CHOOSING THE RIGHT INVESTORS

FOR YOUR BUSINESS

Prepared Specifically For: Minority ATC (Access to Capital), Inc.March 10th, 2016Dar’shun Kendrick, Esq./MBAKendrick Law Practice, LLC

About Me Started Kendrick Law Practice in

January of 2010 Boutique law firm focused on private

securities (legal compliance for companies raising private capital)

2 B.As (Oglethorpe University), J.D. (University of GA), M.B.A. (Kennesaw State)

FINRA Non-Public Arbitrator Follow me on social media

DISCLAIMER:This presentation does not create an attorney-client relationship nor will specific legal advice be given. Furthermore, this presentation does NOT include all the laws, rules and regulations required for a proper and legal private placement offering. Please consult a knowledgeable securities attorney before making a solicitation to an investor.

The Numbers• $17.B in angel investing in

2009 to 57,255 businesses• $4B in VC funding in 1982

Almost $300B in 2007• $1.6 T in private equity overall

from 2000-2009• Quarter before last saw MOST

private equity investment in a quarter since early 2000s

What is private capital?

• Hedge funds• Venture Capital• Leveraged Buy outs• Angel investors• F & F• Convertible notes

What is NOT private capital?• Rewards based crowdfunding• Grants• Publicly held companies• Traditional loans

Ways to Raise $$ Through an Exemption

• Mini-IPO (Regulation A+) of $20-$50MM

• Regulation D (3 rules)• Equity based crowdfunding

Not all investors are created equal!

2 Important, Non Exclusive Factors

RE: InvestorsType of Capital Raise

• Some exemptions will limit the NUMBER of “unaccredited investors” you can raise money from

• Some exemptions will limit the WAY (no “general solicitation”) in which you raise

• Some exemptions will limit RE-SALE in and of the secondary market

• Some exemptions will limit the AMOUNT of money raise

• Some exemptions will limit the LOCATION of those you raise money from

Type of Relationship• Rule of Thumb: If you wouldn’t

have dinner with the investor, don’t go into business with them.

Types of Investors• Institutional Investors (Morgan

Stanley, SunTrust Rob Humph, Citibank, etc.) [$100M +]

• Venture Capital Firms [$1M+; 10 year partnership; high return and usually “high growth” industries and preferred equity rights]

• Angel investors [$2,500+; lesser restrictions on high growth and return; typically individuals or small groups]

So CAN YOU and SHOULD YOU just start raising money (in exchange for equity) from

investors, including family and friends?

PIECE OF ADVICEHire a knowledgeable securities attorney who will be able to guide you through the LEGAL COMPLIANCE and BUSINESS

DECISIONS of who to go to dinner with for 6 months- 1 year.

Pitfalls• Corporate form set up has to be specific and in a certain order• “Time triggers” for solicitation• Agreements that you will need to have to investors (limit on the secondary

market, unregistered security disclaimer, risk disclaimer, PPM, etc.)• Financials required to be provided to investors• Founder protections to be discussed (Dilution and bad math caused a company

who thought they owned 66% of a company to go down to less than 10%)• M & A strategy needed for an exemption that allows for “general advertising”

under a Reg. D exemption• State “blue sky laws” requirements• REMINDER: The S.E.C. can recommend CRIMINAL PROSECUTION to the

Department of Justice, like the I.R.S.

Thank you!Dar’shun Kendrick, Esq./MBAKendrick Law Practicewww.kendricklaw.net(678) 739-8109Find us on social media