The SAFE (“Simple Agreement for Future Equity”) construct is a security and not a true note, as it has a conversion feature that the SEC has decided makes the SAFE a security – with all the attending disclosure and registration issues and requirements. The new SEC Final Rule 33-10884 specifically mentions SAFEs as being eligible for trading and sale for registration-exempt Regulation Crowdfunding (“CF”) offerings with a new limit of $5,000,000 being attainable in any 12-month period. These come with important caveats that require the issuer to know exactly what they are getting themselves into and what the new rules mean (get good legal advice before you get started regarding the new compliance issues). If you are considering a SAFE transaction, remember simple is often better than sexy. Every SAFE transaction requires an additional underwriting review and analysis to determine rights, risk value, control, dilution and trigger events in terms of the SAFE being compared to something easier to understand (i.e.: more common like preferred equity securities, convertible debentures or notes with attached warrants) Every transaction starts with understanding the capital market investment preferences and potential structures and securities the capital market investors may be willing to underwrite before you make final determinations. Feel free to contact us to discuss putting your transaction into the INVIZEN Business Accelerator Program as part of the ongoing services we provide to small and medium sized issuers and commercial real estate developers.
The INVIZEN Step-Up Business Accelerator Program
The INVIZEN Step-Up Business Accelerator Program is designed to support entrepreneurs, commercial real estate developers and other business sponsors to create the necessary conditions to enable them to maximize the opportunity for rapid growth and raising capital in a series of defined steps (hence the term, “Step-Up”). The changes in the rules and regulations owing to the securities industry by the SEC have conspired to create an unprecedented opportunity for these sponsors to undertake an accelerated program of growth and capital financing access. The mission of The INVIZEN Platform is to be the catalyst to achieving these goals thru our exclusive suite of programs and services.
Regulation Crowdfunding (“CF”): The First Step
The INVIZEN Business Accelerator’s initial focus for the sponsor is to complete the tasking necessary to qualify and execute a registration-exempt securities offering pursuant to the Regulation Crowdfunding exemption for the $5 million limitation. These funds are the spark that powers the entirety of the rest of the growth program and access to future capital financing. The changes created the new Rule 206 and Rule 241 that have the potential to create compliance issues for everything from what you say to even a business plan submitted to a funding provider. The INVIZEN Business Accelerator Program captures the essence of these requirements.
The Clear Path Forward – Before & After the Regulation CF Offering
The Accelerator approach includes a comprehensive package of services and program opportunities designed to quickly prepare the sponsor for the capital market process, create pre-offering investment interest in the pending issue, then select the resulting offering exemption based upon market response. This could maximize the opportunity for a successful outcome and clear path forward.
The next step outcome goal is qualifying the business or project for a Regulation A Tier I or Tier II registration-exempt securities offering. The Regulation A offering requires the value creation steps proceed to the threshold of commencing actual asset Acquisition, Development & Construction (“ADC”) activities. When successfully implemented, achieving this state of readiness creates a potential valuation point in the lifecycle of the business or project that can be correlated to capital market investment preferences to support the offering valuation. The INVIZEN Business Accelerator provides the component investor portal information center (known as the “Digital Investment Information Portal”) where all of the due diligence documents, exhibits and information supporting the next offering are lodged in one convenient, easy-to-navigate place that can be tracked as to when, who and what was accessed for the record. The issues owing to the concept of “integration” – as the term is applied in the securities regulations – must be carefully considered by the sponsor and the sponsor’s legal advisor(s). The resulting documentation has to provide full disclosure of financial and non-financial matters.
The Next Step – Post-ADC or More ADC Financing?
The next step in the process is determining what the growth requirements of the business or project will reasonably require in light of the rules and regulations regarding capital financing market access. The SEC rule changes provide a new level of potential opportunity to effectively reduce the cost of capital, eliminate the reliance upon debt financing to create investment leverage, and create potentially powerful investment outcomes for the benefit of the sponsor, the investing-public and the resulting business operations. This requires careful attention to the attending issues, regulatory requirements and emerging capital market investment preferences. All of these issues are part of the overall systemic approach of the Business Accelerator.
Exit Scenario Support
The Regulation D offering approach is the expected outcome capital financing event that can be structured to serve as the final exit opportunity and profit-taking opportunity owing to a given project or business (typically thru the Rule 506(c) registration exemption. The Business Accelerator services program supports these securities offerings and is also the exit point in which the Business Accelerator typically supports a given sponsor. To find out more about the INVIZEN Step-Up Business Accelerator Program please contact our offices.