How to industry sign banking north carolina pdf online
welcome everyone we'll get started in just few minutes from everyone to the webinar today we're going to go ahead and get started even though we have a few people still coming on board so that we can stay on time my name is Emily Edmunds and with the NC growing together project at the Center for Environmental farming systems and we are on the sixth webinar in our series for food and farm business development in North Carolina this is co-sponsored with the rural center and we are very very grateful for them being here with us to put these on I'm really excited about today's presentation I'm going to give you a little overview of what we're doing today and what we're going to go through and then I'm going to introduce you to Leo John who is because insan' investor outreach legal specialist with the Securities Division at the NC Secretary of State's office and he's going to go through some of these new laws that will impact businesses in North Carolina so I'm going to walk you through a little bit of how to use the platform how to ask questions all of that sort of technical stuff and then we'll talk with Leo and we will have a question-and-answer session at the end so if you have any specific questions or things that you don't understand I'll show you how to ask those questions and we'll address that at the end while we have Leo on the line for those of you who have not come to one of these before or worked with us before NC growing together is a five-year USDA nifA funded project at chef's we're based at NC State at A&T and at the NC Department of Agriculture and consumer sciences we focus on four primary areas moving local and regional food into supply chains across the state and the region and trying to develop models that will work for other states across the country so we've done a lot with farmer capacity and supply chain expansion in our first few years and now we're really moving into partnerships with both small business center networks across the state and the local and regional governments across the state to try to create more supportive business environments for food and farm businesses that are developing so this is part of that bucket of work if you have any questions about NC growing together feel free to reach out to me after the webinar or to check out our website and see growing together org so for the platform today just so that you guys know what you're looking at over on your right hand side of your screen you have your sort of control panel for the webinar if you look at the handout section which has a little triangle next to it if you click that you'll see a PDF version of today's slides you are more than welcome to download those and use them to check out links or keep on file with you later and then you are also if you go down a little bit farther you'll see questions that's where you can type in any questions that you have during the presentation and I will see those and direct them to Leo either at the time if it works or at the end if it doesn't you are all muted by default so you will not be able to use your voices so you'll have to use the questions box to get in touch with the staff who are running the webinar at the end of this this is being recorded so we will have a link to a YouTube video that you can watch again later if you have questions and you will get an email from me with that link and the PDF version of the slides at either later this afternoon or first thing tomorrow morning and if you have any other topics you'd like to see in this series pretty feel free to reach out and let us know all right and with that I am going to turn things over to Ryo please feel free to let me know if you have questions or difficulties during the webinar and we are really excited to have real with us today we are thank you for being on well good morning Thank You Emily for inviting me to do this webinar I'm going to attempt to show you what I look like let's see if if this happens there you go so that's me just so if you see me on the streets or feel like saying hello if you ever catch sight of me feel free to do so my name is Leo John I've worked with the North Carolina Secretary of State's office in the Securities Division and I'm often traveling to small business centers and really all over the state providing this kind of educational information so my contact information is on the first slide so feel free to reach out to me if you have specific questions after this webinar and we don't answer them here all right going back offline visual mode okay so now that you're not going to be distracted by my beautiful face let's get into the meat of what we're going to talk about so I'm particularly excited to be to be doing this summit this webinar because for two reasons one as I understand it this group is is really people from all over the state especially from the rural counties and rule cities etc rural towns and the the message is of particular relevance to so the smaller towns in the state because because of the change in the way the laws were written in the past few years it is now possible for average investors to now invest in small start-up businesses and this is you know for a lot of you that might seem like you know what's the big deal well in the past it used to be that investing in these kind of startups these kind of high growth but also high-risk businesses was limited to sort of high net worth individuals these individuals or venture capital funds or investment funds are often located in the bigger cities even when the state as well as across the country they're often in Canada you know the Boston's and the Silicon Valley's and places where