Guide to Crowdfunding: JOBS Act and Georgia Law

© Kendrick Law Practice * 678.739.8109 * www.kendricklaw.net Page 1

Guide to Crowdfunding: Under the

federal JOBS Act and in the State of

Georgia

What You Need to Know

Last Update: June 2013

DISCLAIMER: By downloading and reading this Guide, you understand and agree to the following:

That this is just a guide to crowdfunding on the federal level and in the State of Georgia ONLY

and no other U.S. territory or State.

That Kendrick Law Practice is not authorized to practice law in any other U.S. territory or state.

That access to this guide does not create an attorney-client relationship between you, your

business or others with access to the guide and the Firm unless there is a signed retainer

agreement on file with the Firm.

That is just a general guide to explaining crowdfunding and does NOT represent all of the legal

requirements and procedures to legally execute a crowdfunding campaign.

Kendrick Law Practice, LLC

3035 Stone Mountain Street, #630

Lithonia, GA 30058

678.739.8109

[email protected]

www.kendricklaw.net

mailto:[email protected]

http://www.kendricklaw.net/


Crowd. Capital. “Unaccredited Investors”.

Crowdfunding is a way for businesses to raise capital for their business by soliciting “the crowd”,

whomever they may be, for money. Think of it sort of like Groupon in that it is a business offering

“something” in exchange for a large group of people giving money to the business.

In the context of this guide, crowdfunding is the newest way for business owners to raise capital by

exchanging a piece of ownership in their company (equity) in exchange for capital from family, friends

or, in the case of Georgia and federal crowdfunding, from total strangers through general solicitation.

Now NOTE: There are 2 ways to crowdfund: On the federal level under the federal JOBS Act and on

the state level under the IGE (Invest Georgia Exemption).

TIP: Your Crowdfunding Campaign is only as good as your “crowd” or access to people to invest in

your business. Build the RIGHT team to find the RIGHT crowd with the RIGHT campaign to get the

RIGHT results.

Example of Crowdfunding under the IGE (in Georgia)

Example No. 1: ABC Corp. is a Georgia based and registered business and has launched a

crowdfunding campaign to raise $100,000 for equipment badly needed for its

medical practice. [There are steps in between] but ABC Corp. solicits strangers

through a portal and asks that 10 individuals give $10,000 in exchange for 1%

equity in his company. ABC Corp. is giving up 10% equity (1% equity x 10

individual investors) and retaining 90% equity.

What is Crowdfunding?

June 2013


How was it BEFORE the

federal JOBS Act

Time Consuming & Expensive.

Before the federal JOBS Act, business owners had

to file what’s called a “REGULATION D

EXEMPTION” with the Securities and Exchange

Commission (“SEC”) in order to be exempted

from registering with the SEC and being highly

regulated. But get a “Regulation D” exemption, a

business (1) had to sell to “accredited investors”

(those making over $200,000 a year) or (2) if

selling to “non-accredited investors”, the limit was

35 investors that could not be generally solicited or

(3) the investors had to be “sophisticated” which

meant they participated in the stock market to a

certain degree.

June 2013


Federal JOBS Act

Offer securities (equity) to an

UNLIMITED no. of investors that can be

“NONACCREDITED”/”UNSOPHISTICA

TED” investors

General solicitation is allowed

Raise up to $1M a year ($2M Cap);

Emerging companies can raise up to $50M

Accept capital of:

o $2,000 or 5% of annual income

from those making LESS than

$100,000

o 10% of net worth or annual income

from those making MORE than

$100,000

DISCLAIMERS: There are still…

o Reporting obligations depending on

the amount of money you want to

raise

o This is not for EVERY business.

CHANGES NOW: A Tale of 2 Ways to Crowdfund

June 2013

Georgia “Blue Sky” Regulations

The federal Securities Act of 1933 has an exemption

under SEC regulations for INTRASTATE (within

state) offerings. In 2012, the GA Commissioner

came up with the rule called the “Invest Georgia

Exemption” (“IGE”).

