Georgia Intrastate Crowdfunding and How It Helps Pitching

Now, in Georgia and a growing number of states, so long as a company is planning to keep a securities offering local (with all investors –both accredited and non-accredited – coming from the same state in which the company is formed), a company can freely pitch an investment offering to anyone, as long as the members in the audience certify their state of residency (such as filling out a sign-in sheet prior to or at the beginning of the pitch event). With only residency to vet, an intrastate offering is the least administratively taxing while offering companies the largest investor pool to choose from. A major win for any company in an intrastate friendly state.

One quick word of caution – the federal and local laws addressed above are complex and require strict adherence. In each case, there are basic filing prerequisites, among other things, that must be followed before a company can legally participate in a public pitch event under any of the mechanisms addressed above. Please use SmartUp’s free consultation tool for more information. We can help you assemble a securities offering best suited to fit your company’s needs.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Megan K. Johnson is a business lawyer with over 7 years of experience. She helped champion securities crowdfunding at the local level and worked with the first company to successfully close an equity crowdfunding involving everyday investors. She is a partner at Founders Legal and can be reached at [email protected]

megan

Source: Smartup Legal

Federal Changes That Make It Easier to Pitch Your Startup

In the last few years, two important shifts have happened in the local and national securities space that make it easier for companies to take part in pitch events without fear. The one that has garnered the most attention operates at the federal level. The JOBS Act, passed on April 5, 2012, has now made it legal for young companies without a stable of rich uncles to advertise a securities offering to any high-net worth individual, so long as the company verifies that all the investors in the round are actually accredited.

JOBS Act: What Does This Mean for Pitch Events?

Now, if a company accepts the added administrative burden of verifying investor eligibility (and limiting the offering to only accredited investors), it can pitch an investment offering to anyone, including the general public. However, only high net-worth individuals are permitted to invest – even if interested investors are in the room who do not meet the accredited standards.

But What About Everyone Else?

At the local level, some states are relaxing the general solicitation ban even further to permit companies to advertise an investment offering to the general public – and more importantly – to actually sell securities to the 97% of the public who are not considered high net-worth individuals. Currently, 14 states (and growing) have updated securities regulations to allow the middle class to invest in local companies. Georgia is one of them. Startups and small businesses in these states have an unprecedented opportunity to both advertise their funding needs and actually garner investors, now that the investor pool has expanded to include all investors, regardless of income.

For more information on rules in Georgia read: Georgia Intrastate Crowdfunding

If you are interested in more detail related to your situation it is best to speak with an attorney.

Megan K. Johnson is a business lawyer with over 7 years of experience. She helped champion securities crowdfunding at the local level and worked with the first company to successfully close an equity crowdfunding involving everyday investors. She is a partner at Founders Legal and can be reached at [email protected]

megan

Source: Smartup Legal

Where Can You Pitch Your Idea and in Front of Whom?

For almost 100 years, companies seeking investors have had to be very careful not to “advertise” an offering – or else risk attracting the ire of federal regulators. To be specific, federal law requires all sales of securities to be either registered with the SEC (aka, “publicly traded” like Apple or Facebook) or else qualify for an exemption from registration. The exemption most commonly invoked by young companies is Rule 506 under Regulation D, which allows a company to raise an unlimited amount of money from high net-worth individuals, so long as the company refrains from engaging in “general solicitation.”

What is a high net-worth individual?

A high net-worth individual – also known as an “angel” or “accredited” investor – makes at least $200,000 in annual income or has at least $1 million in net worth (not including primary residence). Basically, these folks range in the top 3-5% of the American public, and (until very recently) they have been the only class of investor eligible to invest in young companies. However, because of the ban on general solicitation, an entrepreneur essentially had to have a pre-existing network of rich uncles in order to make an offering of securities under Rule 506 because of tight restrictions around what could be said to the public about a securities offering.

What is general solicitation?

The type of activity covered by “general solicitation” – and therefore forbidden by companies relying on Rule 506 – includes the following:

• Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; and

• Any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

In short, because young companies have not been permitted to broadcast news of a securities offering (even to “high net-worth individuals”), the safe course until very recently was to limit a young company’s investor base to friends and family, or to those with whom the entrepreneur has a pre-existing relationship.

How Did Companies Pitch Without Violating the Ban on General Solicitation?

Although entrepreneurs (and angel groups) have not always followed the letter of the law, the safest route for a pitch event involving members of the general public was a “demo day” – or a product focused presentation that omits any reference to a capital raise, funding need, investment opportunity, etc. This means no business plans, financial projections, growth rates, etc.

The only time an investor could truly pitch an investment opportunity was in a room of exclusively accredited investors that were previously known to the entrepreneur or event organizer.

 

If you are interested in more detail related to your situation it is best to speak with an attorney.

Megan K. Johnson is a business lawyer with over 7 years of experience. She helped champion securities crowdfunding at the local level and worked with the first company to successfully close an equity crowdfunding involving everyday investors. She is a partner at Founders Legal and can be reached at [email protected]

megan

Source: Smartup Legal

How Can I Prove I Am Patent Pending for a Provisional Patent?

In the US, provisional patent applications are kept as confidential documents, away from public availability. There is no publically accessible database in which you can search or verify provisional patent filings. This is to protect and preserve your rights while your product is still in the beta/development phase. It also allows you to let the provisional patent expire without having lost your patent rights since the subject matter of the provisional was never published.

If investors ask for proof, simply show them the records of your provisional application, which includes a filing receipt. Be sure that the disclosure is done under a Non-Disclosure Agreement. About 2-4 weeks after you file your provisional patent application, you will receive an official notice from the USPTO. You can also show this Official Notice to investors.

In the mean-time, you need to have virtual patent marking putting the public on notice that you are patent pending and, if you are selling your product, in your product packaging materials, you should reference your virtual patent marking that you should place on your website immediately. If cost is an issue, please let us know and we will give you this product at a discounted rate.

When you file your US non-provisional, you will reference your US provisional Patent Application No. to claim priority. During the filing, your attorney will submit a request for the USPTO to send a copy of the provisional patent application to the International Bureau.

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If you are interested in more detail related to your situation it is best to speak with an attorney.

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

Source: Smartup Legal