we're sort of you know the small entrepreneurs setting something in its garage is often not able to access funds from so because of these changes in the federal and state laws it's not only possible for an average entrepreneurs to raise money from people in their communities and I think that's a big that's a big shift the other reason this group is a particular interest to me is I track this kind of crowdfunding fairly closely and from everything that I'm seeing a lot of the crowdfunding activity the investment crowdfunding activity is happening among the exact businesses that are part of this group which is the food the farm the restaurants the cupcake shops the breweries the distilleries you know all of those have food and groceries and you know all of those businesses that that are really the you know the the kind of folks that are going to be on this call so so for those two reasons I think this you know this seminar is of particular interest to me okay let's see if I can move ahead where okay there you go so a quick disclaimer some of this is may sound like legal information and it is but it's not legal advice if you are going to be helping a small business or if you are a small business yourself we strongly recommend you talk to a an attorney who is familiar with this kind of this area especially around security the business law and take sort of their counsel before you actually go and do a securities offering stretching the state is Elaine Marshall has been since the mid 90s for all of you who are from Nadia my mother involved in kind of North Carolina business you probably know this is a quick outline of what I am going to cover and hopefully this will give you a good feel for you know what some of the issues are in terms of what we're going to be talking about so I'll start with kind of the basic what is a what is crowdfunding talk about an example I'll mention the basic general rule in this area and talk about some of the common exemptions we will go in-depth into the North Carolina paces Act so for those of you who like to Google things after webinars I would recommend you google this phrase and see paces Act this is the name of the legislation that was passed by the North Carolina General Assembly last year that made possible the state based crowdfunding law that that we're going to be talking about so NC paces Act would be or the phrase to look up also relevant of this discussion is the federal crowdfunding law which also went into effect last year and to find out more about that particular piece of legislation I would look up the phrase regulation crowdfunding and the SEC or regulation crowdfunding and title 3 or regulation crowdfunding and the JOBS Act those are all phrases that you could use to to search in terms of this presentation we'll end with just common sense things that all of us as investors and some of us is entrepreneurs need to keep in mind when we are getting into the space of federal and state crowdfunding okay so let's start with kind of the basic what is crowdfunding right and for all of you that are familiar with Kickstarter IndieGoGo and GoFundMe it is it is just that right it is an online money raising strategy it essentially began with kind of you know lakhs of people going online and donating small amounts of money to fund a particular project an idea a book a movie something that they wanted to see happen right it usually is done online it doesn't have to be done online but you know because of the growth of the internet it's become possible to organize these kind of fundraisers and so it's usually done online so what happened was in Canada mid to the mid 2000 to 2006 2007 time frame websites like Kickstarter and IndieGoGo started taking off and it began as a way to get lots of people to donate money towards a cause and in return get something nominal right in return get copy of the book get a you know you get to come spend a day with the director of the movie or you know something nominal like that and then businesses started seeing the possibilities there and they said you know what if we could use this method to sort of crowd fund our product development so so businesses started you know developing little cool devices and products and asking people to essentially pre purchase those products right so one of the biggest Kickstarter campaigns that has ever happened is a campaign by a company call a pebble PEBB le they were they were a smart watch company before Apple was got into the SmartWatch business they raised ten million dollars in the first round of Kickstarter money and in return for you know average contribution of $100 they gave all their contributors a watch so they told them hey once the watch is ready we'll send your watch so in effect these people were pretty purchasing this particular watch in fact pebble was so successful they came back a second time and then they raised twenty million dollars using the Kickstarter method so it became this way for businesses to essentially fund product development all kinds of coolers and you know sauces and things got developed this way so Congress was also apparently watching these you know this kind of development and they said you know perhaps there is a way for us to use crowdfunding to fill or to solve another problem and the problem that they thought was access to capital for small businesses so Congress thought what if we use this exact same model of connecting people who want to give little bits of money and businesses that need a you know pool of cash and what if we added to that a profit motive so in effect what they did was they said hey instead of people just donating money or giving 100 bucks and getting a watch in return what