A recent report from NextGen Crowdfunding reviewed all of the Reg A+ offerings filed from June 2015 – June 2016. Reg A+ allows startups to raise up to $50 million from both accredited and non-accredited investors through investments via an online investing portal. The investments made by investors can be as little as a few hundred dollars.

NextGen analyzed 131 companies that have taken advantage of updated rules established by the JOBS Act of 2012. Some of the key takeaways from the report as reported by Crowdfund Insider include:

• The number of individual companies filing under Reg A+ totaled 131 – 13 of the 144 filings were duplicates. Of these, 129 of them are U.S. companies and two are from Canada.
• Reg A+ companies span various industries, including finance and real estate (48 companies, which is 36.6% of the filings), services (30 companies, 22.9%) and manufacturing (23 companies, 17.5%)
• Many more mature companies are participating in Reg A+; the oldest firm has been operating for 37 years and 22 of the 131 firms have been in business for 10 years or longer
• Many Reg A+ filings are coming from the largest states around the country, including California (34 firms), New York (9 firms), Illinois (7 firms), Florida (14 firms), and Texas (7 firms) – with little participation from firms in the Southern states (16 firms in total from the region)
• 54 companies filed under Tier 1, which allows them to raise up to $20 million
• 77 companies filed under Tier 2, which allows them to raise up to $50 million but requires a financial audit
• 79 of the 131 companies reported no revenue and were early stage firms

One of our previous blog posts can walk you through the steps to determine whether or not a Reg A+ offering might be right for your company.

Should you determine that a Reg A+ offering is the right route; Seed Equity can assist with your capital raising needs starting with the company’s offering materials, the eventual closing, and everything in between. We make sure that the Reg. A+ offering is compliant with all the applicable regulatory requirements.

Seed Equity’s online investing platform was created to make capital raising seamless. We help manage the process so that you can do what you do best: grow your business. The Seed Equity platform is able to do everything online for investors. We enable document execution, verify investor identities, suitability testing, investor communication, perform anti-money-laundering checks and provide an escrow account to easily track the transfer of funds.

 What You Get with Seed Equity

• Online Investing Platform– Seed Equity makes it easy and seamless for your customer base to invest. Our engineering team will work closely with your team to make sure the process is as painless as possible.
• Communications Portal– You can communicate with all of your investors through our communications portal.
• Suitability– Seed Equity performs suitability on all investors in compliance with FINRA Rule 2111. Investor’s investment profile including the investor’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs and risk tolerance and others.
• AML – Instant Identification Verification. Complies with Section 326 of the USA Patriot Act. All Investors are checked against a comprehensive set of global terrorist watch lists, including the Office of Foreign Assets Control (OFAC), Politically Exposed Persons (PEP) and others:
• BES: Bank of England Sanctions
• CFTC: Commodity and Futures Trading Commission
• DTC: Defect Trade Controls
• EUDT: European Union Designated Terrorist Groups + Individuals
• FBI: FBI Fugitives
• FCEN: Financial Criminals Enforcement Network Special Alert List
• FAR: Foreign Agents Registration Act
• IMW: Interpol Most Wanted
• OCC: Office of the Comptroller of the Currency Alerts
• OSFI: OSFI – Canada Entities
• SDT: State Department Foreign Terrorist Organizations
• BIS: US Bureau of Industry and Security
• UNNT: United Nations Named Terrorists
• WBIF: World Bank Ineligible Firms

Instant Verification includes identity verification and instantly authenticates businesses and individuals.

• Bank Level Security– All information is sent securely using bank-level SSL encryption.
• Escrow Account – Set up and Management

 Investor funding Options include:

• Checks
• Wires
• Secure Data Room– Bank level security for offering documents and financials stored securely in an SSAE-16 (SOC 2) certified, FINRA compliant document storage system.
• In House Legal Counsel to assist with SEC Filings– Seed Equity has qualified compliance and in-house counsel that are familiar with Reg. A+ and you will have full access to them at any time. At the option of the company, Seed Equity will help with drafting Form 1-A and will assist in resolving any issues that are brought to our attention by the regulators. Seed Equity can be as involved as you would and your counsel would like.
• Transfer Agent – Establish account with SEC Registered Transfer Agent. Coordinate shareholder list from Escrow agent to Transfer Agents records.
• FINRA Member – Seed Equity is a member of Financial Industry Regulatory Authority (FINRA), the largest nongovernmental regulator for all securities firms doing businessin the United States. All told, FINRA oversees nearly 5,000 brokerage firms, about 172,000 branch offices, and more than 676,000 registered securities representatives. Created in July 2007 through the consolidation of NASD and the member regulation, enforcement, and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. For more information on FINRA, visit finra.org.

