In 2012, the SEC allowed small businesses to crowdfund Investments and “go public” by the legal process called. is used Regulation A. It was part of the JOBS Act (Jumpstart Our Business Startups Act) to enable small business funding from unaccredited investors and raise up to $ 75 million.
on The radio show for small businesses this week Tony Drockton, Founder and Chief Cheerleader at Hammitt, a Los Angeles retail company that sells luxury purses and bags, describes how their company raised $ 10 million to $ 25 million using this method.
Go with regulation A. to the public
Tony shares how they used traditional funding for their Serie A, but when they “built 100,000 fans and clients at Hammitt, I wanted to give them the opportunity to invest with their friends and family first – it’s a democratization of the investment process. “
There are many strict guidelines for applying Regulation A. Tony says Hammitt required two years of scrutinized statements, full SEC approval, and specialist lawyers and advisors. In addition to all of these up-front costs, the company had to make a one-year commitment to raise the money. Tony adds that there is “a much higher level of due diligence than when accredited investors participate in typical seed funding for other small businesses.”
In Hammitt’s offer, people need to invest at least $ 550. After they become an investor, Tony believes they will become a Supercharger fan, or “fan investor!” He hopes they will buy additional products and share more about the company. Hammit will use its email list, online advertising, and social media to find these investors. Tony doesn’t think this will preclude the addition of institutional investors to this Regulation A sponsored round.
Hammit will also be featured on a TV show about her trip starting October 19th called Publish, a 10-week series that introduces five companies, all of whom raise capital through sales to retail investors. Anyone watching can invest in a few minutes on their cell phone. Tony says it’s “Shark Tank, but the audience are the sharks!”
Listen to Tony’s entire interview The radio show for small businesses.
Pictured: Tony Drockton