Reg CF investors do great in a Reg A+
Hi Everyone,
We've been getting some questions about our planned Reg A+ and how that impacts Reg CF investors. The short story is that anyone who invests in a Reg CF can be expected to do great in a subsequent Reg A+.
The terms of the SAFE note in the Reg CF that are really advantageous are the Discount (e.g. 20%) and the Valuation Cap (e.g. $10M). Generally, investors get to pick one or the other but not both when their SAFE's convert. In a subsequent Reg A+, a SAFE note holder is most likely to benefit from the Valuation Cap.
A Reg A+ is sometimes called a "mini IPO". A share price is set and investors convert to common stock. So, let's say we manage to raise $25M at an effective valuation of $75M (giving away 33% of the company to new investors in the Reg A+). That would mean investors in a Reg CF with a $10M price cap are doing roughly 7x better than the Reg A+ investors. Each one of their dollars gets 7x as many shares. Investors with a $7M cap would get 10x as many shares. It's a great place to be!
Our lawyers want me to mention that we are updating people on our Reg CF here, not inviting anyone to invest in the Reg A+ yet (we aren't allowed to do that without SEC approval). Our Reg CF is currently open here on Wefunder and we ARE encouraging you to invest here and now in the CF.
Also, we aren't making any promises about valuations, amount raised, or anything else. There are other investors converting as well and a few moving parts we don't have nailed down yet and won't until our Reg A+ application is finalized, which we expect in the next week or two. We are just doing our best and sharing with you the numbers we are currently working with as we think they are the most realistic.
In the end, if we pull off the Reg A+ as hoped, our Reg CF investors will do great. It could mean a several fold increase in valuation in just a few months. A great place to be!
Huzzah!
1) These numbers include startups currently live on Wefunder if they pass their minimum target.
2) Some startups use two different laws at the same time (i.e., Regulation D and Regulation Crowdfunding).
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Greetings Rick. Are there any updates? Also, I found a potential business partner who could use the service and whose optic technology the company could use. The name is Epilog and they make AI related tech with 8K optics which could give the security cameras here a competitive edge. Just a thought. A win win for everybody. Help protect their assets and your services get the best low cost optics.
Today I was looking through the SEC filing for the Reg A (dated April 10) - https://sec.report/Document/0001683168-20-001145/. The paperwork seems to indicate that our SAFEs will not convert with this new offering. Am I reading that correctly?
Hi Natan, you have a good eye for legal docs!
I had to consult with lawyers to make sure I got your answer right. The Reg CF investors in all likelihood do much better than the Reg A+ investors as far as terms go, whether the shares convert now or at a liquidity event (e.g. IPO or sale).
The Wefunder SAFE's don't call for an immediate/mandatory conversion, and there is a potential advantage to not converting to common right away (e.g. if the company issues more common stock between the Reg A+ and liquidity event, the SAFE holders could experience dilution they may have avoided if they kept their SAFE's).
I'm just trying to make an apples-to-apples comparison and I think the only way to do that is to look at what happens at conversion (whether now or in the future).
Make sense?
Quite encouraging in these troubling times... God's grace and speed... This is reassuring that through Faith and patience Dreams come true!!!! Here's to the American Dream Fellow Friends:)
Let me first just say thank you for confirming what I already figured from my education, this is certainly music to my ears. I am even more pleased that I chose to invest in your company on both the Republic raise and this current round on WeFunder. I am certainly confident that in the right business climate and return to normalcy following this Covid-19 Coronavirus scare that you and your team have what it takes to pull off a big win for your company and for your early investors.
Onward and Upward!!!
This is awesome news guy's keep up the good job also stay safe in this trying times
I'm assuming those like me who invested on your Republic raise will do even better considering you were a 7 million valuation at that point.
I so love hearing good news! Thanks for the great update. :-)