A Few Things to Know

1. MUST BE A: (a) Georgia based (b) "for profit"

business, (c) registered to do business in Georgia

that is (d) not an investment firm.

2. The cap is $1M in any 12 month period.

3. All funds must be deposited into a bank

authorized to do business in Georgia.

4. Before the use of general solicitation or 25th sale,

a Notice must be filed with the GA Commissioner

with certain requirements.

5. The issuer must inform purchasers that securities

are "unregistered".

6. Can only sell to residents of the State of Georgia

initially and only resale to non-residents after 9

months.

7. Those with income under $200k a year can invest

up to $10k; those with income more than $200k can

invest as much as they want.


1. Tell Your Story. Why are you raising the capital for your business? What is

your unique story behind why you started your business in the first place?

Every business has a story that answers the question “Why”. Remember, facts

“tell” but stories “sell”.

2. Provide value. How will the potential investor benefit from investing in your

product or service, besides the obvious rate of return they will receive? One

item of value is what makes you, as a owner in the business, different than

other owners. Perhaps it’s your connections, charisma, sales experience, or

technical experience. Any additional value will be appreciated and noticed.

3. Argue why your product or service is scarce. If you can convince potential

investors that your product or service is so unique and “one of a kind” that

there is nothing like it being offered, the value of your company increases as

you have more investors wanting to have a part of your company.

4. Create a marketing plan, including a marketing event. You are only as

good as your crowd and if no one knows about your product or service, it

won’t get any investors. Period. It’s important to have a strategy to attract

investors but you may also consider a one time big event that creates an

illusion (or reality) of exclusivity. Investors like it when they are part of the

“in” crowd where others don’t have access.

5. Highlight V.I.P. supporters. Investors, like other people, are susceptible to

peer pressure. If you have an influential, powerful, wealthy or credible

supporter, make sure to highlight those individuals. Investors like to be

around V.I.P. supporters and others of influence and power. This goes back to

creating an air of exclusivity in your product or service.

6. Use your powers of persuasion. Simply telling your story as I suggested in

No. 1 is only half the battle and may “sell” your story but cannot “tell” your

story. Most investors are practical and need hard evidence and facts before

they invest their money. Therefore, make sure you have details and evidence

to support your story.

7. Communicate. Communicate. Communicate. This is an interpersonal skill

that cannot be overstated, especially when it comes to wooing and keeping

investors happy. Your ability to communicate clearly and often reflects on

your position at a leader in your business and investors decide if they want o

work with YOU, regardless of it you have the best business idea. And

remember, this communication does NOT stop after you have the investment.


An

ACCOUNTANT

to keep up with

funds coming in

A trusted

BANKER to

hold the raised

funds and set up

accounts

A

MARKETING

EXPERT to help

formulate your

message to

investors

An INSURANCE

AGENT to

advise on

insurance

products to

mitigate your

risks

A BUSINESS

ATTORNEY to

complete all

paperwork and

agreements and

advice on legal

issues and

procedures

Who You Need to Get Started!

“You are only as good as your crowd.”

A BUSINESS

COACH to

guide you

along the way

on “Best

Practices”

Reach

your

campaign

GOAL!


Kendrick Law Practice

3035 Stone Mountain Street, #630,

Lithonia, GA 30058

Phone: 678.739.8109 | Fax: 678.323.7887

[email protected] |

www.kendricklaw.net

Call us TODAY if you have a few follow up questions or

you are ready to get started with your own

CUSTOMIZED consulting session to learn IF and HOW

to get started with YOUR crowdfunding campaign with

our group of professionals.

Crowdfunding Consultation Services

Here is what YOU can expect from our 1 hour in person consultation. We will help you:

Decide if you QUALIFY to crowdfunding at this time (We have a check list);

Decide if crowdfunding is right for YOUR business at this time (We will give you the PROs and

CONs for federal and state crowdfunding);

Compose a list of “dream team” professionals to make your campaign a SUCCESS (Choose

from our already vetted list of contacts to follow up with);

Receive answers to YOUR questions specific to your business and circumstances;

Come up with a written “action plan” to get started immediately (including legal services).