if they were allowed to invest in businesses in return for you know getting a piece of the business they would give the hundred bucks or 200 bucks and get you know ten shares with the company or they would buy a promissory note in the company offering the company a loan in return for 5% 6% rate of interest so they in fact made it an investment based crowdfunding model this was legislation passed by the JOBS Act of 2012 and it made possible several different types of investment crowdfunding and this is a distinction that I will come back to in a few slides down the line because it's an important distinction difference between donation based versus investment based crowdfunding so here is a classic example of what we are talking about right I am sure all of you are familiar with this kind of scenario so all of you have probably met with or are yourself a entrepreneur you know somebody who is trying to get a business off the ground so I have a little example here where I say there is a lady but then you must Amy okay Amy is a resident of named your County in North Carolina Amy is a natural-born Baker right that's what she does she's really good at baking cupcakes she shares her cupcakes with a friends and family they love it they tell her you should start a little business because you're clearly good at it so maybe she goes over to a little town nearby and she opens a little store the store is popular right there are people who wait for you know in long lines trying to get into into her cupcake store Amy has a problem I just got all these customers who want her cupcakes and she's unable to satisfy the demand she needs capital right that she's got to expand her business she's got to open a new location amy has a number of choices when it comes to obtaining capital she could go the traditional route go to the bank the SBA credit unions though they're all perfectly good options she could go to venture capital funds they are through the more professional investing class she could go to wealthy individuals who fund businesses with their own own capital like the individuals on the TV show shark tank those those people write big checks you know ten thousand twenty thousand hundred thousand dollar checks and Amy could get some funding that way or she could go the most commonly used route which is she could raise money from friends and family these are people who typically fund the first round of capital let's say amy chooses to go with friends and family all right so now Amy is essentially giving up a piece of her business in return for cash from friends and family she is in fact doing a securities offering she's selling equity in her business or she is borrowing money by issuing a promissory note all of those are examples of securities offerings and Amy now has to be careful because there are all kinds of federal and state securities laws that she has to comply with and I won't sort of go into a whole bunch of details about all of those laws other than to say well the basic general rule in this area is that Amy or really any one of us cannot offer or sell any security and less number one you register that offering number two you find an exemption for that offering or number three you have their offering classified as a security covered in the federal law which is essentially a special class of security and I tell you all that just to point out that there are existing ways for small businesses to issue securities and raise capital other than the crowdfunding method which is what we're going to get into more detail but as you can see in this slide in there are all kinds of exemptions mostly for small offerings so for the classic small business that just needs you know some capital they could raise money under seventy nine which is an exemption which allows and offered not more than twenty five persons and there are the exemptions that Amy could use the problem was it was not possible for an Amy to reach out to a large number of people I talking you know a hundred people two hundred three hundred four hundred people without running into problems of publicizing securities offerings in a way that violates securities laws so one of the big developments with crowdfunding is and here's another exemption the five or six exemption which citizen you know allows businesses to raise capital by essentially sidestepping state laws and merely complying with a federal law but really the possibility of Amy reaching out to lots of people was was essentially non-existent because of the raise of securities laws were written with the changes that the federal law made and the changes that the state made in July of 2016 now it's going to be possible for Amy to reach out to several hundred people she can do it online she can she does not anymore had to reach out to the five or ten wealthy individuals in her town who she may or may not know she's she's the chicken now use essentially the power o
