different requirements, so it’s key to understand who you are pitching to and adjust your strategy accordingly. Regardless of who you’re targeting, it’s vital that you fully understand your business plan, because investors will ask you questions that a memorized sales pitch might not answer adequately. By doing this, you can ensure that the capital-raising process is as seamless as possible.

Prioritize Compliance

When raising capital, adhering to securities regulations is essential for success. While there are many components to compliance, using a broker-dealer is one of the first things that any company should consider when raising capital. Broker-dealers can also help you navigate the complexities of securities regulations. By selecting an experienced and reliable broker-dealer, you’ll have peace of mind knowing that the process is compliant and secure. With these raises sometimes having thousands of investors on a cap table, you want to be sure that your investors are managed properly and that your raise is in compliance with the law.

Raising capital for your venture doesn’t have to be a daunting task. By following these five tips for frictionless capital raising, you can make the process as smooth as possible so you can be well on your way to securing the funds needed for growth. 

 

Seeking Opportunities in Times of Crisis

Posted on by Oscar Jofre

The collapse of Silicon Valley Bank has sent shockwaves through the financial sector, sending bank stocks plummeting, heightening stresses, and leaving many people with feelings of anxiety and uncertainty about the future. However, amidst this chaos lies a unique opportunity to innovate and create jobs, which can stand as a shining message of hope. We see this as a time for ingenuity and entrepreneurial spirit to uncover a unique solution to this crisis and serve as the spark that sets off further development in the sector. This blog will discuss how opportunity and crisis are closely linked, showcasing the potential for businesses to use this moment of disruption as a chance for growth and renewal.

The Innovation Opportunity

 

When crises arise, they can often be overwhelming and unsettling. But, in times like these also lies a unique opportunity for entrepreneurs to shine, by innovating solutions that meet the challenges of the moment. This is an opportune time for businesses to:

 

  • Make a meaningful difference.
  • Find creative solutions to problems.
  • Identify new markets for their services.
  • Develop products that can meet the unique needs of those affected by this crisis.
  • Offer creative solutions that can help bring stability and growth back to the sector.

 

When businesses take advantage of these types of opportunities, it can result in job growth and increased economic activity. But, to take advantage of this opportunity, companies need access to capital that can fund innovation and job creation. Fortunately, RegA+ and RegCF exist to fund businesses. And because retail investors can make investments into companies through these JOBS Act exemptions, it provides companies a source of capital even if there is decreased venture capital or private equity activity.

 

Raising Capital During a Crisis

 

In times of crisis and disruption, finding capital can also be difficult. This is especially true for start-ups that do not have access to the same resources as large businesses. Fortunately, there is a range of ways that companies can raise capital, such as through RegA+, and RegCF. 

 

Through RegA+, companies can raise up to $75 million from both accredited and nonaccredited investors. And since it offers companies the ability to turn current customers into investors and brand ambassadors, the exemption can bring a company tremendous value and help to grow the business. A Reg A raise is excellent for companies that have a wide customer base or need to raise a large amount of capital.

 

Like RegA+, RegCF allows both accredited and nonaccredited investors to invest in the offering. However, offerings are limited to a maximum of $5 million per year. Compared to other regulations, Reg CF is one of the most popular due to its lower cost and ease of implementation. 

 

These options offer companies a way to raise capital to fund innovation, job growth, and other related activities when traditional means might be less available.

 

The collapse of Silicon Valley Bank has sent shockwaves throughout the financial sector. But despite times of crisis like this, entrepreneurs can find unique solutions and opportunities to innovate, create new jobs, and make a meaningful difference. By seeking creative solutions that are tailored to the unique needs of those affected by this crisis, entrepreneurs have the potential to help bring stability and growth back to the sector. In addition, through access to capital through the JOBS Act, businesses can have the resources necessary to fund their growth during a time of disruption. All-in-all, the opportunity is closely linked with times of crisis, providing companies and entrepreneurs with a unique chance for growth and renewal.

What is Affinity Marketing?

