$1 million to $5 million equity investment for operating companies
Whitehall uses the SEC authorized REGULATION CF which allows eligible companies to raise up to $5 million over a 12-month period. The primary benefit of using REGULATION CF is that it allows a company to make a general solicitation to prospective investors to purchase shares in their offering.
If a company is qualified under this regulation, the company can conduct a public offering to attract investors to invest in the offering. These offerings are open to both accredited and non-accredited investors. Most public offerings succeed if the offering company prices its offering fairly and provides a good exit strategy for investors to recoup their investment.
A five-minute phone call with a Whitehall partner can tell you if your company meets the requirements established by the SEC.
The Requited Elements
Investors view private placements differently than the company that is seeking the investment. The key elements that investors look for are whether their investment is protected while invested, whether the company has a plan for the investor to exit the investment, and how the investor makes money.
The Keys To a Successful Private Placement
Real Estate Works
If the private placement was an investment in a real estate parcel. The private placement could call the deed to be held by both the sponsor and the investors. There could be an agreement to sell the real estate within a set number of years and a description of how the sales proceeds are to be divided. These types of private placements satisfy investors on all f their key issues.
Future IPOs A Great Pathway
If the private placement was to fund the expansion and grow profits of an emerging growth company, and the company intended to go public, this is a good start. Investors have an excellent exit strategy in any future IPO. Investor protection during the growth cycle can be provided by issuing private placement investors preferred stock, convertible into common stock in an IPO. In the event the IPO did not occur, the private placement investors get paid before any common stockholders. Preferred stock is not perfect but will generally tips the scales in favor of investing.
No Investor Interest
The most difficult type of private placement to get funded is one that expands a company and increases profits but without an IPO exit. Investors fear their investment could be trapped in a privately held company. The company owners build a company from scratch and often invest a lifetime of work building up the business. Investors fear being trapped in a closely held privately owned company. It is rare that a private placement into this type of company would ever get funded, outside of friends and family.