Digital Technology is Ruining Reg D 506 C


With the Advent of the JOBS Act of 2013 Title III, the syndication market has gotten flooded overnight with every Tom, Dick & Harry that had a brilliant idea for a new business or a real estate pipe-dream of creating the next Mel Simon empire. Marry that with the ability to utilize digital technology to mass-market an offering to millions of prospective investors and you’ve now created the perfect storm for disaster. An eclectic cacophony of newbies and seasoned pros.

Reg D 506 c, at face value is revolutionary. Consider the previous 80 years, the Securities Act of 1933 forbade the advertising of any security albeit to accredited investors or not. This industry changing exemption exploded with opportunity to now advertise your offering to anyone in the universe with the caveat of only accepting funding from accredited investors (now exceeding 11M). Group that with the termination of the requisite traditional PPM’s lowering the cost of admission and you have a whole new dynamic to this old-boys club cottage industry.

Now, add digital technology to this equation and you have a brand new 2021 ball game. Anyone who is half-way savvy with technology can now create Landing Pages to be hosted on social media getting tens of thousands of curious eyes taking a peek. Curious, yes….Serious, no. For some strange reason, technology has made us lazy. We forgot how to sell. We expect results to magically appear. After all, we posted it on Facebook and have 10,000 followers. Why shouldn’t it be successful?

I have been preaching for years, there is no magic bullet in the syndication world. The examples
abI have been preaching for years, there is no magic bullet in the syndication world. The examplesabove should be used to “augment” the hours a Sponsor spends raising capital. Reg D 506 c iscertainly a game-changer but is not meant as an excuse for arm-chair Sponsors. Sit back and letFacebook or Instagram raise my money. You’ll go broke and waste everyone’s time.

Reg D 506 c Title II allows for the “General Solicitation” of your private placement without the cost of an expensive PPM. Think about that. For the 1 st time in history, you can now openly advertise for investors and the cost is no longer prohibitive. Also however, understand that the floodgates have opened and competition for investment capital is likewise at an all-time high. Considering these nuances, there is no cause to second-guess a capital raise. Just be prudent, strategic and realistic, which I know sometimes is difficult.

General Solicitation means marketing which comes in many different shapes and formats. If you’ve spent the time and energy to lock-down a deal, then spend the time and energy to lock- down a marketing campaign. It’s not about Facebook or LinkedIn, it’s about a solid well thought through 90-120 day campaign that touches every single metric associated with your offering. Whether it’s a golf course or a tech company, identify your investor 1 st . Is it geo-centric or industry-centric. Identify your investor 1 st . Is it long term or short term, identify your investor 1st . Are you looking for a Family Office or an IRA Custodian? Once you identify, go after them.

In closing, Reg D 506 c is the easiest, fastest, least expensive way to raise capital. The days of passing the hat at the cathedral and synagogue are gone along with the expensive PPM’s but sweat equity can never be replaced by exemptions or technology. Remember, you only get out what you put in.