UNDERSTAND KEY POINTS WHEN ADVERTISING FOR INVESTORS
ADVERTISING FOR INVESTORS
One of the most important changes in the Federal Securities Law was enacted in 2014 permitting "you" to advertise for investors.
Regulation D - Rule 506(c) is a new Federal Regulation that allows for the direct advertising and solicitation of investors. In other words, if you comply with the specific requirements of the law you are permitted to advertise for investors. However, remember that the rule mandates specific restrictions and compliance responsibilities and as a result investor solicitation (advertising) must be done in a manner that complies with the law.
Goal: No one can force an investor to write you a check. To successfully raise capital your ultimate goal must be to drive "qualified" leads to a "place" potential investors can be exposed to your "Offering Documents."
Qualified leads: Your likely ad/message will be restricted to less than < 130 characters. We must say something within your 130 character ad that will cause the reader (potential investor) to reach out to you and request more information. As a result, each response provides you with a "qualified" lead. In other words, there is an element in your advertisement that the prospect likes and is now incentivized to read the entire Offering Document.
What's the deal?
To properly educate a prospect to the details of your project takes a great deal of time, hours. You cannot sit down with every potential investor and tell them your story. You need to offer prospects a deal that is financially attractive that can be pitched on a short website landing page and make them "want to" read your investor documents. There are many ways to conceptualize and structure a deal that will create excitement with prospects. Remember, your deal must incentivize the prospect to read your investment documents. Are you thinking of Offering Equity or Debt? Too often, we will have businesses submit to us their Offering Documents that contain an unworkable and unsellable deal. Their Offering is already a non-starter. When we prepare Offering Documents, there is a great deal of information we must collect first before we begin to make suggestions as to possible structures. You will find this is especially true in Real Estate Offerings. We begin by framing the questions for talking points that you will need to consider and address. We then discuss both your thoughts and answers with our recommendations which allow you to make informed choices
Special note: Before we begin to prepare the PPM - Offering Documents, the first item discussed and decided is what are we going to say within the 130 characters that will identify the keywords prospective investors will be "searching" which will sufficiently compel readers to seek more information. That's the secret sauce as they say.
Place: Now that we have the prospect requesting more information; we need to have a "place" for the prospect to access and review all available information about your project. We provide this by creating a website landing page with specialized programming.
We can only solicit investors who first meet the criteria of "accredited" investor" so we must qualify them as an appropriate "accredited" investors before giving them access to the Offering Documents.
We need to provide the prospect with enough information to keep them interested but not information that would violate Federal Securities Laws.
We need to incentivize the investor prospects sufficiently for them to provide us the personal information needed to qualify them as "accredited" investors. In so doing, we can then provide them with the Offering Documents fully informing them of "all material information" about your project and staying in compliance with Regulation D.
Follow up: Once the prospective investor has all the information, a follow-up call from a company officer offers to answer the prospect's remaining questions.
Results: Remember, in this case, the prospects are reaching out to you for more information. Sending your information to prospects that have "qualified" themselves by expressing an interest in key features in your advertisement has a much higher chance of success.
Advertising Cost: The advertising cost should average between $1.50 - $2 per "qualified lead. Dependent on the quality of the project, you might hope for 4% - 6% of those leads to pursue active discussions with you. In each and every case, the prospect willingness to invest will be dependent on how you come across. They must perceive you as honest if they are to write you a check.