Posted on by Oscar Jofre

Affinity marketing is an effective way to increase brand recognition and reach a larger target audience, especially when it comes to raising capital. By leveraging existing connections with customers, companies can improve their visibility and attract more investors. With the right strategy and tools, affinity marketing can be a powerful tool for businesses looking to expand their customer base and create trust between parties. 

 

Affinity marketing is a type of marketing strategy that focuses on creating relationships between a company and its customer base. This connection could be due to things like shared values, such as environmental sustainability or ethical labor practices. The main goal of this approach is to create loyalty and increase brand recognition. The idea behind affinity marketing is that a brand can appeal to an audience that is connected by brand loyalty, shared values, or other aspects that would make them like to make a purchase, return as a customer, or even become investors. 

 

Using the JOBS Act and Affinity Marketing

 

With Regulations A+ and CF, affinity marketing is an effective way to raise capital. By leveraging existing connections with customers, companies can reach a larger target audience and increase their chances of success. When beginning new capital-raising efforts, affinity marketing promotes a sense of trust and credibility.

 

Whether you have had several raises in the past or this is your first capital raise, affinity marketing is an effective way to reach a larger target audience. Leveraging your existing connections can help you gain exposure and attract more investors because people trust the brands they already know. By leveraging this group of investors, you can improve the visibility of your company and reach a larger pool by utilizing these people as a type of brand ambassador for your marketing.

 

Tips For Implementing Affinity Marketing Effectively

 

When implementing an affinity marketing strategy, there are certain steps you should take to ensure success. Here are some tips for using this type of marketing effectively:

 

Identify your target audience: Identify a customer base that shares similar values or had displayed brand loyalty. This will help you create a more tailored marketing plan that is specific to the target audience.

 

Set clear objectives and goals: Setting clear, measurable objectives and goals will help ensure that your affinity marketing strategy is successful. It will also allow you to track progress and make necessary adjustments as needed.

 

Communicate with your partner: Establishing a strong relationship with your affinity marketing partner, like an investor acquisition firm, is essential for success. Communicating regularly and discussing expectations, challenges, and successes will help foster collaboration and ensure successful outcomes.

 

Measure results: Tracking metrics such as customer acquisition rate, customer engagement rate, or return on investment (ROI) is important to determine the success of your affinity marketing strategy.

 

Affinity marketing is an effective way to increase brand recognition and reach a larger target audience. Especially when raising capital. By leveraging existing connections with customers, companies can reach more potential investors and create trust between parties. Additionally, tracking specific metrics can help measure success and ensure that you are meeting your goals. With the right strategy and tools, affinity marketing can be an effective way to increase brand visibility and reach a larger pool of investors.

 

Looking Ahead at the Growth of Private Equity

Posted on by Oscar Jofre

As a market now worth millions of dollars on a global scale, the history of private equity dates back to the early 1900s when J.P. Morgan purchased the Carnegie Steel Corporation. Since then, the industry has seen tremendous growth, especially as the global economic climate continues to develop. Over the next four years, analysts predict that the global private equity market will grow by $734.93 billion between 2022 to 2027, a CAGR of 9.32%. 

 

Much of this growth is being driven by many factors. One of the most important factors is the increasing number of high-net-worth individuals on a global scale. High-net-worth individuals are defined as people with net investable assets amounting to more than $1 million. Because of this wealth, they are key players in private equity investments. Based on a report published by Boston Consulting Group, its projections show that capital commitments to private equity funds from these wealthy individuals will grow at a CAGR of 19% to reach $1.2 trillion by 2025 and account for over 10% of all capital raised by private equity funds.

 

The rise in private equity deals is another major driver of the market. Strategic alliances between companies are becoming more common, allowing them to access resources they otherwise would not be able to gain access to on their own. For example, Blackstone recently partnered with Thomson Reuters to carve out its financial and risk business into a USD 20 billion strategic venture. 

 

Despite the various drivers of market growth, there are a few challenges that could impact the future development of the private equity market, such as transaction risks and liquidity. This concern primarily arises in transactions between companies from two different countries. Transaction risk can lead to losses when the currency rate changes before transactions are completed, as well as through delays or defaults in payments due to foreign exchange controls or political instability in certain countries. Additionally, low liquidity levels of private equity assets could hinder investments in private equity, as investors require more liquidity to invest in other assets.

