Raise Capital
with Netshares
What types of companies does Netshares support in raising capital?
Netshares supports a wide range of companies, including:
Startups: Netshares can help startups raise capital through equity crowdfunding, which is an increasingly popular funding method for early-stage companies. We offer customized fundraising strategies and ongoing support to help startups achieve their fundraising goals.
Growth-Stage Companies: Netshares can also support growth-stage companies that are looking to raise additional capital to fuel their expansion. We offer a range of fundraising options, including Regulation CF offerings, private placements, and Regulation A+ offerings, which can help growth-stage companies access capital more easily.
Real Estate Companies: Netshares has experience working with real estate companies to help them raise capital for their projects. We offer a range of fundraising options, including private placements and Regulation A+ offerings, that can help real estate companies access capital more easily. Reach out to us today to learn more about how to raise capital.
Franchise Businesses: At Netshares, we specialize in assisting franchise businesses in securing capital for their franchise expansion plans. Leveraging our expertise, we provide a comprehensive suite of fundraising options tailored to the unique needs of franchise companies, including private placements, Reg CF, and Regulation A+ offerings. These solutions empower franchise businesses to access capital efficiently, fueling expansion, and enhancing operational capabilities.
Restaurant Businesses: We offer a diverse range of fundraising options, including private placements, Regulation A+ offerings, and Regulation Crowdfunding (Reg CF), tailored to the unique financial needs of restaurant enterprises. Whether you're initiating a new culinary concept, expanding your footprint, or refining the dining experience, our comprehensive solutions empower you to access capital seamlessly.
Small and Medium-Sized Businesses: Netshares can support small and medium-sized businesses across a range of industries. We offer customized fundraising strategies and ongoing support to help these companies raise the capital they need to grow and thrive.
In general, Netshares works with companies that are looking to raise capital through a securities offerings. We have a deep understanding of the regulatory landscape and the capital markets, and we use this knowledge to help our clients achieve their fundraising goals. Whether you are a startup, growth-stage company, real estate company, or small and medium-sized business, we can help you access the capital you need to succeed.
Conducting a Securities Offering to Raise Capital
Three common exemptions used for raising capital in the United States are Regulation A+, Regulation Crowdfunding (Reg CF), and Regulation D. Regulation A+ allows companies to conduct public offerings of securities to both accredited and non-accredited investors, with two tiers offering different fundraising limits. Regulation Crowdfunding facilitates crowdfunding campaigns, allowing small and emerging companies to raise capital from a broad range of investors through online platforms. Investors, regardless of accreditation status, can participate within specified investment limits.
Regulation D provides exemptions from the full SEC registration requirements for private placements, enabling companies to raise capital from accredited investors through different rules, including Rule 506(b) for a limited number of non-accredited investors or Rule 506(c) for accredited investors with general solicitation. These exemptions offer diverse avenues for companies to access capital while addressing the unique regulatory considerations associated with each offering method.
Regulation A+ Offering - Reg A+
Raise Limits:
- $20 million for Tier 1 Per Year
- $75 million for Tier 2 Per Year
Who Can Invest?
Accredited and Non-Accredited
Public Advertising/General Solicitation Allowed?
Yes
Regulation A+ is a securities offering exemption that was adopted by the United States Securities and Exchange Commission (SEC) in 2015 as part of the JOBS Act. It allows small and medium-sized companies to raise up to $75 million in a public offering over a 12-month period through a streamlined and cost-effective process.
If you are considering using Reg A+ for your website, here are some key things to know:
Eligibility:
To use Reg A+, your company must be a US or Canadian-based company that is not already a reporting company under the Securities Exchange Act of 1934. Your company must also be current in its reporting obligations to the SEC and meet other eligibility requirements.
Tier 1 and Tier 2 Offerings:
Reg A+ has two tiers. Tier 1 offerings allow companies to raise up to $20 million in a 12-month period, while Tier 2 offerings allow companies to raise up to $75 million. However, Tier 2 offerings require more extensive disclosure requirements and ongoing reporting obligations than Tier 1 offerings.
Filing Requirements:
To use Reg A, company must file an offering statement with the SEC, which includes information about the company, the securities being offered, and the offering terms. The offering statement must be qualified by the SEC before the offering can begin.
