Example Ads - Garage Capital Guide to Innovative Business Funding

	Sign In Sign-Up

EXAMPLE ADS

DOCUMENTS

What are some of the documents one can create for raising money from friends and strangers?

The coupon to the right was attached to a bottle found in the supermarket. I cannot say what exemption was used, but a similar approach was used, quite famously, for the public offering of "Samuel Adams Beer." Ideally, such a coupon would probably be found inside the package, but judging from the rarity of these coupons nowadays, this approach may have fallen from favor.

In California, ads like this coupon are strongly discouraged as advertizing. This coupon was not issued in California.

In some states, like California, advertizing securities is happening all the time over the internet, due to a special law which is referred to in the Funding Garage Inventions section, the "Qualified Purchaser Limited Offering Exemption," Code Section 25102 (n). The $600 fee is a bargain in the light of allowing companies to advertize a new issue of stock, with the subsequent website links pre-qualifying the investor for the investment, and transmitting a prospectus. Not bad. 25102 (n) also requires fairly strict warning notices which are perfect for e-mail, though possibly not for coupons like this or short newspaper ad's. This coupon would have been much longer if it had been issued in California,...

TELEVISION?

Let's say one sent a video to a complete stranger,...

This site is dedicated to the entrepreneur -- whether high school student or senior citizen -- who has a fledgling business in need of a boost; garage capital has made every effort to keep these pages current and correct, but cannot warranty them for correctness or suitability to the viewer's circumstances; securities lawyer comments welcome...

Being friendly is legal.

Advertizing securities by mail, on the other hand, is regulated by some very well-meaning laws. So, the video that one sent could only refer to one's "business opportunity" in the context of "getting to know me," or to better comply with the law, would ideally be part of one's next video letter. So, one could send a video to a completely stranger showing one playing frisbee with a dog, with a narration about one's past triumphs, personal goals, philosophical grounding, and then end with a phone number or web site address.

When CAN one send a video advertizement?

First, remember to separate an IPO -- initial public offering -- from the other kinds of loan and equity solicitations being made. IPO's are closely srutinized and rely on "creating a buzz," instead of intrinsic and liquidation value. They are intended for the general public, such as one's mother's 401K, if her 401K leans on the aggressive side. The emphasis is on the word "PUBLIC." IPO's have many fringe benefits, like resourcing a broad base of talented and interested people for human resources and supplier options. But since they are heavily promoted, rules relating to "windows" of one kind of another are written especially for them, with "cooling off" and "quiet" periods and separate treatment from state to state. When a small business owner approaches a wealthy person qualified to invest in their business, that is a "private" transaction. Loan and equity queries sent to insiders in one's industry or financial professionals are not part of the public IPO process.

(Coincidentally, these are the identical people invited to pre-IPO and bridge-financing "roadshows." And anyone you can invite to a roadshow, you can mail or e-mail a roadshow,...)

Stockbrokers, securities lawyers, close friends and personal acquaintances, rich people in the same industry that you are in, bankers, commercial or business loan agents, accountants, people who are obviously worth more than $1,000,000, retired bankers, certified financial planners, investor relations, investment advisors, stock analysts, venture capitalists, noted "angels," and others believed to have special financial acumen, such as: MBA's, close friends and relations of the above who consult with them, ex-financiers, 12 year-old millionaire day-traders, finance professors,....

It could also be argued that some of the above may not be right to buy one's win-win collateralized high upside philanthropic investment. If, for instance, the person you send a video for a tax-advantaged investment is not paying taxes, either because they are fully invested in municipal bonds or because they do not have high income; one should prudently withdraw the opportunity. This is also why it is helpful not to make any kind of a firm "offer," until one has conducted "matchmaking" of the investment and investor. Most of us will not face this situation on a daily basis. Take heart.

The rules of thumb on "private"/"exempt"/"business" transactions are: young investors without families can bear some risk; people on small fixed incomes should not have gotten your number; one should not act through in-betweens such as a young single investor purchasing for their small fixed income parent; under no circumstances should one sell close to 5% of a person's net worth, not including their home, and there are several state laws dictating the guiding limits that are available online; if the investor's net worth is greater than $500,000, independent of their home, this is good; if they have bought similar investments, and are comfortable with them, this is very good. As an example, if your best friend from college -- using the common sense private offering exemption -- has just had a $50,000 gross year, is twenty-eight, single and has been following your investment for some time, and has another $50,000 in stocks and in the bank: the maximum you should feel comfortable asking him or her for is about $3,000.

The issuer with integrity is intending to pay back an investment that unexpectedly fails, and if one is comfortable with personally guaranteeing an investment, there is always that option. Since a majority of "hot" leads are going to come from asking friends of friends of friends "six degrees removed" for personal introductions to people working in areas like venture capital, the "filtering" process will have already been done.

One can also send out new kinds of video's which have a special charm. These video CD's are easily produced with available technology that one can buy or borrow from friends, and can be prepared to run immediately once they are dropped into the CD-Rom drive of the investor's computer.