 

Overall, the private equity market is expected to experience moderate growth over the next five years. This growth will be driven by factors such as an increasing number of HNWIs investing in private equity and a rise in strategic alliances between companies. However, some challenges could impede this future development including transaction risks associated with international transactions and low liquidity levels of assets. Despite these potential issues, global private equity investments will likely increase between 2023 and 2027 due to economic recovery and businesses seeking new investments. 

How Does Tech Allow People to Make Smaller Investments?

Posted on by Oscar Jofre

The world of technology has completely revolutionized the way we view investments–no longer do people need to invest large sums of money to have access to incredible investment opportunities. Through the use of online platforms and computerized transactions, people can now make smaller investments that still have the potential to provide generous returns. This change has made it possible for more people to invest in the private market and other forms of capital, thus democratizing the process and giving more people a chance to participate in the economy.

 

Making Investments Accessible

 

In the past, making investments usually required working with a financial advisor and entailed putting down large sums of money. This often puts investing out of reach for the average person. However, with the advent of online platforms, virtually anyone can now get started in investing with relatively little money. For example, Acorns is an app that rounds up your credit or debit card purchases to the nearest dollar and then invests that spare change into a portfolio of ETFs. In this way, users can invest without even realizing it, while simply making purchases as they normally would. This convenience is one of the main reasons why investing has become more popular in recent years. And, with JOBS Act regulations, nonaccredited investors can use technology to pool their money and invest in startups that were only accessible to the wealthy.

 

While VCs have been known to invest large sums of money into startups, there are now platforms that allow nonaccredited investors to get in on the action with as little as $100. This is made possible through the use of crowdfunding platforms such as WeFunder and Republic. These platforms give everyone a chance to support the businesses they believe in and potentially make a profit from their investment. 

 

Technology has also made it easier for people to keep track of their investments and monitor their portfolios. In the past, people had to rely on paper statements and manual calculations to track their progress. Now, numerous apps and websites offer real-time data and analysis of an investment portfolio. This makes it easy for investors to stay on top of their finances and make well-informed decisions about where to allocate their money.

 

A Technology-Driven Evolution

 

It is clear that technology has completely changed the landscape of investing. No longer do people need to have a lot of money to get started. With the click of a button, anyone can now invest in the stock market or support their favorite businesses through crowdfunding. This accessibility has democratized the process of making investments and given more people the opportunity to participate in the economy. In the past, only those with a lot of money could afford to invest. However, thanks to technology, that is no longer the case.

 

The changes that have been brought about by technology are sure to revolutionize the way we think about investments in the years to come even more than they have already. This not only benefits the common person who wants to invest their money but also smaller organizations and startups looking to raise capital. Through acts like Reg CF and Reg A+, businesses now have a better chance than ever before to get the funding they need from a wider pool of potential investors that are accredited and nonaccredited alike. This is all thanks to the power of technology and its ability to connect people from all over the world.

 

Thanks to technology, making investments has become more convenient and accessible than ever before. Whether you’re looking to invest a small amount of spare change or put together a portfolio of startups, there’s an online platform that can help you do it. This change from the past has democratized investing and given more people the opportunity to participate in the economy. In the years to come, we can only expect this trend to continue as technology continues to evolve.

 

A $30 Trillion Market in 8 Years: Shari Noonan Speaks with Crowdfund Insider

Posted on by Oscar Jofre

The private securities market is predicted to grow exponentially in the next decade, with a total value of $30 trillion by 2030. Recently, Shari Noonan, CEO of Rialto Markets spoke to Crowdfund Insider about this remarkable trajectory.

 

There are several reasons we can anticipate this tremendous growth. First, the JOBS Act introduced powerful exemptions to SEC registration, removing or easing many of the administrative barriers that had stood in the way of capital formation. As well, new tools have emerged to help companies seek capital in online capital markets.

