Leading crowdfunding attorney and vocal Regulation A+ supporter, Kendall Almerico was ready to go on the first day Regulation A+ offerings were allowed to be publicized.
On Friday, Mr. Almerico unveiled BankRoll, a website allowing startup and emerging companies to fundraise from the crowd. Upon SEC review, BankRoll will be able to launch ‘Mini-IPOs’ for his clients.
He said he has been working on BankRoll for more than three years and was waiting to see which of Title III or Title IV would be the first to pass.
Mr. Almerico works with companies considering capital raises to make sure they know what they are getting into should they opt for the mini-IPO.
“The first thing I do is look at their business plan to see what they have budgeted for legal, accounting, and marketing fees,” Mr. Almerico said. “Legal and accounting fees they understand, but marketing fees surprise them.”
With all the industry hype surrounding Regulation A+ combined with recent high profile IPOs like Lending Club and OnDeck, many come thinking they sign some papers and ride the hype straight to the bank.
“No one seems to get the typical IPO,” Mr. Almerico explained.
Using this week’s Fitbit IPO as an example, he said people have no idea the amount of work behind the scenes that goes into such an event. Working with major banks, sending out sales teams, and groundwork in other areas takes place. Because of the players involved such unique events do generate plenty of their own hype, but those behind the scenes efforts play a large role too.
“Mini IPOs have none of that,” Mr. Almerico explained. “A startup is unlikely to have the sales force and big funders behind them. They post the offering on their website. How are people going to find it?”
The answer is you have budget significant marketing funds and be prepared to work very hard.
Whichever route a company chooses, investor networks become incredibly important. In traditional methods, they can be the entire pitch group while in others they use their contacts to screen and recommend various opportunities.
The mini-IPO gives the investor network an interesting twist, thanks to the testing waters provision where companies can gauge interest before moving ahead.
“If you are successful, you can end up with tens of thousands of leads,” Mr. Almerico said.
Like most in the industry, Mr. Almerico said a Regulation A+ offering is not meant for true startups unless they are well funded from the beginning. Filing fees and other costs are out of the reach of most companies.
They are a boon for the everyday investor, he said. While the chances of getting in on the next Facebook are rare, there now is an actual chance of it happening. Oculus, which was purchased by Facebook, provides a timely example of the potential gains small investments can make, he added.
“Until now the general public has never had access to these opportunities,” he explained.
While there is clear excitement about Title IV, the fate of Title III remains unclear. Mr. Almerico noted the SEC has scheduled Title III for final action in the past but has not resolved the issue. The delays may be an attempt to give Congress time to find a solution, he suggested.
Mr. Almerico represents StarShop, a new e-commerce venture where celebrities promote their own products or ones they endorse through short videos. Their roster includes Eli Manning, Paula Abdul, and Rihanna. They will be the first client to offer the mini-IPO.