At WealthForge, we seek to bring greater efficiency to the private capital marketplace. Every day we work with issuers and sponsors who are raising capital, and with advisors and institutions who seek differentiated, pre-vetted, and compliant direct alternative investment opportunities for their clients.
So it should come as no surprise that when it came time to raise additional capital to help fund the next stage of growth for our business, we turned to the industry leading platform that we know best.
In 2012, Congress passed the Jumpstart Our Business Startups (JOBS) Act to help stimulate the economic and job creation engine of small business. Rule 506(c) became effective in September 2013, updating Rule 506 by allowing general solicitation.
As a result, under Rule 506(c), a company like WealthForge can freely broadcast to the world that we are currently raising up to $2.5 million in a convertible note offering (see what I did there?).
One of the most interesting features of our convertible note offering is that our lead investor, New Richmond Ventures (NRV) has agreed to set up and manage a special purpose entity (NRV-WF III) that will invest directly into our convertible note offering. An investment into NRV-WF III provides benefits to individual investors that they would not receive on their own. For example, they receive the benefit of a fiduciary manager of the entity, board representation, and enhanced investor rights including anti-dilution provisions. For an issuer like WealthForge, NRV-WF III provides a single entry on our cap table which streamlines our ownership structure as we look to secure institutional Series B funding in the near future. The full details of the NRV-WF III offering are available here.
The ability to publicly advertise a private offering is a powerful tool for companies raising capital. However, it does come with several important responsibilities. Most well-known, is the additional obligation it creates for issuers to take reasonable steps to verify that all purchasers are accredited investors. However, an issuer, even one who is exempt from the registration requirements, still acts as a securities broker and must meet all of the relevant federal and state regulations.
Historically, this has left issuers in the tenuous position of having to either run their private securities offering on their own - hoping they don’t inadvertently run afoul of the myriad unique state and federal securities regulations - or engage the relatively expensive services of a registered broker-dealer intermediary. Our research into the 2015 Form-D filings for successful Reg-D capital raisers, indicates that less than 10% of the capital raised by direct issuers, raising less than $100 million and not in a fund structure, was raised through a broker-dealer intermediary. As the benefits of using a registered intermediary are clear, we can only assume that cost has been the primary issue.
Today, all that has changed. Our platform makes it easy for an issuer to take advantage of the capital formation benefits of the JOBS Act, and the regulatory compliance of a registered broker-dealer intermediary in a cost-effective manner. The WealthForge platform solves these common problems for issuers:
- Issuer and offering due-diligence that signals to your investors that a registered and regulated securities broker stands behind your offering
- A consistent, standardized presentation of offering materials to investors with an audit trail of what was provided
- Administrative ease in tracking investor status including who has created a user account, logged in, and their investment status
- Online investment processing that is efficient and secure, with an audit trail of what was signed, by whom, and when
- Investor verification including accreditation, suitability, and anti-money laundering protection
Additionally, we are marketing our own convertible note offering to the WealthForge Network. The Network is our solution to our issuer-clients' desire to be able to leverage our award-winning platform to reach a broader network of investors. Instead of turning to retail crowdfunding, we have assembled a Network of financial professionals, including financial advisors, broker-dealers, registered investment advisors, family office representatives and others who are the trusted advisor to their clients: the accredited investor.
Through the power of The WealthForge Network, we are able to offer these advisors access to a vetted, compliance approved selection of direct alternative investment opportunities that may be attractive to their clients who are seeking the diversification benefits of alternative investments without the layers of fees associated with fund-of-funds, or the “2 & 20” hedge fund fee structure.
These are exciting times for WealthForge, and the opportunity to walk a mile in our issuer-clients’ shoes by leveraging our own platform to support our capital raise has been a great learning experience. I hope you will consider joining us, because at WealthForge, we believe that where capital goes, progress follows. Our team is excited to work with all of our issuer and advisor clients who are helping capital flow to the best opportunities, which in turn creates exponential benefits for us all.
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Disclaimer: WealthForge provides this information to our clients and other friends for educational purposes only. It should not be construed or relied upon as legal advice. Private securities offerings may have a long holding period, be illiquid, and contain a high degree of risk. Investors must be able to afford the loss of all of their principal.