 

Plus, these online tools mean that companies now have access to a wider pool of potential investors that had been traditionally unavailable to the private market. On this subject, Shari Noonan said, “Rialto Markets enables not only venture and institutional investing but also retail investing. This diversity can help private companies seeking capital find a wider range of investors, which might mitigate some of the shakiness in the economy.” With traditional forms of investment, reaching niche investors used to be nearly impossible. It’s a different story online because finding niches is a huge part of what the online world is all about. So whether a company is in real estate, ice cream, or electric vehicles, online platforms make it easier to find the right investors who support unique, innovative companies.

 

So far, the interest in investment through JOBS Act exemptions has not slowed down. “We saw a 1,021% increase in equity crowdfunding in 2021 to $113.52 billion, so that level of growth may be difficult to sustain, but it will still be a strong 2022 for the Reg CF and RegA+ investment markets,” added Shari.

 

So, what does this all mean for investors? Well, the private securities market is set to continue growing at a rapid pace, and with the help of companies like Rialto Markets, it’s easier than ever to get involved. And if it’s easier for investors to get involved, then it’s easier for companies to find investors.

 

For players in the private capital market, like Rialto, the mission is to create a fully democratized ecosystem. Shari believes that “​​this enables private companies looking to raise capital to expand their net and reach a much wider and more diverse investor base, providing investors with access to investments at an earlier stage than previously.” 

 

Continued growth will require a robust infrastructure. “We will continue to expand services to bring greater efficiency and scale to the private markets,” said Noonan when asked about Rialto’s plans for the future. This will also include support for new types of securities, and Rialto is already prepared for the expansion of digital securities. Shari points out that “many NFTs are securities that also live natively on a blockchain. The right way forward is to wrap NFTs into the regulatory framework by registering them as Reg CFs or Reg As, then approving and tracking ownership on a next-gen SEC-registered Transfer Agent.” This would allow the industry to test new technologies while adhering to securities laws that protect issuers and investors alike.

 

The private capital market is growing at an incredible rate as issuers increasingly turn to private capital sources for their funding needs and investors explore new types of investments. With so much growth potential ahead, the private capital market is poised to introduce new technologies, efficiencies, and opportunities to the financial world.

 

What Kind of Data is Relevant for Private Equity?

Posted on by Oscar Jofre

The world of private equity is shrouded in a certain amount of mystery. What data do private equity firms use when making their investment decisions? What kind of research is needed to identify opportunities in this market? With the private equity markets raising over $665 billion in 2021, up from $521 billion in 2020, the use of data for private firms is becoming more crucial than ever. This blog post will look at the data types most relevant for private equity investors and how this information can benefit them in certain situations.

 

The Role of Data in Private Equity

 

Private equity is a type of investment generally reserved for high-net-worth individuals, venture capitalists, and institutional investors. However, these opportunities are being afforded to more individual investors thanks to the JOBS Act. It is an investment strategy that involves buying stakes in companies that are not publicly traded on stock markets. Private equity firms, in particular, typically have a longer time horizon for their investments than other types of investors and often are willing to invest in companies with high growth potential.

 

For these investments, investors may rely heavily on multiple data sources to provide insight and justify investment decisions. These sources may include:

 

  • Financial data is relevant to PE firms because of the need to monitor a company’s financial health. This data can help PE firms identify potential risks and flag companies that may be in trouble. Financial data can also help firms assess a company’s growth potential, allowing them to make more informed investment decisions. 
  • Operational data is relevant to PE firms because it helps them understand a company’s business model and evaluate its efficiency. This data can help firms identify opportunities for cost savings and process improvements. 
  • Market data lets PE firms know what’s happening in specific industries and understand where there might be opportunities for companies they own to gain or lose market share. It also helps firms keep tabs on broader industry trends that could present opportunities or threats to their portfolio companies.
  • Alternative data allows firms to track a company’s performance in real-time and make more informed investment decisions.

 

Data is an essential part of the private equity investment process, which firms must consider when making investment decisions. Private equity firms often rely on proprietary data sources, such as data from the companies they own or have invested in, to make investment decisions. They also use external data sources, such as public market data, to corroborate what they see from their data sources. 

 

The Importance of Data

 

With the increasing importance of various types of data, private equity firms must be able to access and analyze this data to stay ahead of the competition. Firms that can effectively use data will be well-positioned to make informed investment decisions, improve their portfolio companies’ performance, and generate better returns for their investors.