Marketing the Offering:
Companies can use their website and other advertising channels to market their Reg A+ offering, but they must comply with SEC rules regarding advertising and solicitation.
Ongoing Reporting:
Companies that use Reg A+ must file annual and semi-annual reports with the SEC, as well as other ongoing disclosure obligations. Tier 2 companies also have additional reporting requirements.
Benefits and Drawbacks:
Reg A+ can provide smaller companies with an alternative to traditional IPOs or private placements, allowing them to raise capital from a wider pool of investors. However, there are costs associated with preparing the offering statement and ongoing reporting obligations, as well as potential risks associated with the offering process.
It's important to consult with legal and financial advisors before deciding to use Reg A+ for your website, as the process can be complex and requires careful planning and execution.
Regulation Crowdfunding - Reg CF
Raise Limits:
- $5 million Per Year
Who Can Invest?
Accredited and Non-Accredited
Public Advertising/General Solicitation Allowed?
Yes
Regulation Crowdfunding, also known as Reg CF, offers an exemption from the registration requirements for securities crowdfunding. Through Reg CF, companies can offer and sell securities up to $5 million without having to register its offering with the SEC. This Regulation offers vast opportunities for start-ups and small businesses to raise capital. Regulation CF allows anyone from the general public to make an investment. Investing under Regulation CF can be risky and investors can lose their entire investment. As such, the SEC has limited the amount one can invest, which is dependent upon one’s net worth and annual income.
Equity Crowdfunding is a financing method that raises money through soliciting relatively small individual investments or contributions from a large number of people. Specific Securities and Exchange Commission (SEC) regulations exist for companies hoping to carry out securities offers through equity crowdfunding. According to Regulation Crowdfunding, a company must register with the SEC before making any offer or sale of security, unless said company is exempt.
The Securities Act of 1933 required registration of any offer and sale of securities, absent an available and applicable exemption from registration. The Jumpstart Our Business Startups Act enacted in 2012 loosened some regulations regarding the offer and sale of private securities. In particular, Securities Act Section 4(a)(6) of the JOBS Act allows certain crowdfunding transactions exemption from registration. In 2015, the Commission adopted Regulation Crowdfunding, which allowed eligible companies to raise funds via Regulation Crowdfunding beginning May 2016.
Reg D Offerings
Raise Limits:
- Unlimited
Who Can Invest?
Accredited Investors Only
Public Advertising/General Solicitation Allowed?
Yes for Reg D 506c
No for Reg D 506b
Regulation D allows the raising of funds and capital through private offerings of debt and/or equity securities without registering the securities with the Securities Exchange Commission (SEC). Regulation D is not to be confused with the Federal Reserve Board Regulation D, a regulation that limits withdrawals from savings accounts. Many companies prefer raising capital under Regulation D versus going through a public offering's tedious requirements. Regulation D offerings give companies plenty of time to sell securities that cannot be issued under certain circumstances. Companies raising funds through a Regulation D investment typically have less burdensome requirements compared to those of traditional public offerings. Several clauses within the regulation emphasize how issuers can solicit prospective investors from their network.
Regulation D set SEC regulatory measures for implementing private placement exemptions. Raising capital through Regulation D is beneficial, as it streamlines the acquisition of funds for private companies. Without a public offering and at a significantly lower cost, small entrepreneurs can expand their capital through the sale of equity or debt securities. While extremely advantageous to up and coming businesses, regulatory requirements apply under Regulation D. Regulation D imposes numerous rules highlighting qualifications for issuing securities' registration requirements. This regulation divides into three main exemptions: Rules 501, 502, and 503. Rule 501 defines all terms utilized throughout Regulation D. Rule 502 subsequently refers to important conditions required to meet certain exemptions under Regulation D. Conditions stated in Rule 502:
Issuers must provide information and disclosuresGeneral Solicitation is prohibited. When securities sold are placed on the market again, one must observe certain restrictions
Lastly, Rule 503 requires all issuers to fulfill a Form D with the SEC. Businesses must file this form before making an offering under Regulation D.
Legal Requirements for Regulation D
Entrepreneurs can raise their capital with only one or two investors under Regulation D.
Businesses, however, still must adhere to state and regulatory measures. Issuers must submit both the proper framework and disclosure documentation.