For extra "novelty," one can send a "mini-CD" which fits into the small depression of the CD tray, and is a throwback to an earlier generation of CD's. "Mini-CD's" are enjoying a rennaissance as a new kind of business card.

"Mini-CD's" and CD's also have another advantage: they run immediately.

Anyone can have a "roadshow" on their website extolling the virtues of their products or services and management team. The Securities and Exchange Commission seems to lean in favor of keeping these movie files and Power Point presentations invisible, though I could be wrong about this. An "invisible" page of a web site is a "link" that is not present on the main "Index" or Home page, or anywhere accessible by clicking on any page. If you go to the page's correct address by typing it into the web browser's address window, however, or by clicking on the address sent to you in an e-mail (if you are a CPA or banker mailed a message about the company) -- boom, you're there.

Then, you get to wait ten or twenty minutes while the web site's movie file loads over the lightning fast 28.8K/sec lines typically used throughout the United States. On the plus side, many office buildings are now equipped with faster lines like "DSL," and it would probably be worth e-mailing such invisible "roadshow" links to those businesses and individuals. I will probably stick with mailing video "CD's" for the time being, since they can be played at home or office in realtime.

Banner ad's can be bought on popular websites very affordably, and on web servers with low or no monthly fees like Netzero for relatively conservative amounts. The service which I have noticed on Netzero is called ValueClick. The price to the business can start around 25 cents per "click-through," or $250 per thousand impressions, also known as CPM. I have seen CPM's as low as $50.00, and I have read about CPM's as low as $5.00. Referrals are possible -- also known as "finder's fees."

There are several well-known banner advertizing companies, with different ways of "qualifying" the ISP's, web sites and web servers they connect with advertizers.

When I signed up for the Netzero service, while unemployed but interested in finance and a few other activities, I couldn't help noticing that the banner ads I received were primarily for employment agencies and investment services. As a former stockbroker, I would say I am qualified to request and receive info about most any investment.

Does using banner ad's move the private placement from private communication into public offering? Is it right to use banner ad's to promote stock or to promote loans to lenders? The banner advertisement above is pretty silly. It would probably get a great many "click-through's," but mostly out of curiosity and entertainment, rather than investment.

Where some Internet businesses might get in trouble would be: representing other investments besides their own company to investors, which is an area regulated by states and the National Association of Securities Dealers; unconscionable no-no's (felonies, misdemeanors) like guaranteeing any kind of return or guaranteeing low risk or anything else that smacks of insincerity, heresy and fraud; or not having some filter between the Banner click and the robot for receiving credit card "investments."

These filter pages often protect the issuer from making a firm "offer" to a public investor, and also "qualify" the investor according to benchmarks for private investments, like those that apply to "matchmaking."

Filter pages are important, beyond the obvious reasons of accidentally clicking, or children playing with their parents' keyboards. But too much is probably made of "filter screens," because it is more likely that phone conversations and face-to-face meetings will precede a stock purchase. If the investor is Theodophilus Reserve, of the family that they named the money after, and his VISAJ purchase is approved to add a few thousand more shares to his account, rest easy. Bank card services companies are charging as high as a 50% premium for monthly service charges for investment-related merchants, and give those transactions added scrutiny, but that seems to imply that the system is working.

The Banner ad above implies there might be more than one kind of investment, and that can get a little sticky. The ad should lead to one investment only, and it should lead to a series of qualifying pages.

Technically, the Banner ad above does not require the 25102 (n) $600 fee and registration form for California, because it is a request for a phone call in the form of a link-through by a person who is exempt from the special investor protections of the Securities and Exchange Commission investor protection rules. (That is, as long as the investor is informed in the next page or so that "very very rich" means a net worth of $500,000 exclusive of home and incidentals.) It is comparable to an advertizement in a newspaper for a stockbroker to call. Since the NASD does not publish the names and addresses of either investors or stockbrokers, it behooves businesses to contact them through advertizing, but contacting exempt investors is not the same as marketing. 25102 (n) allows investors to order, or immediately download, a prospectus document of some kind, and then to purchase the investment after a minimum waiting period of 5 days. If one has the budget for the $600, it is a bargain well worth the added effort and expense, but in a majority of cases, it is probably unecessary.

If a person clicks on the above Banner, they will need to be sent to an interim "qualifying" page.

There are several required warnings and phrases in the 25102 (n) document that need to be observed if 25102 (n) is being used, and other warnings that are typical of investments. This document may also be used to "filter" non-exempt or out-of-state investors who may have "wandered in."

(Hopefully, there is no such company as the above.) Since the prospective investor should only live in the area requested, this is primarily a formality, but the Internet is also an international phenomenon. If the investor lives in another state, a brief apology page is linked to, which thanks the investor but says that the issue is not registered in their state, and that they will be contacted if this status changes.

Generally, the following page will invite the investor to leave their name and address, and to choose a format for transmission, such as text or HTML or Adobe PDF. State and federally mandated notices are also included, and are listed in the 25102 (n) package provided by the state. They are similar to the notorious blurb used for "Regulation A" small issuer offerings. These qualifying cautions are somewhat different for IPO offerings of stock.