the internet to reach a wide audience of people and perhaps persuade them to invest in her cupcake shop and that is the the I guess the promise of crowdfunding that Amy can now reach lots of people in the state and have then sort of bankroll her business in a way that she could not do in the past which which is is in many ways exciting and from our point of view in many ways unnerving because we are also kind of the regulator in this space and we now have the possibility of lots of investors being involved in these high-risk startup stage businesses many of which are likely to fail as all of you probably know a lot of small businesses tend to fail in their early days I mentioned I'd come back - the difference between donation-based and investment based crowdfunding and here is here is what I was talking about the donation based model involves websites like Kickstarter IndieGoGo GoFundMe and they don't involve the issuance of securities right the people that are contributing money in those cases are getting something tangible in their time they're getting a cooler they're getting a watch they're getting a t-shirt a mug a book something something nominal the people who are investing in investment based crowdfunding on websites such as angel list we funder start engine etc these people are actually investing their money with the hope of some kind of a return in the future they are doing it for a profit motive in many cases they're doing it because they want to make a financial gain right they're not just expecting a t-shirt or a mug they are essentially investing in the business to make a financial return and if that is going on then you now have a securities offering and you have to make sure you comply with state and federal securities laws in this space so here so that's been talked in abstract terms I thought I'd just show you a few websites is to show you kind of what I'm referring to so I'm going to try and attempt to go to these websites which I have opened and we'll see if you can you can see what I'm talking about so here is Kickstarter Kickstarter probably many of you are familiar with involves kind of the the movie project in this case you know this particular movie is raising you know whatever amount of dollars they've got pledges of $54,000 they've got five hundred and eighty six backers and they're being promised some perks in return the there are no security is being offered in this case now I want to show you the website beef under comm which the website where investment crowdfunding is now occurring and if you scroll down to one of these companies that are raising money figured I'd show you something you could relate to which would maybe be the Texas beer company project or issuer if you look at what they're offering they're essentially offering a Class B unit of the company and they've priced it at eight hundred and forty dollars which means that you invest 140 dollars in this business you are getting one unit which I think means a LLC member unit it could be equity in the company it could be debt in the company it could be other types of securities in something but it looks a lot like it starter in that they have set out a minimum which is a hundred thousand dollars as their goal they have set out the maximum which is a million dollars and they've already got investors to 114 investors to put in an urn and twenty two thousand dollars right so this is a an example of an existing investment crowdfunding offering that's going on next feed calm is another right which I think has a lot of food based offerings and it also does last interstate crowdfunding which is the type of North Carolina based crowdfunding that that I was hoping to show you so I would you know I would take a look at these websites to get a sense as to the kind of offerings that are going on so let me just click on this is a restaurant it's based in LA and let's say they are offering it looks like some kind of in revenue share agreement they are raising a minimum of a hundred and fifty thousand dollars and they've got seventy four investors who put in $50,000 so what they're promising their investors is we'll give you a 1.5 X multiple on your investment and I haven't looked through all this but I imagine it's some kind of revenue share where you know from all the money that we get from selling food at our restaurant we are going to set aside say 10% until we pay off all the investors their principal and then we'll give you 50 percent on top of that as a financial return for making an investment so all these websites are registered either with the SEC or with the SEC being the Securities and Exchange Commission or with and/or with their state securities regulator in many cases they are they have been operating a sort of in the past couple years under you know specific exemptions that they can operate under so when you get a chance to take a look at the difference between these two webs two sets of websites it will give you a sense as to kind of you know why that distinction matters okay so now moving on to the North Carolina crowd funding option so I told you that you have to if you're doing a securities offering you have to register the offering or you have to find an exemption for it the North Carolina crowd funding option is an exemption from registration of your securities offering so it allows businesses to raise capital without registering the offering which is which is a fair amount of savings for the small business in terms of the costs of putting together their offering documents so what does the North Carolina crowdfunding exemption look like I have a slide here which kind of gives you an overview the state legislature called it the invest North Carolina exemption the idea being to allow North Carolina investors to invest in North Carolina businesses and that is a significant point part of this crowdfunding is part of the way the laws are written in this space the only way this exemption works is if everybody operating in this exemption is is a resident of North Carolina so you have to have North Carolina investors putting money into North Carolina businesses if you have even one investor who's outside the state the exemption may be lost in which case you may have you may be in a little bit of a pickle because now you may be doing an unregistered offering without an exemption which could set you back a little bit in terms of your your business goals so so keep that in mind an important piece of this