1. A Regulation D Offering provides for fractional investments much more successfully and efficiently than utilizing only a business plan. A business plan alone cannot provide the basic fundamental necessity needed for raising capital from investors effectively - the framework necessary to offer and receive fractional investments. Business plans typically confine businesses and entrepreneurs to locating one or two wealthy individuals with the capability of investing a substantial amount of capital. These investors are hard to access and, since they are taking the majority if the risk, typically demand a large amount of ownership and control for their investment. A Regulation D Offering provides the legal framework and structure that allows multiple individual investors to participate in the investment opportunity on a fractional basis. Regulation D is the actual Securities and Exchange Commission legal exemption and program you use to sell your stock (or membership unit if an LLC) to an investor.
2. A company that has a Regulation D Offering in place is seen as more capable and serious to investors. A business plan is not a sophisticated document for soliciting capital investment. A business plan just delivers an idea - it does not actually provide the documentation needed to raise capital from an investor - nor can it legally. A private placement memorandum, used in conjunction with Regulation D Offerings, is a sophisticated document that provides the necessary documentation that enables the investor to actually invest into your company. How hard will it be to "close" an interested investor if you do not even have the appropriate documentation to accommodate their investment? Would you invest into a private company that did not approach you in a sophisticated manner?
3. In addition to being able to effectively raise capital from individual investors, a Regulation D Offering enables the company to utilize a vast and effective network of sophisticated and regulated funding resources unavailable to companies that just have a business plan - brokerage firms, fund managers, and individual stockbrokers. These are the most efficient and effective resources for raising equity capital - they are the same resources a public company uses to raise equity capital. When you consider that a single stockbroker typically has access to dozens if not hundreds of investors - it is easy to see why Regulation D Offerings provide a company with an inexhaustible resource for raising investor capital. These highly sophisticated resources will not work with a company that has not formulated a Regulation D Offering.
4. Most businesses and entrepreneurs make the mistake of presenting their opportunity to typically one venture capital group at a time. This is highly inefficient, and when combined with the limitations of raising capital via a business plan only format, is also highly ineffective. A single stockbroker typically represents dozens of investors interested in early stage opportunities - thus a Regulation D Offering provides access to the largest, most effective source of private equity capital - securities brokers and the individual investors they represent.
5. Most entrepreneurs and businesses don't have the ability to identify quality investor prospects. By structuring a Regulation D Offering, the entrepreneur or business can easily research and contact stockbrokers, fund managers, and brokerages about their offering.
6. The company sets the terms and conditions of the Regulation D Offering and the investment to the prospective investors. In a situation that involves a venture capital group or single, wealthy investor, the situation is typically reversed.
7. Additional rounds of capital investment can be structured more efficiently.
8. The detailed disclosures in a Regulation D Offering memorandum limit the liability of company principals.
9. Many smaller companies waste time seeking capital through venture capital groups. Most venture capital firms are interested in capital investments exceeding $5,000,000 and companies in ultra high growth industries capable of producing very high annual returns. Many small companies seeking funding in the market do not match these criteria. A Regulation D Offering allows smaller companies the ability to leverage the smaller amounts of equity capital they need.
10. Companies utilizing only business plans to raise capital ultimately end up paying "finance brokers" large retainer fees to promote their business plans to investors. These finance brokers have extremely low success rates due to the same fundamental problem outlined above - business plans are not effective vehicles for private capital formation.
11. A Regulation D Offering allows an emerging company to effectively target the best source of private equity funding available for their company - the individual private investor.