Form D
Issuers must file Form D with the SEC. One can access and file this form online after an initial sale of securities. Form D requires far less information to complete than the lengthy forms involved in public offerings. One must simply record names and addresses of a company's executives and directors, in addition to disclosing a few details regarding an offering.
What Type of Securities Can You Offer?
Common Stock
Common stock offerings are a common method for companies to raise capital and enable investors to participate in the company's growth. It's important for both the company and investors to understand the terms of the offering, including any dilution effects on existing shareholders, voting rights, and other relevant factors.
Funding: Once the shares are allocated, investors fund their subscriptions by paying the agreed-upon purchase price per share. The funds raised from the common stock offering go into the company's capital, providing the necessary financial resources.Listing (if applicable):If the company is not already publicly traded, the common stock may be listed on a stock exchange, enabling investors to buy and sell shares on the open market.
Common Stock or Membership Units represent ownership in a company and typically comes with voting rights. Investors who purchase common stock become shareholders and gain certain rights, including the right to vote on important company decisions, such as the election of directors.
An equity security makes you a joint owner of that company. As an owner, you have the right to share in any profit distributions and also share in the company’s value appreciation. There are, however, some risks involved with holding equity, including but not limited to:
Debt Securities
Debt securities, like promissory notes and bonds, allow you to be paid before equity investors in the event of the company’s bankruptcy. A debt based offering is often term loans. These loans can pay any amount of interest or not pay an interest. Many different structures for debt securities exist. You should therefore strongly consider learning about a particular security’s risks before investing. Some risks associated with debt securities include:
Repayments and payments are not guaranteed: while you, as a creditor, have payment priority if a company dissolves, a company may simply not have enough money to pay its debts
No third party credit ratings: credit ratings are designed to help investors gauge the risks of a debt security. Securities on our Portal might not be rated by rating agencies such as Moody’s and
Standard & Poor’s, leaving investors with little to no objective measure to judge the company’s creditworthiness
Interest rate might not adequately compensate your risks: chances are that the interest you will earn does not adequately compensate the level of risk you are taking
Lack of security: a promissory note may or may not be secured by property, such as an interest in real estate or equity
Convertible Notes
A convertible note is a type of financial instrument commonly used in early-stage financing, allowing a company to raise capital without having to determine an immediate valuation. It is essentially a form of debt that has the option to convert into equity at a later stage, typically during a future financing round. Here's how a convertible note works:
Issuance:
- The company issues a convertible note to an investor as a form of loan.
- The note includes details such as the principal amount (the amount invested), the interest rate, the maturity date (when the loan must be repaid if not converted), and the conversion terms.
Interest Accrual:
- While the note is outstanding, it may accrue interest. However, instead of paying interest in cash, the interest is often added to the principal amount to be converted later.
Conversion Trigger:
- The conversion of the note into equity is typically triggered by a future event, such as a subsequent equity financing round.
- The conversion may be automatic, or it may be at the option of the investor, depending on the terms negotiated between the company and the investor.
Valuation Cap and Discount:
- To incentivize early investors, convertible notes often include a valuation cap and/or a discount. The valuation cap sets a maximum valuation at which the note can convert, ensuring that the investor gets a more favorable conversion rate in the event of a high company valuation during the equity financing round.
- The discount provides the investor with a predetermined percentage discount on the price per share during the equity financing, further encouraging conversion.
Conversion into Equity:
- When the triggering event occurs (e.g., a subsequent equity financing round), the investor has the option to convert the outstanding principal and accrued interest into equity at the predetermined conversion terms.
- The convertible note converts into shares of the company's preferred stock or another form of equity.
Repayment (if not converted):
- If a conversion doesn't occur by the maturity date, the company may be required to repay the principal and any accrued interest to the investor.
Convertible notes are a flexible financing option for early-stage companies and investors. They provide a way for companies to secure funding without immediately determining a valuation and give investors the potential for equity participation in the future success of the company. However, both companies and investors should carefully negotiate and consider the terms to ensure a fair and mutually beneficial arrangement. Consulting with legal and financial professionals is advisable when structuring convertible note offerings.
SAFEs (Simple Agreements for Future Equity)
A SAFE, or Simple Agreement for Future Equity, is a financial instrument used in early-stage fundraising, particularly in the startup ecosystem. A SAFE is a type of convertible security that allows investors to invest in a company with the expectation of receiving equity at a later date, typically during a future financing round. Here's how a SAFE works:
Issuance:
- The company issues a SAFE to an investor, representing an agreement between the investor and the company for a future equity investment.