legislation is that all of the activity has to be within the state so what are the what is the framework for this kind of a securities offering one of the main rules is you can only raise a maximum of two million dollars under this exemption so that is the cap for any business that trying to raise funds under North Carolina crowdfunding you are limited to two million dollars if you do not have or do not want to provide reviewed or audited financials meaning a balance sheet and income statement some kind of a financial statement if you do not have or do not want to provide that you are limited to a million dollars in terms of how much funds you can raise under the exemption as I mentioned all investors must be northglenn or residents there is a limit on how much an individual can invest in one of these offerings and that limit is $5,000 per business or poor-poor offering which means I as an investor can put $5,000 into Joe's food truck I can put $5,000 into Katie's small tax business and I can put $5,000 into Amy's cupcake shop however I cannot put more than $5,000 into any one of these individual offerings now that is a significant difference from the federal crowdfunding option which is another option for small business which allows you to raise money across 50 states the federal option limits you based on how much each investor makes in terms of the income and we'll get into that in a couple of slides down the line before a business can do any kind of advertising or try and raise money they required to file certain paperwork certain forms disclosure document that kind of thing with the North Carolina Securities Division once the business has begun fundraising they now have an obligation to keep their investors informed as to how the fundraising is going and once the fundraising is closed as long as they still have investors and that out funding offering then they have to continue to give them quarterly updates as to how the business is doing this is a significant investor protection mechanism that's been built in that requires the business to keep investors informed as to what they're doing with a funder raised and how the you know how when or if the investor can expect some kind of a financial return for the money they've invested another important point the company Amy's cupcake shop can raise money using her own website or she can raise money using a third-party funding portal in either case that website has to be registered with the North Carolina Securities Division however a point to be made there is a me being able to use her own website is a significant advantage to Amy because a third-party funding portal would charge a particular rate which is typically five six seven percent of the amount that's being raised as a fee for hosting this kind of securities offering using a third-party registered funding portal is a requirement under the federal law however under the state the North Carolina Pacers offering Amy can use her own website to conduct the securities offering so that is a significant advantage to Amy compared to the federal model so there are essentially two channels for crowdfunding if you want to think of it as two packs or two two roads to raising money under the North Carolina paces act exemption one is called the ncpo and the other is called the LPO the ncpo is for businesses that want to raise a maximum of two million dollars they have to use the internet to conduct the fundraiser they can of course use their own website or they can use a registered funding portal in many parts of the state we are told broadband is not as high speed as you know we would like in many cases businesses may not want to use the Internet in those cases we have added the option of the LPO the local public offering however any local public offering is limited to to a fundraiser of a maximum of $250,000 you don't have to use the internet you may use the internet and you are limited in terms of the type of instruments you can offer you're limited to equity debt or the so called revenue share agreements so if you're interested in this space get familiar these two concepts the ncpo and the LPO and who it works for one is for those with wanting isn't in it and the others for those that want or may not want to use into it okay if you think if you're looking for an overview slide for what is what all is involved in a North Carolina crowdfunding offering this slide might be it for you this is kind of the checklist of all the things you've got to be thinking about if you're thinking of raising money from the crowd by issuing some kind of an investment offering number one your financials so how much in terms of financial information do you have what kind of information are you comfortable giving out to your to the crowd number two all of the funds until you've hit your minimum argot offering amount all of the funds have to be kept has to be kept in a in an escrow account which means the business does not have access to the funds until they've hit a minimum which also means that as a business you have to start thinking about finding an escrow agent or an escrow account number three are you going to use a funding portal to do your crowdfunding offering or are you going to use your own website if you are if you are using a funding portal what are the fees associated with it are you comfortable with those fees if you're using your own website are you going to create a new web page to do the offering how are you going to sort of manage the process of make of doing the offering okay not sure what happened there but let me go back so that would be the question of whether to use a funding portal or website the fourth thing to think about is are