Frequently Asked Questions by Entrepreneurs
What is Syndicate Path?
Syndicate Path is a financial technology company that provides all the services required for small business owners and entrepreneurs to gain the capital they need on their own terms with the market differentiating core value that all properly-operated funding campaigns will be 100% successful.
What will you do for me?
What Syndicate Path delivers is our judgment based on decades of dealing with small businesses seeking an infusion of capital to grow. Crowdfunding is just a means to that end. Crowdfunding is a process that is intended to end up with a check in your hand. The big questions we are going to answer with you are 1) what does the investment look like? and, 2) how best to make the offering successful by approaching it intelligently in collaboration with the advertising agency tasked with selling it?
I think the most practical thing we provide for you is a good measure of hand-holding. We appreciate that like every other business person pondering this same decision, there is a lot that you don’t know. We know a lot about finance and crowdfunding and will expect your questions along the way.
The laws that allowed, only in the last few years, business owners and entrepreneurs to directly solicit investment without going through an expensive and long-term process of an Initial Public Offering managed by expensive broker-dealers, who, to their credit, will sell out your investor offer and take an average of 16%. Unfortunately, there’s not enough money in offers seeking less than about $10 million to get the attention of these investment sales professionals. The new laws mean you don’t need to use them.
However, your investment offer still needs to be sold. That’s where we come in. Though there are many places where you can post an offer to investors, none of the registered portals will make the effort to sell the offer for you. They will post it and you can “hope they will come”. Hope is not a plan. There are some 70 such portals licensed in this country. About 20 are actually operating and three are making money. None, though, have been helping businesses raise capital as long as we have.
We will help the company to structure the financing terms that it will offer to investors. Our goal will be to deliver terms that investors will find attractive while also providing a reasonable cost for the capital provided. b) We will prepare the term sheet and all other documents necessary for the offering to proceed. We will help the company prepare and file its Federal Reg. CF Form C filing. The real value we supply here is helping you to decide on the terms of the offering. At the same time, we want to create an investment that investors will consider because they are easy to understand and also provide investors with a legitimate, competitive ROI.
What else do you do?
Once the terms sheet is complete, we will prepare and file the rest of the paperwork. Obviously, you will be supplying information about your company, we will be relying on you to supply what we need. We see our assignment as helping to prepare everything necessary to hand it over to the marketing agency to move forward.
We will work closely with the advertising agency engaged by the company to manage the advertising campaign for the offering. We will review all advertising materials for regulatory compliance.
There is a difference between selling products and selling investments that not all advertising agencies appreciate. There are specific rules governing what you can say, cannot say, and what you must say in each ad. If the agency gets too close to the line, the compliance person at the portal might reject it. There will also be questions from investors once the campaign goes live. Written responses will need to be drafted or reviewed in real-time. I am always available when a prospect waiving a check says that his lawyer has questions. That happens more than you might think and I am always happy to respond quickly.
We will be available to assist the company through the testing period and thereafter if needed The testing the waters period is 30-60 days before the offering goes live. During this period the agency pretests various advertising messages to see what works. These are also restricted in content by the SEC and must send potential investors back to the portal. During this period there are frequent re-writes and new copy. Each new ad requires portal approval and they will insist on my approval first.
We will introduce the company to a suitable Reg. CF funding portal and other vendors that the company may need. The company will be responsible for all out-of-pocket expenses required.
There are several portals that we would advise you to avoid, based upon our own observations and complaints we have heard from people who tried to raise money on those portals and failed. In too many cases what they advertised was not delivered.
Do investors pledge the money and once the raise has been met those pledges are then converted into payments /investments?
Money is committed (deposited in escrow) by the investors until the issue is closed (the required amount is raised) and is then recorded with the appropriate certificates and documents returned to the investors. If an issue does not close, the committed funds are returned to the investors.
What if a pledge is defaulted on prior to funding?
The money must be transferred to an escrow account until the issue is closed or not, there is no chance of a pledge failing.
Is this legal? How does the corporate legal structure look? S Corp, LLC, etc.?
Syndication is legal in all jurisdictions and subject to the jurisdiction’s requirements concerning both real property and securities as well as Federal regulation from the SEC. These securities are sold under the Regulation D exemption of the 1933 Securities Act which makes available issues to verified accredited investors. The SEC furnishes guidelines on what constitutes such accreditation at this link.
Do I have to be an accredited investor or licensed in any way?
No to both. Depending upon the terms we establish for you, some or all of the investors may need to be accredited.