Are you struggling with a capital raising plan? Whether you’re a small, large, or mid-size company, Raising Capital 101 can help you navigate the intricacies of raising capital in today’s unpredictable and often volatile business environment. From the full life-cycle of the capital raise to the obligations you’ll face after the raise concludes, each episode will feature practical and easily digestible insights, advice,and tips from the foremost experts in the industry.
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In this episode of Raising Capital 101, the KVCF team provides a brief overview of who we are and what our team hopes to educate our audience on with regards to capital raising – including the whys, hows, and various technical aspects that you’ll need to navigate.
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Welcome to the inaugural podcast, Raising Capital 101. We’ve got three esteemed colleagues here, Rhys James, who’s on the phone, and Mike Bevel and John Watson, myself, Tom Voekler. We are hoping to take you through some of the interesting aspects of raising capital from startups all the way to established companies. There are a lot of footfalls, nuances, things that we can explore in depth. Hopefully we’ll be able to take you through the whole life cycle of capital raising from the startup to the established, and we’ll spend a lot of time focused on real estate companies and some of the nuances of that.
Yeah, this is Mike Beville, associate here at KVCF. I think our goal is to view something that’s typically viewed through a business prism, capital raising and deploying capital, and executing business plans, and apply a legal viewpoint to it. The nuances of who you can raise money from, how you do it, what channels are available, best ways for the business to ultimately reach those goals, which sometimes isn’t capital raising, but a lot of times it is. So we want to dive deep into how to actually execute it.
Yeah, I think the interesting part is we get calls daily from people who either have started the capital raising process through friends and family, realize that they’ve now gone into an area that is heavily regulated. Surprisingly, people do not think that small fundraising; you go to your friends, you go to your country club, they don’t think that there are reporting requirements or exemption requirements or filing requirements. But amazingly, regardless of the size of the offering, you’re subject to the same securities laws, acts rules, and we’ll be running through some of those.
We’ll introduce to the Securities Act, the Exchange Act, some fund advisor issues. When you get more sophisticated, the more deals you do, obviously the greater scrutiny there is on your overall operation, whether you are now a fundraiser or whether you’re operating a business or operating a real estate company. I think the hardship is that there is a cost to raising capital, and we as a firm try to do that as efficiently as possible. But whether you’re doing a $1 million raise or 50 million or 100 million raise, sometimes the cost can be the same.
Right. And like Tom said, sometimes clients come in and they’ve raised some money from their friends, family, country club friends, and want to take it to the next step. And here at KVCF, our clients run the gamut from public companies to the person I just described. And not surprisingly, each one of those people along the way are subject to different regulations, whether that’s on how they raise money or how they can use the money, many, many things that we commonly find that people are not thinking of, which is a natural thing. Which again, is why we’re hoping this podcast is to place some bread crumbs for people to start paying attention to. And we can speak to all the different types of things that you may run into, and you may not want to run into those things. And that’s important to realize when you are raising capital.
Yeah, I think one of the interesting things that we deal with is that our clients have a fundamental thing that they are good at. Whether that’s operating a business, whether that’s finding real estate, operating real estate, they are not necessarily good at raising capital, or maybe they are, but they don’t understand what it takes to raise capital, and it’s usually a secondary aspect of their business. And so we have to come in and educate on that process and make sure that it is done correctly. One of my conferences, about 10 years ago, the lady by the name of Denise Crawford was the securities commissioner in Texas, and she came up to speak and said, “Here in Texas, we as security commissioners are licensed to carry a gun, and we will come visit you if you do something contrary to our rules.” Kind of eye opening to people to realize that securities laws have some teeth and running a foul of, securities laws can preempt you from ever raising capital or at least severely curtail your ability to raise capital if not done correctly, and can run into civil and criminal repercussions.
We here in Virginia, have a very stringent commission, does like to make sure things are done correctly. And we’ve had clients that we’ve had to help through issues with the State Corporation Commission here in Virginia. We help people avoid some of those nuances. People don’t realize state administrators are looking at websites. They have searches done on filings that are done to see if you are in their state. They very often like to look at any type of public, I wouldn’t call it advertising necessarily. People don’t realize that it’s advertising on social media, talking about what they’re doing. It’s not too hard to then immediately do a search and see if you’ve complied with the state’s laws.
Yeah. And I think, Tom, you just raised a couple of important teasers there of when you’re raising money, maybe not shockingly, that if you’re raising money from people in Virginia, people in Georgia, people in Texas, you’re then subject to three separate state legal regimes on what you can and can’t do, what you have to file, who you have to file it with. And then you have the big gorilla in the room like we always joke about the federal government, the SCC, and what you’re required to do with them. Even if you are exempt from some of the bigger filing requirements, there’s still things you need to file with them and the rules you need to follow.
And another point, Tom, you said, if your business is not raising capital, but now you’re raising capital, well what if now a big part of your business is raising capital, then all of a sudden now you’re subject to all different rules of that state commissioners, federal commissioners, semi public, private commissioners. I’m referring to the FINRA Regulators and what you can and can’t do. So I mean, it’s a labyrinth of things that you have to think about.
So our hope is to give people a little bit of a primer of what to expect, what to ask, whether that’s going to a broker dealer to promote your sales effort, whether it’s by yourself, just so you can know what questions to ask, know what potentially file, depending on which way you’re going, private, public offerings, whether it’s intrastate or interstate. There’s different rules depending on, like Mike said, you go outside of a couple of states, now you’re in the federal regime, but you still are probably subject to the state regulations, or you have to make sure you’re exempt and what do you need to do to make sure you are exempt in those states.
So hopefully we’ll be able to provide some insight into some of the more interesting topics and some of the more complex topics we hope to go as in depth as people want. And again, it’s all about efficiency, making sure that people can conduct the primary business that they’re in. Fundraising should never become a primary business unless that’s the end objective. But it does seem to surprise our clients by how much time is taken in complying correctly with a sales process while that was not their original intent.
Yeah, I mean, I think you summed it up well. And also I think we did a great job of trying to appropriately say how complicated fundraising can be, but there’s a reason why this is capital raising 101 is it’s our job to make it less complicated, more streamlined. And I think that’s possible, and I think clearly our clients and everyone in the industry has that same goal. And I think we just want to talk about it more.
We look forward to hearing from you guys. Give us ideas of what you want to hear. Next topics will probably be a little introductory on private and public fundraising, a little bit of the different regulatory regimes, and then we’ll go probably more in depth from there. Welcome to Raising Capital 101.
This podcast is provided by KVCF, PLC for informational purposes only and should not be considered legal or investment advice. The transmission of the information in the podcast is not intended to establish, and the receipt of such information does not establish or constitute an attorney-client relationship. The listener should not act on information contained in any of the materials on this podcast without first consulting legal counsel. The podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.