No Immediate Equity Ownership:
- Unlike traditional equity investments, a SAFE does not grant immediate ownership or voting rights to the investor in the company.
Investment Amount and Terms:
- The SAFE includes details such as the amount of the investment, the valuation cap (optional), and the discount (optional).
Valuation Cap: A valuation cap sets a maximum valuation at which the SAFE will convert into equity during a future financing round, ensuring that the investor gets a more favorable conversion rate.
Discount: A discount provides the investor with a predetermined percentage discount on the price per share during the future financing, further incentivizing investment.
Conversion Trigger:
- The SAFE converts into equity at a later specified triggering event, typically a future equity financing round. This could be a qualified financing round with a minimum fundraising amount.
Conversion into Equity:
- When the triggering event occurs, the SAFE converts into shares of the company's preferred stock or another form of equity based on the terms agreed upon in the SAFE.
Conversion Terms:
- The conversion terms may include the valuation cap and discount, if applicable, to determine the conversion price of the SAFE into equity.
No Repayment Obligation:
- Unlike debt instruments, SAFEs do not have a repayment obligation. If the triggering event doesn't occur, the investor does not receive their investment back.
Investor Rights:
- While SAFEs do not provide immediate voting rights, they may include certain investor-friendly provisions, such as information rights, allowing investors to receive updates on the company's performance.
Simplicity and Efficiency:
- SAFEs are designed to be simple and efficient, streamlining the fundraising process by avoiding some of the complexities associated with traditional equity financing.
Risk Considerations:
- Investors in SAFEs bear the risk that the triggering event may not occur, and therefore the conversion into equity may not take place.
SAFEs are commonly used in early-stage fundraising because they provide a relatively straightforward way for companies to raise capital without immediately determining a valuation. However, both companies and investors should carefully negotiate and consider the terms of the SAFE to ensure a fair and mutually beneficial arrangement. Legal and financial professionals are often involved in the process to provide guidance and ensure compliance with applicable regulations.
Revenue Share Notes
A Revenue Share Note is a financial instrument that allows a company to raise capital by offering investors a share of its future revenue over a specified period. Unlike traditional debt instruments that pay a fixed interest rate, a Revenue Share Note provides investors with a return based on a percentage of the company's gross revenue. Here are the key features and components of Revenue Share Notes:
Issuance and Agreement:
- A company issues a Revenue Share Note as a form of debt agreement with investors.
- The terms and conditions of the agreement are documented in a legal contract, specifying the obligations of both the company and the investor.
Principal Amount:
- The principal amount represents the initial investment made by the investor. This is the amount on which the revenue share will be calculated.
Revenue Share Percentage:
- The Revenue Share Percentage is the portion of the company's gross revenue that the investor is entitled to receive. This percentage is agreed upon during the issuance of the note and can vary depending on negotiations between the company and the investor.
Term of the Note:
- The term of the note defines the duration over which the revenue sharing arrangement will be in effect. It is the period during which the company agrees to make payments based on the agreed-upon revenue share.
Maximum Repayment Amount (Optional):
- Some Revenue Share Notes may include a maximum repayment amount, capping the total amount the investor can receive. This protects the company from potentially excessive repayment obligations.
Payment Structure:
- Payments to investors are typically structured as a percentage of gross revenue over regular intervals, such as monthly or quarterly.
- The payment structure ensures that investors receive returns based on the company's actual revenue performance.
No Fixed Interest Rate:
- Unlike traditional debt instruments, Revenue Share Notes do not carry a fixed interest rate. The return to investors is directly tied to the company's revenue.
Flexibility for Companies:
- Revenue Share Notes offer flexibility for companies, especially startups or those with uncertain cash flows. They allow companies to share financial success with investors without committing to fixed interest payments.
Investor Rights:
- Investors in Revenue Share Notes typically do not acquire ownership rights or voting privileges in the company. Instead, their return is solely based on the agreed-upon revenue share.
Prepayment Option (Optional):
- The agreement may include an option for the company to prepay the outstanding balance of the Revenue Share Note before the end of the term.