 

Beyond traditional data sources, alternative data is becoming increasingly important for private equity firms. This data can come from various sources and helps PE firms better understand the companies they invest in, make better investment decisions, and provide more hands-on operational support to their portfolio companies. Alternative data can help PE firms corroborate what they are being told and get a complete picture of the company they are interested in investing in. Alternative data can also help with operational decisions after an investment has been made. The ability to crunch a company’s proprietary data and glean insights into broader industry trends is crucial to helping a private equity company increase its market share, improve operational efficiency, and ultimately time the exit correctly. Therefore, a practical application of alternative data can create a virtuous cycle for private equity firms: better investment strategy, selection, execution, management, and realization, driving improved returns and increased LP demand. 

 

Any one source of data may not provide the entire picture of a potential investment, making it critical for private equity investors to analyze a wealth of data before making an investment decision. Overall, data can help to illustrate patterns and opportunities within the private equity space.

KorePartner Spotlight: Curtis Spears, President and CEO of Andes Capital Group

Posted on by Oscar Jofre

Curtis Spears, President and CEO of Andes Capital Group, has over 25 years of experience in the asset management arena. At Andes Capital Group, he is responsible for overall firm strategy, strategic direction, and day-to-day operations. 

 

Andes Capital Group is a boutique firm that prides itself on its long-term relationships and excellent customer service. With a diversified client list that includes public and corporate pension funds, foundations, investment advisors, and endowments, Mr. Spears has had a hand in delivering bottom-line results for various customers.

 

Additionally, Curtis Spears is deeply committed to giving back to his community, as a Chicago native. He previously served on the Governing Board for UCAN and on auxiliary boards for the Steppenwolf Theater, the Field Museum, and the Primo Center for Women and Children. In these roles, he helped raise funds and increase awareness for various causes.

 

Curtis Spear’s years of experience in the financial services industry and his dedication to giving back make him an excellent KorePartner. We were excited to sit down with Curtis recently to ask him about himself and the capital industry.

 

Q: Why did you become involved in this industry?

 

A: I got lucky! I knew nothing about this industry coming out of college. When I first started in finance, I was a computer programmer, writing programs to manage index funds. As my role evolved, I became more interested in working directly with investors and spent the last half of my career servicing clients and raising capital. Over the years, I developed a particular interest in helping people get access to deals and access to capital that they historically would not have access to.

 

Q: What services does your company provide for RegA offerings?

 

A: As a KoreConX partner, we provide deal due diligence, AML/KYC, etc. However, since the bulk of our business is private placements, we have the ability to offer fundraising and general advisory services for every aspect of a deal.

 

Q: What are your unique areas of expertise?

 

A: Since the majority of our reps cut their teeth in asset management, fundraising is a crucial aspect of what we do. We have relationships that span every type of investor, from the most prominent institutions to the smallest retail individual. We are somewhat industry agnostic, but much of what we see tends to all be in the Medtech, fintech, and proptech areas.

 

Q: What excites you about this industry?

 

A: Over the years, outsized returns have been earned primarily in the private markets. What excites me is giving issuers even more access to capital with a new investor class and allowing the average investor to play. 

 

Q: How is a partnership with KoreConX the right fit for your company?

A: In talking with Oscar and the KoreConX team over the last couple of years, we learned that our interests and goals are truly aligned. That is important to us. Also, working with other like-minded partners and leveraging their expertise will really allow us all to propel this part of the industry forward.

 

What is Regulation S?

Posted on by Oscar Jofre

It is essential to be familiar with the different regulations that govern how companies can raise capital in today’s business world. One important rule is Regulation S. This article will give you a basic overview of Regulation S, how it affects businesses, and how companies can use it to raise capital.

 

What is Regulation S?

 

Regulation S is a set of rules that govern security offerings to offshore investors. It is an attempt by the SEC to clarify its role in regulating securities offerings sold by US companies outside the United States. The regulation allows companies to offer and sell securities without registering the offering with the SEC, as long as the securities are only offered and sold outside of the United States. This excludes investors within the US from participating in the offerings. If an offering is for foreign and domestic investors, it would not fall under Reg S exemptions because it would have to be registered with the SEC.

