A new business requires money – and seemingly, lots of it. In addition to using their own resources, owners have two options to raise capital from others:
Debt
Equity
Each type has its own issues, but they share one potential barrier: the securities laws at both the federal and state levels. The general rule is that all public offerings involving any type of capital raise, whether equity or debt, must be registered, a process too costly for most new businesses.
A host of exemptions from registration are available, however. But relying on the exemptions typically requires planning and filings with federal and state securities regulators, even potentially for raises from “family and friends” and always for raises from “angels” or venture capitalists.
And the rules on using crowdfunding to raise money can be baffling to the uninitiated.
The range of exemptions from registration is broad but choosing and applying the best one for your situation require experience and judgment, which we have.
One last word. You may think it not important to consider securities law compliance at the beginning of your business, but this mindset is short-sighted. Even if the SEC or the Texas Securities Board does not “catch” you, you run the risk of subsequent investors like angels and VC asking tough questions as to why you did not comply with the securities laws in previous capital raises. It could result in a far less favorable deal for you from that investor group or a complete failure of a deal.
Services we provide in this area, include
- Closing deals with various investor types and groups
- Drafting and negotiating promissory notes and other loan agreements
- The services listed under Formations and Start-Ups to focus on preparing a company to raise capital and proper corporate governance
- Responding to due diligence requests from potential investors and lenders
- Drafting private placement memoranda
- Crowdfunding advice for raising capital