0. Private Company Financing and Going Public Options Following JOBS Act
Alzheimer's Association Business Consortium
April 4, 2017
DMA/

1. Topics Angels/Friends & Family Venture Capital Regulation D
Rule 506
Rule 504
Regulation A+ IPO

2. Angels/Friends and Family
Angel associations – “sharks”
Friends and family “presold”
May be more favorable valuation
Fewer collars and restrictions than vc
Only one round of financing likely
Not likely much business advice
Common post-seed round

3. Venture Capital
Professional investors – offer business guidance and board assistance
Multiple rounds possible
Significant veto powers and restrictions on management
Potential control over termination of founders
Liquidation preferences create potential conflicts

4. Regulation D – Rule 506
With or without placement agent – can be better valuation and more control than vc
Unlimited amount to be raised without SEC or state registration
Rule 506(b)
Accredited plus up to 35 unaccrediteds
No information requirement unless unaccrediteds
No general solicitation or advertising
Rule 506(c) - new in JOBS Act
Accredited only with 3rd party verification
No information requirement
Advertising and online crowdfunding promotion permitted

5. Regulation D – Rule 504
SEC just increased from $1 to $5 million
Unlimited accredited or unaccredited
No information requirement
No SEC review, may be exempt from state review, but some states require
Can trade the stock post-offering in the OTC
Few experts

6. Regulation A+ – SEC Front Door Reopens
Two tiers: Tier I up to $20 million and Tier II anything up to $50 million in 12 months
Test the waters with any investor- crowdfund/social media marketing
Expedited SEC review- average 74 days
Confidential filing
State blue sky pre-empted OTC for Tier II
Option for “light” or full reporting

7. Regulation A+ (continued)
US or Canada only
Some underwritten, some exchanges
Massachusetts and Montana lawsuit dismissed April 2016
No more than 10% of income or net worth can be invested for nonaccredited individuals if OTC
Alternative to reverse mergers and self-filings
30 deals completed raising $280 million

8. Questions?
David Feldman Partner Duane Morris LLP