 

Benefits of Reg S

 

Regulation S is an important securities regulation because it allows companies to offer and sell securities offshore without registering with the SEC. This is important because it enables companies to raise money from investors worldwide, and it also protects investors because it ensures that all offerings are made lawfully. At the same time, it enables companies to have a greater reach for their security offerings, as they can now globally raise money from investors all over the world.

 

As it was designed, Reg S was always intended for large transactions made by large companies to sophisticated investors. The primary use case of Reg S is still the Euro bond or an extensive offering by a U.S. or foreign company that is made outside the United States. Because Reg S can be used for such a large-scale offering by large corporations, companies will always continue to use it as an option when they need to raise funds globally.

 

The Pitfalls of Regulation S

 

The problem is many companies do Reg S offerings incorrectly in this particular space of crowdfunding. Many think all they need to do is sell to somebody outside of the United States, but they ignore that Reg S has three separate categories. These categories are based on the likelihood of the transaction being made in the U.S. or the securities returning to the U.S. The most effortless use case of Reg S is a foreign company selling securities under their own rules. An intermediate use is a reporting company registered with the SEC. For startups, the rules of non-reporting U.S. companies are stricter, but many businesses are not complying with these rules.

How Can Companies Keep Their Offering Out of the US?

 

No offer sold under Reg S should be advertised or be made known in the U.S. To this effect, companies should Geo-fence any offering site so individuals with U.S. IP Addresses can not see what you are offering. However, if you have Geo-fenced your offer and implemented the proper protections to ensure a US investor cannot invest, and someone found their way around it, it’s not on you. Companies do not need to police the internet, but they should ensure that their Reg S offerings are only available internationally with Geo-fencing. 

 

While Reg S does not have as wide of a use case as Reg A or Reg D, Reg S is helpful if you feel you will exceed the $75 million of Reg A and can capitalize on international investors. However, companies must be aware that Reg S only tells how to comply with the U.S. rules, not another countries regulation. With most countries having restrictions on making offerings to less sophisticated investors, you want to ensure you meet all these standards if raising capital internationally. 

 

The Regulation S exemption was implemented to help companies raise capital from non-US investors without SEC registration. It has its benefits, but it is not always accessible or appropriate for every company.

KorePartner Spotlight: Paul Karrlsson-Willis, CEO of JUSTLY

Posted on by Oscar Jofre

With the recent launch of the KoreConX all-in-one platform, KoreConX is happy to feature the partners contributing to its ecosystem. 

 

Paul Karrlsson-Willis is the CEO of JUSTLY, a registered broker-dealer designed for companies to promote their ESG profiles as the demand for socially conscious businesses continues to skyrocket. Nearly a quarter of the $400 billion investments ESG-focused private capital between 2015 and 2020 was invested last year alone. Paul has over 30 years of experience in financial services businesses and has expertise in building out a company’s global footprint.

 

We took some time to speak with Paul to learn more about himself and his firm. Here’s what he had to say. 

 

Why did you become involved in this industry?  

 

When I left school there was major unemployment in the UK so the government came up with the “youth opportunity scheme” which was an intern program at various companies which the government-funded. I was fortunate to be accepted into this program by the London Stock Exchange who placed me with a broker-dealer, Capel-Cure Myers, and never looked back.

 

What services does your company provide for RegA+ offerings? 

 

We can offer everything from front to back for Reg A+, Reg CF, and Reg. D as a result of having great partners such as KoreConX. Our true value is in our ability to work with the issuers and understand their businesses and needs. Our parent company–Ideanomics (NASDAQ: IDEX)–started no different from the issuers we support and still invests in private equity companies. It’s in our DNA.  

 

What are your unique areas of expertise? 