According to Fortune, there are currently four $1-billion-plus startups located in our hometown, known to many as the “Silicon Slopes,” a stretch of cities along the Rocky Mountains, from Ogden in the north to Provo in the south and Salt Lake City in between. But what is attracting these early-stage companies to the state?

Firstly, there is strong local talent coming from both Brigham Young University located in Provo and the University of Utah located in Salt Lake City. Both Universities graduate plenty of candidates who prefer to work in Utah, due to family ties.

Secondly, real estate is much more affordable compared to other startup hubs such as Silicon Valley and New York. Fortune lists that Median home prices in the area are about $300,000, compared with Silicon Valley’s $1.25 million. The affordability and the access to skiing, hiking and biking in Utah’s mountains are a draw for both founders and out of state candidates.

Finally, while venture capital wasn’t easily accessed in the past, it has since skyrocketed from $299 million across 34 deals in 2013 to $732 million across 55 deals in 2015, according to the National Venture Capital Association.

The future is looking bright for the startup breeding ground. The U.S. Chamber of Commerce recently ranked Utah No.1 in innovation and entrepreneurship, No. 2 in high-tech performance and No. 3 in economic performance in a study of all 50 states.

Securing the capital to take your venture from the idea stage to a revenue-making business can be quite a challenge for a lot of entrepreneurs. If you have been bootstrapping your startup or taken investments from friends and family and are ready to take the next step in financing, here are a few things to consider before raising seed capital.

Does Your Business Disrupt Its Industry?

Investors are looking for innovation – a product or service that’s going to change its industry. It needs to meet the demand of its customers and do so better than its competitors.

Do You Have Traction?

Even if your venture doesn’t have revenue yet, do you have customers? Is your customer base engaged and growing? Investors want to see that there is a need for your product or service in the market.

Are You Willing To Take Constructive Feedback From Investors?

Investors will have valuable feedback about how to tweak your business in a way that might make it better. Having thick skin and learning to take constructive feedback and potentially apply it to your business will help you succeed. If you’re not able to adapt to a better strategy and refuse to abandon your original idea if necessary, you may have a long, tough road ahead.

Is Your Startup Scalable?

Can you grow your business on a global scale? Do you have a strategy in place to do so? Even if you don’t have a business plan laid out on how you will take the venture global, you should be thinking about it and be able to articulate the first steps in the process.

Do You Know How You Will Use The Capital?

When you meet with investors you should have a plan laid out regarding how you will use their investment. Whether its growing your team, enhancing your technology, etc. they will want to hear how their capital will be put to use. They also might have some feedback on whether you should utilize it in a different function, and you should be receptive to that.

We receive dozens of pitches each week from entrepreneurs seeking funding. We choose to invest in a select few of these startups and have specific criteria they need to meet before we deploy our capital.

Venture capitalists are looking for specific traits in the entrepreneurs they choose to invest in. In this interview from McKinsey Insights, Draper Fisher Jurvetson partner Steve Jurvetson reveals what he looks for in entrepreneurs and explains how large companies can respond to disruption.

What do venture-capital firms look for when they back entrepreneurs?

With billions of dollars flowing into start-ups around the world, that question has never been more important, nor the answer more consequential. Silicon Valley venture-capital powerhouse Draper Fisher Jurvetson has backed almost two dozen unicorns—start-ups valued at more than $1 billion—including Box, Skype, Tumblr, and Twitter. In this interview, one of the VC firm’s founding partners, Steve Jurvetson, tells McKinsey’s Michael Chui what he looks for when he makes investment decisions, what he considers hot sectors, and what could be the biggest start-up of all: space. An edited transcript of their conversation follows.

What venture capitalists want

I like to invest in entrepreneurs who have this infectious enthusiasm. This starts with people—people like Elon Musk—who can convince you that whatever they’re working on is going to work. Usually, this has to be in some sector of the economy that we feel is going to experience rapid growth, that’s in a period of massive disruptive change.

In the ’90s, that meant software and semiconductors and biotech. Then it morphed. Today, it’s a wide range of industries, from synthetic biology to rockets to electric cars to a variety of sectors that weren’t ripe for venture investment in prior decades but now are becoming software businesses. As they do, we find that they’re going through profound change. And whenever there’s profound change, that’s great for start-ups.

Only investing in things unlike anything I’ve seen before always gets me searching outward from a comfortable core toward something new, something different. These things tend to correlate with those crazy ideas that actually do change the world, because the ones that succeed dramatically were never uniformly considered good ideas at their onset.

