Rule 506(c) Funding
We have access to two portals, operated by IRA Custodians which currently have a total of more than 50,000 Self-Directed IRA Accounts (that number is increasing daily), and which are possibly the only two IRA Custodians that allow Rule 506(c) offerings to be made directly to their SDIRAs. Basically, almost no IRA Custodians allow their custodial accounts to invest in anything other than Fortune 500 companies and the like; so, these two portals are great places for smaller companies—public or private–to raise money.
The two IRA Custodians require that a FINRA-registered Broker-Dealer make the offering on the portal; so, we have two FINRA-registered B-Ds ready to be the B-D of record (either one can be used), and a “techie,” who has the required approval to set up the company on these SDIRA portals, so that these portals can be accessed quickly, attractively, inexpensively, and in compliance with both SEC regulations and the IRA Custodians’ requirements.
A large majority of the people with IRAs are accredited investors; and, by registering with a SDIRA portal, they are indicating that they want to invest their IRA money on their own, without the restrictions imposed by custodians of IRAs which are not self-directed. And, because a reasonable percentage of this is “risk money” for these wealthy investors, we believe that a well-presented deal will attract the number and type of investors entrepreneurs will want. Also, the 506(c) offering can be conducted at the same time as a Regulation S offering to non-US persons.
The above distribution through these SDIRA portals, plus a simultaneous Reg S offering, should easily provide companies with more than enough exposure to targeted, real investors, enabling the Rule 506(c)/Regulation S offering to be fully sold. For example, with only a 1% return from these approx. 50,000 investors, and with a minimum investment requirement as low as $25,000, a company will raise $12,500,000!
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