 

Over my 30+ career, I have continually been given various businesses, products, and groups to build or rejuvenate, many have gone on to be leaders in their space. A good example was when Fidelity hired me in the UK to build a global trading product for their retail clients base, knowing I had no experience in foreign equities and this was after 3 previous attempts had failed. We were up and running in 3 months and when they asked me to come to the US to do the same, the UK business was profitable. At Fidelity Capital Markets (US) we went from being only able to do everything in USD, to being fully multi-currency, able to trade in over 47 countries in real-time. As a result, Fidelity retail was the first retail US broker-dealer to offer global trading in real-time. I’ve been very fortunate to have worked my way up through the business and therefore know how things get from A to Z and the issues you will come across.  I love to learn; I hate being the smartest person in the room, which is why I try to make sure I have a team that is knowledgeable and feels empowered. I’m very passionate and treat everything I build as part of me, as I believe it reflects on me personally.

 

What excites you about this industry? 

 

Up until now, not very much. It’s been a job I have always put more than 100% into to support my wonderful family. JUSTLY has given me the ability to build something that can genuinely make an impact and help others. Every day, I think about making a difference and not feeding the machine or massaging someone’s ego. Don’t get me wrong, my job is to generate revenue and make JUSTLY profitable, but by making that difference, we will as they go hand-in-hand.

 

How is a partnership with KoreConX the right fit for your company?  

 

KoreConX has the complete platform, amazing expertise and therefore enables JUSTLY to focus on making an IMPACT! True success is never achieved on your own; you need a team and great partners. There is no better partner in this space than KoreConX.

 

What is the Difference Between the Public and Private Capital Markets?

Posted on by Oscar Jofre

 

The public and private capital markets work differently, but both sectors play essential roles in supporting economic growth. Companies raise funds for long-term growth and acquisitions in the public capital market, usually through debt instruments like bonds or stock, while private companies raise capital through private investments.  This article provides an overview of the differences between the two types of capital markets, including how they function and their role in economic development. 

 

Public Capital Markets

Public capital markets consist of equity and debt markets where buyers and sellers trade with each other daily. Many companies use this type of market to raise new capital or sell their existing stocks. It is typically easier for publicly traded companies to use these markets than private ones because traditionally, a wider pool of investors is available, and shares provide a significant amount of liquidity. Most investors use public markets to invest in companies, which buys them a partial interest in a company. It is also where many companies go when they want to raise new capital to fund their business operations. 

 

Private Capital Markets

Private capital markets are where privately-held companies can sell equity to investors like private equity, venture capital firms, and even individuals. This sale of securities is typically exempt from registration with the SEC and may come in the form of a Reg A, Reg CF, or Reg D offering. Before the JOBS Act, these types of investments were limited to high net-worth individuals and institutional investors. Post JOBS Act, even everyday investors can get a piece of a private company, which may offer a significant return if that company ever goes public through an IPO. Additionally, offerings in the private sector typically cost less to the issuer than an IPO, which makes JOBS Acts exemptions a very attractive form of fundraising. 

 

Because of the history of the private capital markets, there are misconceptions that it is expensive to invest. However, Reg A and Reg CF offerings can be affordable for investors, with investments for hundreds of dollars or less. However, non-accredited investors are limited to the amount they can invest each year by their annual income or net worth. The same restrictions don’t apply to private companies. Additionally, investors in the private capital markets have the potential for liquidity through alternative trading systems. 

 

Publicly traded companies are listed on an exchange so that anyone can buy their stocks. This means they have to follow specific guidelines set by the SEC to maintain listing requirements. Private company stock is not publicly available for trading, but there are still ways you may be able to get your hands on some shares. It’s important to note that different securities trade differently depending on where they’re bought from, and choosing the public or private capital market is the first step in any investment.

 

 

 

Bringing Private Placements into the Digital Age

Posted on by Lee E. Saba

How blockchain-based technology will transform private markets

 

Remember the first time you drove a car with a rear-facing camera? The first time you streamed an on-demand movie at home via the Internet, or used GPS instead of a fold-out paper map to find your way on a trip? Similarly, emerging digital technologies have the potential to significantly streamline the cumbersome process of issuing and trading private securities, while automating regulatory compliance and enhancing secondary-market liquidity, transparency, and price discovery. The best part? All these benefits can be captured within existing market structures.