you going to prepare or you have to prepare a disclosure document how are you going to prepare that are you going to use in the turning a you can do it yourself what kind of risks does your business have and what kind of risks could you disclose to your investors so that you are protected in the future in case things don't go as planned one of the big fears for people that are issuing securities is you are required to provide all material information that an investor needs to know at the time of making the investment this disclosure document is where you would provide all those risks and you'd lay out all the possibilities so it's really a disclosure document of your friend and you've got to pay a lot of attention to what your disclosure document is going to include the other thing you've got to think about is and probably you know very significant part of all this is how are you going to advertise and market your offering to the to residents of the state right remember we've got a fairly large state we got 10 million people far-flung areas most of them would never travel to a nice cupcake shop to taste her cupcakes so in that situation how are you going to persuade all these people who are never going to try your products to make an investment in your business what is permitted what is not permitted and there are certain rules about you know how you can use Facebook and social media Twitter etc and what you can say and what you cannot say in these kind of offerings so you've got to get familiar with those rules too there of course forms to be filled out and those forms have to be submitted to the North Carolina Securities Division before you actually begin a securities offering I have included a link here to our website where you can find a lot more information with their FAQ rules that statute is up there and I would encourage you to take a look at at that website for additional information so just running through some of these some of the topics are laid out in kind of 30,000 foot level or financials they have to be prepared in accordance with GAAP they could include things like balance sheets staples of income has to include can your notes your footnotes statement of changes to stockholders equity remember if you're raising above a million dollars only do you have to worry about kind of providing reviewed or audited financials which is different from the federal crowdfunding option which requires financial information for anybody doing more than $100,000 your escrow agent and this is a this is an important point your escrow agent could be a bank it could be a depository institution or it could be your lawyer this is a significant change from how the federal law works in this area because it does not permit kind of use of a lawyer in in trying to tailor this exemption to the use of North Carolina investors and businesses we were told that you know many businesses have existing relationships with law firms and the law firms typically have kind of an escrow account or fiduciary account where they can very typically house funds for things like you know home closings or you know any kind of transactions that require the lawyer to hold the funds so we've added this option where a lawyer or law firm could act as your escrow to handle the funds for you I remember the business cannot actually access the money until you've hit the minimum until that time it has to stay with the escrow agent of the escrow account the minerals are set by based on NCP or LP oh it's 20% for ncpo and 25% for LP oh the funding folder or website they are you could use a registered funding portal right now we don't have a funding pool that is actually registered to operate a funding portal in the state you could also of course use your own website to fill out the offering you are required to add what's called a message board or a communication channel to your website if you're using your own website for the crowdfunding offering it looks a lot like if you go to any of the websites I told you it looks a lot like a message board where investors ask questions and the business res
onds to those questions your disclosure document I mention to you is is crucial make sure you highlight all the lists of the business and this would be a good place to get an attorney involved to sort of care feel for the risks associated with your business your advertising and marketing rules depend on kind of what type of offering are you doing if you're doing an LPO up to $250,000 you have a little more flexibility in terms of what you can say you can use billboards you can use you know face to face meetings you can go at go to your church and talk about your offering all those are permitted as long as you submit all your advertising in advance of any use to the Securities Division so we can take a look at it make sure it does not sort of raise any eyebrows design mislead and then you can go ahead and use your your advertising so those rules are far more flexible and open compared to an ncpo which is of course the two million dollar offering that limits you to tombstone eggs which are essentially really short bursts of information you know this is not much your fundraising this is the name of the company this is where you go to find out more information so you're very limited in terms of what kind of information you can provide under the ncpo option there are forms associated with this they are available on a website at this particular link I have a slide years it just talks about how crowdfunding is going so about 35 states are now approved some version of a state crowdfunding and as of last year almost 180 offerings had had begun so this kind of security is offering there now