If a few people passionately think that something is the future, and a large number of people think it’s absolutely harebrained and will never work, that’s a good sign. I also try to find attributes and people somewhat similar to what I look for in the team at work: enough self-confidence to be humble about what it’s proposing and respect for the team over individuals, as opposed to the cult of a single CEO running a company.

What are the hot sectors?

Then the interesting question is, well, which sectors? We look at how Moore’s law is percolating into new industries and turning them from industrial, crappy, lowest-gross-margin businesses into software-centric, rapidly innovating, exciting businesses. Think of the transition that Tesla brought to the automobile industry or SpaceX to the military–industrial complex or Planet Labs to satellites.

In all cases, those industries hadn’t seen a new entrant for decades—literally decades. There hadn’t been an automotive IPO in America since Henry Ford. Then the next one, Tesla. Believe me, many investments in-between failed. A proven bad sector. But it’s different now; it’s a software-centric industry. Over time, it’s been transformed by an entirely different pace of product enhancements pushed over the cloud-service layer.

Sometimes we’ll see a process of innovation that spans many industries—for example, the application of deep learning and machine learning to just about everything. This was a very geeky subject just a couple of years ago. Only a few people in image recognition at Google and a handful of other companies would have known much about it and would have been applying it routinely to their products.

These techniques are going to percolate out into almost every industry because they embody a fundamentally different way to do engineering. If our minds are prepared for that, then we can look for a variety of companies—in radically different industries, which may not seem to have anything to do with each other—and spot opportunities others wouldn’t spot at that process layer.

How should large companies respond?

If I was a senior executive at a large company, my first worry would be that it’s a precarious place. Just about every large company should wonder how long it’s going to last, and that should be measured in decades at most.

The reason is that the pace of change in technology is ever accelerating and subsumes almost every industry over time. You can see the wreckage in the telecom and other sectors but think, “oh, that won’t happen in my sector, because I have all kinds of”—who knows what? Unfair competitive advantages and monopoly positions and “hey, I’m the only game in town.” This is all going to change, and it will be new entrants that lead the change.

The large companies that are most exciting to me are the ones that innovate outside their core. Think of Apple and everything it’s done over the last decade or two. These things were not in what had been core businesses previously, right?

The innovations were in what initially hadn’t been Apple’s core businesses—in music and phones. In retrospect, this all seems to be a brilliant and unified and digital convergence of media. But at the time, everyone thought Apple was completely off its rocker—everyone would have copied it if this had been the obvious strategy.

My point is that big companies will never do something substantial or worth thinking about or worth writing a history book about in their core businesses. What is meaningful innovation? It’s often synonymous with disruption, meaning that something has changed. It isn’t business as usual. It isn’t an incremental improvement of 10 percent in some process every year. It’s “wow—we finally freed ourselves from gasoline in the automobile industry.” An existing automobile company won’t do this. But the beauty is that it doesn’t mean big companies are dead; it just means big companies need to innovate outside their core businesses.

The biggest start-up: Space

What kid doesn’t want to go to space? The question: is it safe, is it cost effective? When we grew up in the ’60s—those of us who did, of course—it was dangerous, and you had to be a fighter pilot, you had to do the training. But in the future, you’ll just jump on a robot.

A SpaceX spacecraft is a robot in space—the astronaut sits back and has a great ride. There’s seven Recaro-style seats; you just go for a ride. A seven-person jet is pretty expensive to fly around the world. There’s no fundamental reason rockets should be more expensive than air flight, and the only reason they are today is that we throw away the rocket after every one-way flight. That’s insane.

SpaceX will soon succeed in recovering the booster—that’s been a long-predicted outcome, even dating back to Arthur Clarke in 1969. If you can do that, space flight should be as cheap as air flight. That will change everything. It will be as frequent as air flight and, soon, as safe and as much fun.

Before investing in a startup we perform due diligence to ensure that it meets our investment criteria.

We are interested in investing in specific industries, specifically in innovative startups working to disrupt the market.

With the passing of Title III of the JOBS Act, a much larger percentage of the population is able to invest in startups through Regulation Crowdfunding. However, there are a lot of factors to take into account when determining whether or not you should make an investment in an early-stage company. Before deploying your capital, you should consider each of the following points.

Can you handle the risk and potential loss of investment?

Startups fail more often than they succeed. You should be able to afford to make the investment as well as be prepared to lose it. Keep in mind that a return on investment can take years, so if you may need the money in the short-term, an investment in a startup might not be the right investment for you.

Do you believe in the company’s mission/product/service?

