Cricca Concierge

In the world of publicly traded stock, there are companies that are known as “transfer agents”. Their purpose is to facilitate transfer of stock ownership from one shareholder to another. It is really record-keeping process, and every non-bank transfer agent must be registered with the SEC. These registration criccarequirements are meant to keep out fly-by-night operations which may disappear with important records of who owns a company.

Investor relations firms also occupy the post-investment space. Rather than acting merely as a conduit for the transfer of securities, investor relations firm focus on communicating with investors. The communication can be something as simple as sending a proxy forms, or something as complex is putting together annual reports are other items for investors.

Crowdfunding is different. With respect to our clients, we’re talking about consumer-facing businesses, which have thousands of customers. These are the companies that successfully raise money using crowdfunding. As a result of those efforts, they all of a sudden have hundreds of shareholders. The fact is that these relatively small companies now have an extra operational hurdle. Plus they still need to activate these new owners as part of their marketing strategy. Even more than during the funding campaign itself, the period post-crowdfunding creates both traps and opportunity. These crowdfunded companies can’t be relegated to choose between a company that merely acts as a transfer agent or produces annual reports.

That is why we introduced Cricca Concierge. We enhance the power of your crowd – the owners of your business – and turn them into something much more than just owners. We turn them into high-frequency, high spending, and evangelical customers. These are the type of people that you want to communicate with often, ensure that they are receiving answers to all the questions, and are encouraged to use their social networks to promote the business. These are also the same people that you want to plan special events around and provide perks that are a natural part of the business. Cricca Concierge provides exactly that service.

We also help navigate secondary markets, transfers of shares, and other things that a traditional transfer agent would do. We also work with you to produce annual reports for your new owners. We do this all through one of the funding portal partners or through a branded website that is only accessible to your owners. We also have live support, both online chat, email and live person via Skype or telephone. Depending on the type of business you have, this type of concierge service is necessary for you to get the true “bang for your buck” that crowdfunding promises.

Our services are primarily directed toward the companies after we’ve helped them raise money, but we also accept a select number of companies that have been crowdfunded without our help. Do not hesitate to contact us regarding your specific needs. Our services are both powerful and flexible.

Jonathan Frutkin
Jonathan Frutkin is CEO of Cricca Funding, LLC. He’s written a new book called “Equity Crowdfunding: Transforming Customers into Loyal Owners” which was published in May, 2013.

An End to the Ban on General Solicitation

The rule of law has long been abandoned – especially when the rule is the Securities and Exchange Commission’s ban general solicitation for private placements. In English (and perhaps the problem is that seldom has there been even an attempt by the SEC and securities lawyers to put this in English), the ban means that a privately held company cannot ask people that don’t already have a “pre-existing business relationship” to invest in their company.

Now, of course, as a percentage of American businesses, the ones that are privately owned (rather than publicly traded) is quite close to 100%. And, frankly, the number of potential investors that these business owners have a pre-existing business relationship is also infinitesimally small. So is it any surprise that there is a complete dearth of investment in these businesses? Almost all of the capital used to grow businesses comes from banks and family members – with a large amount of that capital taking the form of Small Business Administration-backed loans.

However, a host of companies do in fact get investment through private placements with accredited investors – a geeky phrase meaning “raising money from rich people”. Now, of course, in my experience, clients seldom even realize that the ban on general solicitation is strict. They routinely ask friends and family to introduce them to third-parties that may want to invest. Interestingly, these same clients easily understand and internalize that investors must be accredited – put very basically, that the investors have income above $200,000 or assets worth more than $1,000,000.

So why ignore the rule about general solicitation? Because the ban makes no darn sense.

But both Congress and the SEC knew that there was an opportunity to fix a problem that had been created under the old regulatory scheme. The problem? Companies raising money were taking money from non-accredited investors. The “wink-wink” usually included a questionnaire where the investor attested (falsely sometimes) that they were accredited, insulating the company from any claim that the investment was improper.

So, the new rules are this:

1) Companies can “generally solicit” and attempt to raise money from anyone.

2) In exchange, the company really needs to investigate whether or not the investor is accredited. This means looking at tax returns or certifications from accountants and/or lawyers.

The new rule only applies to companies raising money from accredited investors, but it is a pre-cursor to the equity crowdfunded future where even non-accredited investors will be able to get into the action. Maybe now securities lawyers can provide accurate guidance that reflects the real world, where successfully raising money requires meeting new investors and marketing the opportunity to invest in a private company.

Sometimes it takes a few decades, but the law catches up to reality.

 

Jonathan Frutkin
Jonathan Frutkin is CEO of Cricca Funding, LLC. He’s written a new book called “Equity Crowdfunding: Transforming Customers into Loyal Owners” which was published in May, 2013.

It is All About Access

Traveling the country and meeting with business owners (and those who advise them), I ask a simple question. What does a business investor expect that is different than what a customer expects? I almost always get the same answer: discounts. Most people think that owners are expecting to get lower prices on the products they buy. That’s actually not very important to investors at all.

Owners primarily expect two things when they participate in crowdfunding campaigns. The first thing that they expect is access. That means that they’re able to talk to the manager, and business leaders, and give their feedback. They like to be included. Now obviously, that doesn’t mean that each time you want to hire or fire someone, you’re going to be contacting your crowdfunding investors. But it doesn’t hurt to let them know that their opinion matters. Surveys and other feedback loops help reinforce that the investor has access. Having owner loyalty cards is important, just like having actual physical stock certificates. People want to be recognized as owners. That is true when they walk into the business. And it is also true that that people want their ownership status displayed on their social media page and on their physical wall in their home or office.

This leads to the second thing that owners really want. Investors want to be part of something bigger. They want to be involved with their community. Just like people are interested to see themselves on the roll of people were involved in a particular nonprofit charitable fundraising campaign, these investors also want to be recognized and included in the community of people who added to a local business. This creates a huge advantage to the crowdfunded company. Not only do you have a lot of investors who are going to talk about your business, the investors are also letting you speak directly to their followers about how grateful you are to have them as part of your team. It is a double-win. The business brand gets the benefit of a larger network, and the investor’s personal brand is enhanced because of their connection to a local business in the community.

Remember the crowdfunding isn’t just about discounts. It is about access and community. Companies that embrace crowdfunding will be far ahead of their competitors, saving hundreds of thousands on old economy marketing strategies that are less and less effective – strategies like providing coupons and discounts to entice people through the doors.

Jonathan Frutkin
Jonathan Frutkin is an attorney at The Frutkin Law Firm, PLC in Phoenix, AZ. He’s written a new book called “Equity Crowdfunding: Transforming Customers into Loyal Owners” which was published in May, 2013.

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