happening all over all over the country a regulation crowdfunding is the federal option and I won't spend too much time on it I have a bunch of sites as to you know how it fits within within federal law I have a couple of slides here that talk about the rules for federal crowdfunding as you can see additional financial information that you have to provide if you're raising money under under this particular option the how much an individual can invest really depends on their income in the federal option and it depends on whether you make less or more than a hundred thousand dollars title three federal crowdfunding has also been in in effect for about a year now as of yesterday there were and you know this particular slide is for 2016 and I happen to check information for yes as of yesterday and it looks like now there are more than 450 offerings that are live or that have that have been ongoing businesses ranging from breweries to food trucks to restaurants are all raising funds under under this particular federal option the North Carolina has had I think the last I checked five federal crowdfunding offerings one from Davidson one from Greensboro and three I think from kinda raleigh-durham area I have not seen a food based offering yet a lot of them have been kind of technology companies but the federal crowdfunding option is in effect and has been active for about a year now okay so let's see trying to move ahead here the next few slides are really just common sense tips on you know what you should be thinking about if you're if you're thinking about a crowdfunding offering whether it's federal or state and it's self explanatory so I'm not really going to spend too much time on it I will point out that crowdfunding offerings are high risk and I'm sure this doesn't come as news to most of you but if obviously small businesses at an early stage tend to have a much higher risk of failure I'm actually trying to plug in my my power source so that's why you can hear me moving around but obviously these kind of business is a much more high risk and the Small Business Administration tells us that 50 percent of these companies fail in the first five years so obviously whether you're doing an offering or investing in these kind of offerings you have to be aware that your list so much higher possibility of losing other funds is also much higher than these kind of offering okay so some of the tips are fairly self-explanatory don't discount disclosure right you are doing a securities offering under an exemption from registration they still required to provide all material information that the business should provide at the time of raising funds so don't discount that because that still applies to you even if you're doing a crowdfunding offering avoid distraction this is this is a good thing to think about because a lot of people think of crowdfunding as a great way to to get on board a lot of people and that's certainly true you now have folks who are invested in your business but that also makes them and a co-owners of the business which of course means they now have an interest in how the business is doing what's going on as Amy opened a new store how are the cupcakes selling you know all of those things are any things that these investors are going to want to know they're going to call the businesses and they're going to ask questions and that's going to distract the business owner from running or the everyday business of running the business so that is something that you did you have to be comfortable with that the idea of having all these people on board and as potential shareholder a good business the other thing to think about with having a whole bunch of owners is as a you know if this is going to be the only fundraiser you're doing you don't have to worry as much but if you are going to in the future go out and raise funds from maybe in the second round of funding from a private equity fund or a venture capital fund you're not going to be looking at professional investors who are going to look at your shareholder cap table or the number of owners in the business and there's going to be a little less excited about you if there are you know hundred shareholders or two hundred shareholders because now they have to deal with the whole bunch of people who might have a say in the future of the company and they'd much rather deal with kind the two three or four person or the four shareholder company where it's much easier to to get things done so so be aware that you may be a little less attractive to some of these professional investors consider alternatives this is again a good competent thing to think about because crowdfunding may be kind of the newest option but it's certainly not going to be in all cases the best option and there are other exemption the other sources of funds and you should consider all of those before you dive into into crowdfunding this particular tip the no secondary market for these kind of shares trick is particularly relevant to all of us as investors because we're all used to being able to easily sell shares of companies that we own you know we own shares in Walmart as we want to sell shares we can call a broker or we can you know go online and head sell and we can get out of those shares if you want share the namings cupcake shop though there might not be a secondary market for these kind of shares in which case you may be stuck waiting for an exit on on Amy's cupcake shop and you have to be comfortable with the idea that the exit might not happen in six months it might not happen in your is my take five years or it might never happen at all so there is no tickety's there isn't as much of a secondary market