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How Medtech Firms Can Raise Capital Through Social Media
Best practices for taking advantage of a recent SEC rule change allows companies to market their investment opportunities via social media and other means.
September 27, 2013
2 Min Read
Would you ever advertise a capital raise for your medical device company through Facebook? Perhaps take out an ad in this very publication? Until recently, ideas like this seemed absurd.
For more advice on how to get your medical device firm funded, attend the Start-Up Accelerator Master Class at MD&M Minneapolis on October 28, 3013.
On July 10, 2013, the U.S. Securities and Exchange Comission (SEC) eliminated the prohibition against general solicitation and general advertising for private companies, opening up new nontraditional avenues to raise capital.
The change to the SEC rules means private companies can now market their investment opportunities, a key provision of the recently enacted Jumpstart Our Business Start-ups Act (more commonly referred to as the JOBS Act) that eased access to capital for start-ups. The SEC ruling will make it easier for start-up companies to reach investors, market their available share offerings, and increase funding. A major stipulation, however, is that investors approached in this manner must be “accredited investors” as defined by the SEC.
There are some best practices companies should follow if they decide to raise capital under these new rules:
Sell only nonvoting shares.
Keep track of all investors’ contact information, so they can easily be reached should a major event, such as a merger or sale, occur.
Insert a provision allowing the company an easy way to buy back the shares.
Fundraising can be difficult for companies across industries, but the SEC’s new ruling will allow companies to seek out new, creative ways to reach potential investors and raise the capital they need to be successful.
What creative advertising strategies are you considering to pique the interest of investors? Leave a comment below and let us know!
Mitchell Kopelman is partner-in-charge of technology & biosciences group at Habif, Arogeti & Wynne LLP. Ori Epstein is senior manager in Habif, Arogeti & Wynne’s technology & biosciences group. For more information, click here.
[image courtesy of FRAMEANGEL/FREEDIGITALPHOTOS.NET]
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