It Seems Everyone Conducting a Reg CF Offering is Confused About This 1 Rule
Here’s how to master the “terms” and “non-terms” mixing conundrum.
It has been over a year since Regulation Crowdfunding went into effect, and platforms and companies alike are still struggling to understand what they can and cannot do to market Small OPOs. The biggest issue is still the wrongful mixing of terms and non-terms communications. Honestly, I can’t blame people who struggle with this rule. The rules are confusing and many companies do not have the resources to hire a professional agency to handle marketing for them.
StartEngine believes that every company can and should actively market their offerings, but we also want to make sure they do so compliantly. Below I outline three key areas of the terms and non-terms saga to commit to memory.
Terms and Non-terms: A deadly combination
Mixing Vodka and Vermouth Makes a Martini. However, you shouldn’t add both an olive and a lemon twist. Makes sense, right? Easier said than done. First things, first. What is a term and what is not? Understanding what is defined and especially what is implied by “term” will build the foundation for success and compliant marketing efforts. Remember, the rules are not contingent on the type of marketing effort; the same rules apply across all marketing materials used outside the offering page, and there are no exceptions with respect to the medium used.
Terms (As defined by the SEC)
Price per share
Nature of securities
Closing date
Amount of securities offered
Implied Terms
Statement as to the number of days left in the campaign
Offering goal in dollars
Non-Terms
Minimum investment
Date when minimum is reached
Number of investors
Amount raised
The words “Closing Soon”
What about Updates?
There is only one place where terms and non-terms can be mixed and that place is on the offering page. StartEngine offers its Updates feature for Issuers that conduct offerings on StartEngine Capital. The Updates feature allows Issuers to share news with their followers and investors about the company and offering progress. While the updates section is on the campaign page, these updates also get shared via email, which is off the campaign page. To recap, you can mix terms and non-terms on the campaign page, no where else, including emails.
Since updates may be seen onsite or in email form our suggestion is to always keep terms and non-terms separate. While we are on the topic of updates, please send them. Sending updates via your offering page can be highly effective and it is totally free.
Landing a big interview: What could go wrong?
First of all, if you land an interview with a media outlet — CONGRATS! This is a great opportunity so don’t screw it up. First things first, accept the opportunity. Next, make sure the reporter understands the Regulation Crowdfunding communication guidelines, especially with respect to terms and non-terms. Yes, they have to follow them too. I have seen this countless times. Reporters don’t think the rules apply to them. Wrong. Even worse, it is on you if they make a mistake. If the New York Times publishes a non-compliant article, you can’t link to it via social media or share it on your campaign page and you may be in trouble with the SEC. Pretty much a waste.
Conducting a Small OPO is hard. So is raising capital, in any form. Take the process seriously, learn the rules but do not let fear and frustration hold you back. Marketing is a crucial element to the process and the only way to successfully run an offering is to embrace the challenge with a positive attitude and diehard work ethic.
