Louis Bevilacqua is the co-founder, president and general counsel of Digital Offering, a merchant bank focused on partnering within investing in high-quality growth companies. He is also a member and founder of boutique corporate and securities law firm Bevilacqua PLLC, and was previously a partner at Pillsbury Winthrop Shaw Pittman LLP and Thelen LLP. He has vast experience representing issuers in public offerings and private placement of securities, Exchange Act compliance, angel and venture capital financing and other areas of equity and debt financing.
Mr. Bevilacqua is a featured speaker at the Crowdfunding Conference 2016 — a forum for networking and discussion about raising capital in the digital era. Happening on Oct. 6-7 in New York, The Dealflow event features more than 100 of the most influential investors and dealmakers in the industry. Mr. Bevilacqua will speak on the benefits of Regulation A+ bridge financing, including:
- Types of bridge financing using crowdfunding, Rule 506(c) or institutional capital;
- Understanding deal terms including equity and convertibles, discounts, interest rates, registration rights, and MFN clauses;
- Sources of Regulation A+ bridge capital: and
- Timelines for getting your deal done.
“Being on the cutting edge of things is important to me,” Mr. Bevilacqua said.
Regulation A+ is most definitely cutting edge, and Mr. Bevilacqua said good companies agree, as many are trying to go public through the process.
But to do so effectively they need capital in the range of $300,000-$500,000.
Mr. Bevilacqua said most issuers planning a Regulation A offering will raise some capital in a private placement, whether that be a traditional private placement under 506(b) or an advertised private placement under 506 (c), before its Regulation A offering.
Investors are finding terms much more favorable than Mr. Bevilacqua initially thought. In an article he wrote last December he suggested issuers could offer discounts of 15 percent to the Regulation A offering price, but since he has seen much larger percentages, including one of 60 percent. Interest rates have been just as surprising, topping out at 15 percent.
That combination of high interest rates and deep Regulation A price discounts are a strong incentive for investors to participate in bridge financing, Mr. Bevilacqua said. Entrepreneurs find it worthwhile to forgo the higher interest rate and deeper discount in exchange for that crucial bridge money.
Some investors request deadlines be included requiring the issuer to undertake the offering within a specified time frame or face penalties such as additional interest or conversions. Others could ask for a most favored nations clause or sale premium which gives them the right to upgrade to better terms if the issuer undertakes another private placement on better terms. Should the issuer be sold before the Regulation A offering, such an investor could receive a multiple of their investment amount.
Regulation A+ companies need a financial adviser who can do the middle work in exchange for equity at a low valuation. Those advisers look for good companies with quality management teams and secure them loans of up to $500,000. They help put together a marketing team and identify other personnel the company needs at this stage.
“You’re in the process, making sure it executes,” Mr. Bevilacqua said.
Equity crowdfunding is one way people will bridge the gap, Mr. Bevilacqua said. Once paperwork is filed with the SEC, the deal is posted on a funding portal run by a broker-dealer or FINRA-registered body.
“They can advertise and push traffic to a portal, both accredited and non-accredited investors,” Mr. Bevilacqua said. “This opens up the possible pool of investors.”
Mr. Bevilacqua said a new tool helps the registration process.
“I licensed the iDisclose software because I think it will be a great tool to help organize the process of filing the Form C. Some companies are prepared, but others require a little back and forth and it gets expensive.
“It’s a great tool and it will help my clients.”