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Eight days ago, the fundraising scene was changed when the ban on general solicitation was lifted. For the first time in eighty years, small businesses can now raise funds publicly. Under the new 506c rule, companies who file Form D with the SEC can solicit to the general public. However, no one is restricted to filing Form D if they want to raise money. There is the option of doing it the old fashion way!
Here at Tech-Rx, we are sticking to our time-tested and trusted 506b. There are several reasons we are not jumping the boat, the chief reason being that the alternative is quite onerous. Our first turn-off with Title II of the JOBS Act is that companies are required to take dramatic steps to verify investor accreditation. Investors in 506c deals will need to provide private documents such as tax returns or broker forms to companies they are interested in supporting in order to prove their accredited investor status. I don’t know about you but I try not to make it a habit to release such private information, especially with no guarantee of privacy. (Does anyone else smell unwarranted government intrusion into personal matters?)Our second turnoff is from the standpoint of the company. Companies are required to submit details to the SEC 15 days prior to general solicitation. Do you know anyone who has their presentation materials ready two weeks in advance? It is unheard of!
Lastly, failure to follow strict protocol will result in a one year ban from fundraising. In other words, certain death. A year is a long time in the early stages of a company and a year without funding is even longer.
Amidst all of the craziness of the new rules of engagement, we want to assure you that Tech-Rx is sticking to the traditional methods of fundraising through our accredited investor network.
What are your thoughts on general solicitation? Have you ran across any issues with the new rules?
-Steve Hogan, Managing Partner, Tech-Rx
We get it. Pitching is hard. However, some of us get so worked up about selling their company that we forget the very essential elements to successful pitching, such as knowing your audience! Below are a few unbreakable rules when it comes to pitching.
Know your audience. At networking events, there are usually a number of investors, employees, competitors and advisors. Know who you are pitching and tailor your pitch specifically to your listeners. Trying to pitch each one with the same story can become incredibly long-winded, which brings us to our next point.
Keep it short. Never underestimate the simplicity of the elevator pitch. Stick to less than 90 seconds. By doing this, you lessen the risk of rattling off irrelevant details that are bound to put your audience to sleep! But you know what is likely to sustain their interest? A good story.
Tell a story. Sharing your company story shows that you are personally connected to the problem you are looking to solve. Not only does it show a personal connection but it also demonstrates that you are the right person for the job.
Are there other rules that you pitch by? Or even better, are there rules that you refrain from?
-Nikki Griggs, Business and Marketing Associate, Tech-Rx
The Wall Street Journal recently posted an article on South Korea’s startup scene. While the U.S. startup scene is experiencing a slowdown, South Korea is one place that is experiencing significant growth. The number of funds raised in the U.S. has declined 34% from last year. In contrast, South Korean venture capital firms are experiencing an increase. The number of Korean startups has nearly doubled to 28,193 in 2012 from just 15,401 in 2008.
What does this mean? While the article points to youth unemployment near the end, we wonder otherwise. Does the slight decrease in U.S. venture capital funds and the rapid increase of South Korean venture capital funds indicate a drop in innovation in the U.S.? Or is it possible that this is related to consumer confidence? It could very well be a combination of the two. In South Korea, we see consumer confidence at a level of 104 and trending upward in South Korea, consumer confidence in the U.S. is trending downward at 78. Not to mention all unending cover stories of innovation in America nearing its end.
Clearly there are other factors that make up South Korea’s current success that may have more impact that South Korea’s success itself.
Does South Korea’s startup boom have bigger implications that we think? What other attributes do you think affect South Korea’s startup scene?
-Steve Hogan, Managing Partner, Tech-Rx