Dear Fellow Entrepreneur;
Are you in need of substantial amounts of capital to fund your start-up or early stage Company or novel business idea? During the capital-raising process, would you like to maintain the vast majority of equity-ownership interest and voting control? Do you continue to hear a discouraging “No” as you seek available funding? If so, we are interested in learning more about your company.
Although we have access to many sources of capital for varying stages of a company’s existence, we, too, are looking to invest in start-up and early stage companies through our own venture-capital funds; Commonwealth Capital Income Funds I & II.
The question on many investors’ minds is “what makes for a successful investment in a privately held company?” Since 1998, by successfully servicing entrepreneurs in their quest for capital, we’ve uncovered some undeniable evidence. It has been our experience that many willing, young companies tend to succeed in their capital-raising efforts and ultimately grow into a force to be reckoned with. This is simply because they are willing to go through the process of designing their company’s capitalization plan and structure, building their own securities-offering documents (for legal-counsel review), and soliciting and selling securities in compliance with federal and state securities laws.
These are the only types of companies we want to invest in. We have access to an unlimited amount of capital for convertible participating preferred equity, as well as a capital matching program, where we match $500,000 raised in convertible bridge notes, thereby greatly increasing the probability of raising substantial amounts of capital. With our capitalization process, we show you how to sell securities to us, as well as other investors. We hope you can understand our venture-capital-fund model and appreciate the innovative way we reduce risk for our Funds. Without this model, there’s simply no way anyone could justify the substantial risk inherent with investing in start-up or early stage companies.
As former Wall Street Investment Bankers and experts in compliance matters related to selling securities, we are intimately familiar with the criteria employed by capital-funding sources looking to fund “quality deal flow.” These professional capital sources include investment banks (e.g., broker-dealers), angel-investor groups, hedge funds, private equity firms, family offices, and registered investment advisors. From their perspective, quality deal flow typically refers to a company with positive cash flow and an experienced management team with a unique, high-demand product or service in a growing market. Unfortunately, identifying quality deal flow is often an overly simplified, quantitative assessment that does not fully recognize the distinctive benefit and potential value of investing in your Company. Our Sprocket Network is designed to facilitate a quick painless process enabling us to make an investment decision in your company or enable you to raise your own capital in compliance with federal and state(s) securities laws.
Our Commitment. Because the majority of start-up and early stage companies have yet to establish a solid track record of proven revenues, strong earnings growth, or positive cash flow, professional investors tend to reject them. Our job is to help position your Company to obtain the necessary capital while you and your management team maintain the vast majority of equity-ownership interest and voting control. When seeking the first few rounds of equity capital, too many founders sell too much of their company too early for too little. Most micro-cap publicly traded companies, have fallen prey to this problem, but could benefit from a PIPE using our process to recast the value of the company’s common voting equity, while raising substantial amounts of capital…. it’s all about the deal structure.
Our Process. We have revolutionized the way capital is raised for start-up and early-stage companies by automating the proven techniques utilized by Wall Street investment banks. Our process helps to enable you to legally and effectively compete directly with traditional financial institutions for individual-investor capital. Furthermore, our process puts you in charge of the entire capital-raising effort throughout the life of your Company. Our process will enable you to seek capital from one of our VC Funds directly or attract qualified investors by conducting a series of well-orchestrated securities offerings to meet current market demand while maintaining compliance with federal and state(s) securities laws.
In a market environment where banks rarely lend money to small businesses, selling securities, especially hybrid securities, such as; convertible bridge notes and convertible participating-preferred equity to raise capital for your Company is (without question) the most effective way to raise substantial amounts of capital while allowing you to maintain the vast majority of common-equity ownership and voting control. Thus, our process starts with developing a five-year capitalization plan by constructing pro forma financial projections that are GAAP compliant, assisting you in designing hybrid securities from the pro forma financial projections, and producing securities-offering document drafts (for legal counsel review) with marketable deal structures compliant with US federal and state(s) securities laws, rules, and regulations. Our process further assures the following: 1) you do not sell out too much of your Company too early…for too little; 2) your Company’s capital structure does not become cost prohibitive—by implementing rolling re-financing techniques; 3) you and your Company maintain compliance; and 4) you, your founders, and other management team members actually raise the capital you seek…on your terms.
The hybrid securities created normally include those with a “high-yield” component, convertibility, and participation in net earnings with a forward, non-dilutive lien position against assets, such as preferred equity. Correctly constructed, preferred equity may further act as currency for acquiring competitors, suppliers, or strategic acquisitions. Yes, preferred equity—positioned and constructed correctly—will enable you to use it as “currency” for acquisitions. Our Clients also use the power of these hybrid securities—if they choose to list the securities on an exchange and become publicly traded—to raise substantial amounts of capital by selling them directly to “market makers” at discounts from market price. Market makers seek the stability these types of securities provide and have plenty of capital to invest.
Selling any type of security to raise capital is like selling anything else except selling securities takes place in a highly regulated environment. Thus, it takes significant time, money, and effort to properly execute an ongoing, well-orchestrated securities marketing campaign. It does not matter if you currently have the available funding to implement such a campaign or not.
- First, complete an “Investability Survey” on our Sprocket Blueprint™.
- Second, log into Sprocket Network™ to begin the “Social Proofing” process, which provides us, other investors and potential additions to your management team, a “proof-of-concept” rating to qualify for funding through one of our VC Funds. Other investors will also have a chance to invest in your company under most circumstances, as well. This gives you a greater chance of obtaining the full amount of capital you seek. This part of the process is the single most valuable component as it not only attracts investors but produces direct sales, as well as potential sales distribution channels, including Sprocket Market & Sales Force™ and through Sprocket Distributors™.
- Third, design the deal structure of your securities offering and produce the required legal document with Financial Architect™ included within Sprocket Blueprint(TM) in order to legally solicit and sell securities to one of our VC Funds, as well as outside investors.
- Fourth, engage in the securities sales efforts through a FINRA registered crowdfunding portals and a private secured securities portal on your website, in compliance with federal and state(s) securities laws, with the marketing assistance through the Sprocket Network.™
- Fifth, engage in the process of attracting potential management team members and Directors, through Sprocket Boardroom.™ Your company’s securities offering document is also designed to protect your company in the process of engaging in and contracting with your senior management team. It serves as the full disclosure document for the management opportunity and risks involved. This is a critical element that is often overlooked in the hiring process and further protects your company from potential litigation down the road.
Although there are other processes to accomplish other tasks in the methods you use to build your company, these 5 easy steps enable you to increase the probability of raising substantial amounts of capital to the highest degree possible. How can we make this claim? We can because this is the Wall Street process for Main Street Companies.
The Commonwealth Capital Management Team