TELEPHONE

CALLS

And what would a script for a telephone call look like? The rules for phone calls are somewhat strict for middle men, much less strict for business owners and employees who do not receive fees, and extremely strict for stockbrokers, who are regulated by the NASD as well as their member firms.

Often a call is not needed. If the investor were reasonably selected, and then mailed a "getting acquainted package," they should have made a phone call or e-mail back within a week. The package should include a means like a thank you card and a phone number for getting back to you. That should be enough.

One should have additional phone numbers added or a phone service which provides "special rings" so that a phone can have three incoming numbers and one outgoing, if it is available. This service can be very useful. A pager or cordless phone or both may also be useful. A "caller ID" function can be used to keep track of phone numbers.

The telephone call, in most cases, will be a kind of reminder, which may not be the best stance to start from. "Remember us?"

"Hi, Mrs. Opportunity, I'm Bottomless Mugg with Algonquin International? We sent you a few complimentary cels from our coming animated cartoon "The Return of Queen Invizo?" As a CPA for a major studio, we thought you might like the design of the deal package, as well as the artwork. We would like to send you a video story reel that has artwork and music and gives a better impression than just the cels."

In this example, and in many investment examples, a "getting acquainted" gift may precede a telephone call. Exchanging gifts is a time-honored way of getting to know folks and creating "warm leads." If one has a win-win proposition -- a company with exciting projects from government grants, a tax-advantaged investment, completion funds for a near-finished project, a collateralized philanthropic project -- this approach is the icing on the cake.

If the investor passes, it's their loss, move on to the next call.

The temptation, especially when one has done one's homework, and is presenting an opportunity with little-to-no downside and tremendous upside, is to think ill of prospective investors who are less than enthusiastic. Try to stay upbeat. The Bible blesses those who encounter losses, like this investment opportunity. Our cause is just. This is also why it is such a good idea to start with a strong philanthropic project, instead of a high-risk "opportunity."

If the investor remains interested, they should have some questions: how will the tax deduction be counted if production crosses years? Can they become involved only for post-production costs, when the project is more easily reviewed? How is the project being escrowed? Who is the legal counsel? Who is its CPA? Is there a web site? Preparing for these questions is a good idea.

The goal is a face-to-face if that is possible. Here again, the stockbroker probably has an advantage because there is SIPC insurance in place to prevent embezzling, so it is important to have put together the best win-win investment possible.

And how about leaving messages? The rule is to try a few contacts, and then leave a message on the last call. If one is calling the Beverly Hills mansion phone book or the personal numbers of CPA's in the phone book -- one can leave a tape of a short script with the press of a button.

One can call professionals' numbers out of the phone book, asking permission to send information materials and confirming the address. One can focus on locating "finders" or teaching others how "finders" are created.

IT'S A GIFT

Financial professionals can actually be difficult to provide gifts. There are industry rules like "G20" which limit the amount of value that can be provided as an incentive or reward to NASD members, for instance. Unless this rule has been rescinded, I think the current value is about $100 that a stockbroker can receive from a product provider. New issues incentive programs, business lunches, and a multitude of exceptions apply, but if it happens that someone you give a gift feels insulted or asks for a receipt for its value -- that's probably what it's about.

These professionals probably aren't going to inordinately respond to a watch or golf club any more than an amateur "finder" looking for collateralized returns off the beaten path. The finder will possibly be more discriminating than the stockbroker. The finder may suffer more when deals fall through because their business contacts are frequently personal friends as well. Fortunately, they can be rewarded very well.

As for giving gifts to the "non-exempt" professionals and others (like your Mom) mentioned above, there one should exercise some caution. Advertizing often comes through the mail, and gifts are a common part of advertizing to strangers. Potholders, toiletries, keychains, snack foods, and a whole industry created around the idea of "premiums" move through the mails regularly, but advertizing is verboten for securities. This may be an excessive measure to protect the naive from fraud, but compliance for the honest and upright is not onerous.

If one wants to give a gift to strangers who are not "exempt"from securities protection by virtue of being professional investors, financial experts, in communication with financial experts, close friends, business acquaintances, leaders in related businesses, or rich -- one may give them as many gifts as one likes. Being public does not mean being invisible. There is a lot of love out there to give.

One can probably give away warrants, for instance. It's a free country. If a naive person received warrants for an obscure five penny stock, without a letter urging them to buy the stock in order to see their warrants bloom in value, they might not think to buy any stock. A gift of stock certificates would be the closest one might come to toeing-the-line, but the principle behind gifting stock is secure, though maintaining the stock in annual reports can become costly. This approach has the advantage that investors in a company regularly are invited to buy more stock in later mailings as they are kept up to date with company affairs. As for sending sample products, be they guitar picks or the latest program for mind-reading, it would be fine to list the company name and even to include its symbol, like 20,000-some stocks do. But advertizing securities is verboten.

Now, consider the revolutionary "Stock Pot" potholder stock certificatehJK, developed by Garage Capital,...