You should be excited about a company and its potential to disrupt the market before you even consider making an investment. Have you tested the product or service? You should and you should be one of the company’s most enthusiastic customers and advocates.

Do you understand the financial information and disclosures provided by the issuer?

Before you commit to an investment, make sure you understand where the company stands financially today, and where they forecast to be a year from today. Discuss potential worst-case scenarios with the founder(s) and make sure you have a thorough understanding of the terms of the capital raise. It never hurts to seek a second or third opinion from individuals with experience investing in startups.

Have you performed your due diligence?

Does the company have initial traction? Have its founders started successful ventures in the past? Was the team able to raise any funds prior to this raise? All these questions should be answered with “yes.” If the company has traction with its product or service, is being led by an experienced team and was able to obtain investments from other investors, it could be a more viable investment option.

Passion

When an entrepreneur is pitching you his or her business, their passion for the venture should be apparent from the time they open their mouth. They need to be fully committed to the mission and exemplify that they will do whatever it takes to see it succeed.

Experience

Has the founder started a company before? How successful was it? If he or she was able to grow a successful business prior to this venture, they know the ropes better than a first-time founder and have proven they have the dedication it takes to see a company endure.

Adaptability

Plans and challenges change frequently w
hile building a company. Someone who can adapt and focus on the need of the customer, rather than refuse to abandon the original idea, will be more suited to build a winning company.

Persistence

Acquiring customers and making sales is not an easy task when a company is getting off the ground. When the founder is likely one of just a few employees, if not the only one, they will need to be persistent, tenacious and motivated to keep the company moving forward. Some will want to throw in the towel after hearing “no” several times. A successful founder will keep pushing through until they hear “yes.”

Communication

If you are to be an investor in their company, you want a founder who will be able to communicate issues and how he or she plans to solve them effectively. A founder should be in touch with his or her investors regularly, providing updates on the company and its progress.

Registering as an Investor

We currently only have offerings listed for accredited investors (individuals with a net worth, excluding their primary residences, of at least $1 million or consistent personal annual incomes of at least $200,000). However, non-accredited investors are now able to register on our platform for access to Regulation CF deals, which we plan to offer in the near future.

Become a registered investor here: https://www.seedequity.com/Investors/RegisterAsIndividualOrEntity

Customizing Your Investor Profile

During the on-boarding process we will ask questions to help you customize your experience on the platform. You can tell us about your investment goals and what portion of capital you have put aside to invest in startups.

Browsing Investment Offerings

The companies raising capital on the Seed Equity platform change regularly as companies meet their funding goals and we onboard new ones.

Due Diligence

Investing in early-stage companies is inherently risky. While the Seed Equity team does due diligence on each company it brings on the platform, its important for you as an investor to do your own. Leverage the data rooms of the companies you’re interested in where you can review documents and learn more about the founding team. We offer webinars presented by company founders who provide details on their company. You can also contact the founder directly through our platform to ask specific questions.

Making an Investment

When you click the “invest” button on a startup’s profile you will be directed through a process that allows you to complete an investment. You can invest as an individual or through an entity such as a LLC, IRA or Trust. Once you confirm the investment, the funds will be transferred into an escrow until the fundraising is closed. Once the round closes, you will receive confirmation of success with a link to the counter-signed legal agreements if applicable.

Managing Your Portfolio

Stay up to date on the progress of the startup you invested in by visiting the profile page and reading updates from the founders. Many investors practice portfolio diversification by investing across multiple startups and industries to mitigate risk. Watch for startups in different industries on the platform, and plan for making additional investments accordingly.

For more details on the process of investing in startups via Seed Equity, watch this interview: http://goodcrowd.info/how-invest-starups/

In 2015, we reviewed over 600 pitches from startups and launched eight of those on our platform for funding. Here are some tips to help your pitch meet our investment criteria.

 Proven Management

We look closely at the management team, in particular for solid founders who have a proven track record of building a successful company. We look for founders that are passionate and optimistic, while also understanding the challenges that early startups face.

 The Market

We seek companies that are competing in markets of at least $1B. A company that is working to disrupt a large market that hasn’t seen much innovation is a plus.

 Business Model

Companies pitching our investment team must convey that their business model is well thought-out with at least minimal validation, is scalable and sustainable.

 Traction

In general, a startup must have traction and growth in users, revenue or both. Significant month-over-month growth is something we look for.

 Exit Strategy

We look for investments that have several potential exits, specifically between two and five years after the initial investment. Potential exits include a sale, merger, spin-off or IPO. Our team has experience in founding, selling and purchasing companies and will use that experience to help our startup companies find the best possible exit for their business.