Legal Review and Compliance:
- Issuing Revenue Share Notes requires careful legal review to ensure compliance with securities regulations and other relevant laws.
Revenue Share Notes provide a unique financing option for companies looking to attract capital without the fixed repayment obligations of traditional debt. Investors, in turn, have the potential to benefit from the company's success through a share of its revenue. As with any financial instrument, it's crucial for companies and investors to consult legal and financial professionals to ensure that the terms are well-defined and comply with applicable regulations.
How Can You Market Your Securities?
Marketing securities can be a complex process, and it is important to ensure that you stay compliant with all relevant securities laws and regulations. Here are some general strategies you can use to market your securities:
Define your target audience: The first step in marketing your securities is to define your target audience. Who are the investors that you want to attract? What are their interests, demographics, and investment objectives? Once you have a clear understanding of your target audience, you can develop marketing strategies that are tailored to their needs.
Leverage your network: One of the most effective ways to market your securities is to leverage your existing network of contacts. This includes family, friends, business associates, and other professional contacts who may be interested in investing in your securities. You can also reach out to industry associations, social media groups, and other networks to find potential investors.
Create a compelling investment story: To attract investors, you need to create a compelling investment story that outlines the benefits of investing in your securities. This includes information about your business model, market opportunity, growth potential, and other key factors that make your securities an attractive investment opportunity.
Use digital marketing tools: Digital marketing tools such as email marketing, social media, and paid advertising can be effective ways to reach potential investors. However, it is important to ensure that all marketing materials comply with securities laws and regulations.
Partner with a broker-dealer: Partnering with a broker-dealer such as Netshares can be an effective way to market your securities to a wider pool of investors. Broker-dealers have established networks of investors, as well as expertise in marketing and compliance, which can help you reach more potential investors while staying compliant with securities laws and regulations.
Overall, marketing securities requires a combination of strategic planning, clear messaging, and compliance expertise. By developing a targeted marketing plan and partnering with the right professionals, you can increase your chances of success in raising capital through securities offerings.
Houston Main Office
Netshares Financial Services, LLC is an SEC registered broker-dealer and a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investors Protection Corporation (SIPC). As an intermediary, we provide opportunities to connect private companies with investors for securities offered and sold under Title II, III, and IV of the JOBS Act.
STAY INFORMED
By submitting this form, you consent to receive SMS messages and/or emails from Netshares. To unsubscribe, follow the instructions provided in our communications. Message & data rates may apply for SMS. Your information is secure and will not be sold to third parties.
Check the background of this firm on
FINRA’s BrokerCheck
Netshares Financial Services, LLC By accessing this website and any pages thereof, you agree to be bound by the Terms of Service and Privacy Policy. This website is operated by Netshares Financial Services, LLC (“Netshares”), a broker-dealer registered with the U.S. Securities and Exchange Commission (the “SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investors Protection Corporation (“SIPC”), which protects securities customers of its member up to $500,000 (including $250,000 for claims for cash). An explanatory brochure can be found at www.sipc.org. Netshares is located at 3200 Wilcrest Drive, Suite 275, Houston, Texas 77042. You may find the background of our broker-dealer and investment professionals on FINRA’s broker/check.
Investment opportunities accessible through this website include offerings made in reliance on the registration exemptions provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), Rule 506 of Regulation D promulgated thereunder, Regulation A, or under Section 4(a)(6) of the Securities Act and Regulation Crowdfunding thereunder. Unless indicated otherwise with respect to a particular issuer, all securities-related activity is conducted by Netshares. Investment opportunities listed on this website are intended for investors who do not have a need for a liquid investment. Investments listed on this website are speculative in nature and involve a high degree of risk. Past performance is not indicative of future performance and the value of an investment may go down and result in partial or total loss of your investment. Investors who cannot afford to lose their entire investment should not invest. Neither the SEC nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through this website. All securities listed on this website are being offered by, and all information included on this website is the responsibility of, the applicable issuer of such securities. Netshares does not verify the adequacy, accuracy or completeness of any information, and no communication, through this website or in any other medium, should be construed as a recommendation for any security offering listed therein. In making an investment decision, prospective investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved, and are strongly encouraged to consult with their tax, legal and financial advisors.
© 2021 By Netshares Financial Services, LLC. All Rights Reserved