 

The growing popularity of private placements over public listings in recent years is a well-documented phenomenon, driven by tightened regulatory requirements for public issuers and a widening search for returns among investors in a low-interest-rate world.

 

Strong Growth in Private Markets

Acknowledging that raising capital in private markets is simpler than floating public offerings, the path to private issuance is still lengthy and complex. After capital is raised, issuers incur ongoing costs for stock transfers, escheatment, dividend payouts, and compliance. Meanwhile, participants in secondary markets must cope with complexities in making legal and transfer arrangements. Indeed, the timeline for executing trades in privates is currently calculated not in hours or days, but in weeks and months. Throughout, the process is larded with paper, paper, and more paper, stuffed into a file cabinet or residing on email servers.

 

Contrast that with the way new digital mechanisms can transform how private markets operate.

Source: Preqin

 

Blockchain based technologies help ensure that regulated securities are allowed for trading, execute and track payment and receipt of dividends, and validate that transactions have been executed solely with approved investors.  Post-trade processes leverage blockchain’s single “source of truth” — that is, the immutability of a blockchain ledger — working with SEC registered transfer agents.  Alternative trading systems (ATS) are now live for secondary trading of private yet regulated digital securities.

This is no pie-in-the-sky, far-in-the-future scenario. Industry standard-setting bodies like the FIX Trading Community (aka FIX), the Digital Chamber of Commerce, and the Global Digital Asset & Cryptocurrency Association, operating within the framework of the International Standardization Organization (ISO), are at work developing ways to integrate trading of digital securities into existing market structures. For example, FIX has a globally represented working group focused on adapting its widely used messaging standards to communicate and trade digital assets.

 

In short, digitization of private securities can ease capital raises, streamline compliance, improve liquidity and transparency, and save issuers and investors money — all within a regulated ecosystem. In future articles, we’ll explore what the emerging digital trading landscape means specifically for issuers and investors.

 

Continue reading “Bringing Private Placements into the Digital Age”

Meet the KorePartners: Michel Aliphon, SME Brokers

Posted on by Oscar Jofre

This week we are launching a special series to introduce you to our KorePartners. These are the people and companies who share KoreConX’s governance standards, such as Investor Protection, Compliance, Integration, Security, and Efficiency.

We believe that behind every great company there are great people, and each of those people has a unique story to tell. We will be publishing a series of short interviews introducing who our KorePartners are and what they think about the startup industry, blockchain technology, legislation and more.

 

Michel Aliphon, Managing Director at SME Brokers

Born in: Curepipe, Mauritius.
Based in: Perth, Australia.


What was your first job?

My first job was Futures Broker with a Malaysian based company.

 

How and when did you get involved in the business industry?

I completed my bachelor of commerce degree in Economics and Finance and started my career with Citibank Limited as an Executive Manager in 1994.

 

How do you see the Small and Medium Enterprises scene today?

The Australian SME Scene today is struggling to make ends meet, due to the tightening of monetary policy and the government realizing they need to intervene to assist SME’s to grow to create more employment. About 80% of Australian SME’s are worried about cash-flow.

 

In that aspect, is it possible to have an idea of what the next five years will bring?

Recently, the Australian Federal Government announced a new AUD $2 billion Australian Business Securitisation Fund to help provide additional funding to SME lenders, realizing SME’s are the backbone of the economy and SME’s find it difficult to obtain finance other than on a secured basis.

The new Australian crowdfunding amendment legislation bill passed in 2018, will also assist SME access non-bank funding which will further ease cashflow restrictions placed on SME’s making the next 5 years a better and brighter future for SME’s     

 

What does your company bring to the KorePartners Ecosystem?

SME Brokers bring a nationwide distribution network of qualified and dedicated SME Brokers whose primary role is to assist SME’s with their startup and exit succession plans, making them aware of the many opportunities available through the KoreConX Platform as they expand their business locally, nationally and potentially globally.

 

What is it about the partnership with KoreConX that most aligns with your company strategy?

The ability of the KoreConX Platform to provide SME’s the opportunity to streamline their business processes, preparing for the challenges ahead that come with economies of scale.

Join the all-in-one platform empowering private capital markets.

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