How to market a Reg A+

Of all JOBS Act exemptions, the Reg A+ securities exemption is one of the most well-known and popular.?

Since its inception, this exemption has been used to raise over $5B in growth capital by thousands of early-stage companies, with the market growing rapidly year over year. Often referred to as the pre-IPO financing, there are a lot of perks to a Reg A+, but as with all capital raising, the key is in how you tell your story.?

In this issue of Capital Raising Online, we break down how to think about marketing a Reg A+ offering. And as usual, we will start with some definitions.?

What is a Reg A+ Offering?

The Reg A+ exemption allows issuers to raise up to $75M of capital annually from both accredited and non-accredited investors globally. This can be a valuable source of growth capital, but it can also create other positive opportunities; from tapping into the power of an existing community to building a loyal base of investor-evangelists.?

However, before an issuer can take investment from non-accredited investors, a detailed disclosure document called a Form 1-A Offering Circular must be filed with the SEC and qualified by the SEC.?

This is a formal disclosure document prepared by securities lawyers and typically takes 3-4 months from start to qualification (i.e. being able to raise capital!). It will include everything from an outline of the business plan, background on the company and its founders, as well as two years of audited financial statements.?

Along with the filing of the Form 1-A, issuers will also need to engage a number of service providers to ensure a compliant raise is conducted. Specifically, issuers will need to engage a FINRA-regulated Broker-Dealer who supports AML/KYC checks as well as an SEC-registered transfer agent to manage the share capitalization table (cap table).?

Interested issuers should consult their securities lawyers to ensure compliance with all SEC requirements prior to launching their offering.

Once the Offering Circular has been qualified by the SEC, and the necessary partners have been engaged, issuers need to make sure their “funnel” or overall investment process is optimized for success.?

Building The Funnel?

For those unfamiliar with marketing, the “funnel” is industry jargon for where a potential investor is in the investment process. It spans from the moment a potential investor first indicated interest (a lead) all the way to a closed investment.?

A well-designed funnel is critical to campaign success. While exact estimates vary, most industry professionals will agree that an investor requires at least 7-10 “touches” from an issuer to move all the way down the funnel from lead to a closed investment (assuming they are a well-qualified investor lead). These touches come in the form of everything from press releases and emails to CEO webinars, down to personal phone calls.?

Below we highlight some of the different lead generation or “funnel filling” strategies that issuers can deploy. But before we get to that, there are two key points worth highlighting.?

The first is the importance of a streamlined investment process. Issuers will need to spend substantial marketing dollars to both fill their funnel and work investors down their funnel. Ultimately, conversion is the name of the game with online capital raising (even if issuers have their own community!).??

We like to draw on the example of Amazon’s wildly successful “one-click-checkout” offering. People have short attention spans and expect seamless online experiences - investing is no different.?

That is why Issuance Express was developed to offer an industry-leading checkout experience that takes less than 40 seconds for an investor to complete an investment. Issuance also offers a streamlined mobile and desktop-friendly investor experience that allows investors to check out?using Apple Pay, Google Pay, as well as standard payment methods. Overall, using Issuance Express, issuers can meet investors where they are, and offer a more seamless experience, resulting in a more successful capital rais.?

The second point is the importance of sophisticated and consistent communication with investors.?

No investor wants to invest in a static business. It is critical that issuers communicate the potential of the business, which can take the form of drip campaigns and CEO videos, among other “evergreen” content. Issuers also need to communicate how they’re working (and executing!) every week to achieve that potential, and ultimately build the necessary trust to earn an investment.?

From an investor standpoint, these communications typically come in the form of press releases or at a minimum, email updates. Issuers should have their own email CRM (Klayviyo, HubSpot, etc.) and take complete ownership of the relationship with their investors or potential investors.?

Although not the focus of this newsletter, we previously released a newsletter - Why Are Issuers Paying to Build Another Company’s Investor Community - that explained the importance of owning the investor relationship (and not paying to build another company’s community!). We encourage you to give it a read.

To summarize, in order to maximize conversion, and by effect,? capital raised, every lead needs to be properly nurtured and given the investment path of least resistance. From press releases to phone calls, to a rapid checkout process, every effort needs to be made.?

Once the initial investor funnel has been well-architected, issuers need to start filling the funnel with leads while maintaining a close eye on performance to further optimize the flow and audit the marketing partners.?

Filling the Funnel

Assuming an issuer has the right messaging and a strong communications strategy, if their reach is small, their raise will still be limited. This is where marketing comes in, and there are a lot of options to consider. But the critical piece is to always be lead generation focused - impressions don’t mean anything in online capital raising.?

Before diving in, it’s important to note that proper disclosures for any paid marketing efforts are of paramount importance, and issuers should consult their securities counsel to ensure all marketing efforts remain compliant with SEC rules and regulations.?