for these kind of shares okay so these are this kind of the wrap-up slide for the mid car Pawnee is not easy money these are not risk-free investment you cannot simply crank up a website and crowdfunding an important point because I cannot tell you how many places I've been to where you know somebody comes up to me and tells me I would love to start a website to do crowdfunding and that's great and we certainly hope you know more website since pop-up to do boots kind of thing but this would not be similar to Kickstarter because you would have to register this website and you'd have to follow some of the rules associated with these kind of websites that do crowdfunding as a funding portal not to say that it you know these are cumbersome or they're impossible to overcome but there's certainly some rules that you've got to follow until you go to make sure you're familiar with those if you're if you're going to crank up a website and finally these investments are not pre-screened right if you're doing a securities offering you file in certain paperwork with us but we're not screening these to make sure whether these are good or bad investments for investors as investors we're all going to be required to do our own due diligence to before we therefore cut money and invest in these kind of businesses why do we tell you all this while they're fairly stiff penalties associated with violations of securities laws making an unregistered offering of the non registered agent may be a felony depending on the intent involved and your business could be exposed to penalties provided by securities laws which include fines jail time and of course you've got to worry about lawsuits from your investors who may come back to to sort of you know try and retrieve any funds they've lost in a bad offering securities laws are time due for the protection of investors you're required to provide complete macular information before investors can make informed decisions some of things you should be disclosing are listed here and then I provide you a link to a the website of NASA which is essentially the association of state securities regulator and they have some good information as to what kind of you know material information you should be providing in your disclosure document yes what I'm suggesting you talk to a good securities attorney before you get into the space I have some links here for those people who are some more self-help kind of people take a look at these links they provide some more information and of course we are a resource we want to be a resource in this area and there's a phone number feel free to reach out to us Emily I will now hand it over to you you Emily are you there hey leo sorry I was talking and no one can hear me can you hear me now yes we can you know great sorry about that everyone leo thank you so much that was a lot of material and I can get probably raised a lot of questions that people will want to contact you about later I don't have any questions that have come through in the questions box at this point I'll give you guys a couple of seconds to shoot this in in the meantime if you do have questions about what we as presented here you will receive an email with the PDF of these slides you can check out the links you'll have his contact information and you can feel free to reach out to him afterwards and also note that we have two more webinars in this series that will wrap up the year and the next one on September 7th is about changing trends and practices and how to support restaurants and other food businesses as they are shifting towards more local product and then on October 10th we are going to have Leo back again and he is going to give us sort of an overview of trademarking and why it's really important for students on businesses to pay attention when they are doing their branding work and developing trademarks so I don't have any additional questions Leo did you have anything else you wanted to add the only thing I would add is V at the North Carolina Secretary of State's office have a an active outreach program so we do travel all over the state so if you feel like you have a business audience or an audience that would be interested in learning more about this kind of you know this new option for fundraising again feel free to reach out to me because we do travel all over the state and we do make in-person presentations on this and other topics that are you know helpful to to small businesses at Thank You leo all right well everyone thank you so much for getting those in tomato I do have one question Leo can NC resident investors be do they have to be full-time residents or could they be second home owners who have property in North Carolina what's the sort of definition there so that the statute is only just says North Carolina residents okay so so right now you know if it would you could fall back on kind of the IRS definition of where your resident right when you pay your taxes and so you know that could be an option however the statute is silent on kind of who is an ocular resident so the only the only requirement in terms of the rules is you have to provide a a local address so North Carolina address for where your resident so I'm not sure if that answers the question but you but you are required to provide a an address for for a your resident off okay I think that is perfect thank you all right good job and we squeezed about one end for you all right thank you everyone we are going to end the recording now and I will make sure that you get the PDF and the youtube link sometime today or tomorrow again leo thanks for joining us and thanks to the Royal Centre for helping us hosteen bye everyone thank you bye