Paid Marketing?

Paid marketing is a common strategy for a lot of traditional investor relations campaigns for public companies, and when done right, it can be very effective for Reg A+ campaigns as well. Traditional paid marketing is fairly well understood, however, issuers should be looking beyond simply driving traffic to their landing page.?

As noted above, it’s critical to own the communication with potential investors, which means issuers need to encourage investors to enter their funnel (typically by providing their email). This means they need to have proper lead forms on their lander/website to ensure they capture the leads from the traffic that is driven. The leads then need to be nurtured through various informational series to help investors understand the investment narrative/potential.

Other effective lead generation strategies can include offering exclusive information (reports, white papers, etc.) for investors to enter their email, or encouraging investors to sign up for webinars. There are also more direct approaches; marketing agencies can have potential investors complete lead forms indicating interest in the investment opportunity, where issuers only pay for leads that are generated.?

While issuers may think their story has incredible potential, expecting an investor to immediately want to start the investment process after being served an ad is unrealistic. The goal with any paid marketing efforts is to generate leads, and then work those leads through the investment process with consistent communications that demonstrate the potential and build trust.?

Social Media

Much like there are newsletter groups or broker networks, there are also pockets of investors and investing groups across the various social media platforms. This is especially true for Twitter, where there is a very large “FinTwit” community that could serve as a viable source of growth capital.?

While targeting these groups can take a number of different forms, the only surefire way is to engage directly with these people. That is the beauty of Twitter - individuals can generally engage with anyone else (and vice versa). With the ability to accept non-accredited investors, all it takes is one viral post to drive meaningful investment.?

Look no further than Boxabl. They received a shoutout from Elon Musk, and leveraged it to raise millions of dollars into their active Reg A+ offering. It’s a lot of hard work, and an issuer will certainly need to be able to defend their story, but if done right, it can be a low-cost means of generating investor interest.?

Earned Media

If an issuer has a unique story that is newsworthy, obtaining earned media can be an effective way of generating investor interest. This again serves as a form of third-party validation and can be extremely cost-effective. However, not every company is doing something “on trend” that the media will want to cover.?

It’s important to note that not every marketing channel will be right for every issuer. It’s equally important to think critically as to whether a particular strategy is likely to work. If a marketing channel could be effective, or even if there is uncertainty, it is worth trialing before buying.?

Newsletters?

In the online capital-raising industry, there are newsletter groups that have a community of paid subscribers who look to them for investment recommendations. This can get a deal in front of a large group of investors, rapidly, and at a fixed cost (or potentially no cost), and again these newsletters can provide another similar form of third-party validation.?

Whether paid or earned, a newsletter marketing a deal can be an effective means of filling the investor funnel, and with a “recommendation” from the newsletter, investors may even be starting further down the investment funnel (i.e. more than just a lead).??

However, issuers need to understand that paid newsletters are likely to be less effective than earned newsletters, so keep this in mind when considering the potential return on marketing spend.

Direct Outreach?

Although not the standard strategy for a Reg A+, targeting some larger investors (ex. VC funds, institutions, Family Offices, etc.) can be a good strategy to supercharge a raise.??

Direct outreach is the equivalent of a good old-fashioned cold call. With platforms like LinkedIn and the various “LinkedIn Marketing” companies that exist, it’s possible to target high-net-worth investors, angels, family offices, brokers, etc.?

This typically needs to be managed by a third party as the volume of outbound that needs to be sent to get meetings set up is high. But if a founder or CEO can have 15-20 1-on-1 meetings with qualified, interested investors, they should be able to convert those meetings into meaningful investments.

The Missing Piece (Again!)

We shared this detail in our last newsletter on marketing a Reg D 506(c), but it remains equally as important for Reg A+ campaigns:?

True with any capital raise, but especially so with equity crowdfunding, it’s important to create a “why now" incentive, especially with smart, discerning investors.?

Ask yourself: why would someone invest today and risk the business (or broader market)? facing an existential crisis when they could invest in 5 months when the campaign closes, and at the exact same valuation??

From a global pandemic to negative regulatory changes to AI disruption to losing a major competitive edge - these are all risks any discerning investor considers.?

This means issuers need to carefully consider how to create a proper “why now” incentive. From doing tiered closings on the back of achieving major milestones to adding perks for the first X investors to invest Y, finding ways to encourage investment today can be critical to gaining early traction. And of course, these initial inflows can be reinvested into marketing to continue building momentum.?

Capital Raising Online:?Equity Crowdfunding (regulation financings) is the new frontier of capital raising and they are digital-first and democratizing early-stage investing for the masses. Every month we discuss the ever-changing regulation financing industry as it continues to expand. From important developments to critical considerations and insights, we provide an experienced perspective on the industry.?

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