January 11, 2023

Revolutionizing Capital Raising: CEO of Issuance, the Premier Reg A+ Investment Platform

Midas Letter
Midas Letter
Revolutionizing Capital Raising: CEO of Issuance, the Premier Reg A+ Investment Platform
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Today, we sit down with the CEO of Issuance, Darren Marble, the leading investment platform for Reg A+ offerings. In this interview, we delve into Issuance’s business model and how they use its proprietary technology to support companies in raising capital under Reg A+ with its ability to allow retail investors to purchase securities in under 60 seconds.

We also discuss what makes a Reg A+ offering successful and the key factors that drive a company’s ability to raise capital. Darren shares insights on how companies either market their deals or convert their audience base into investors. He also touches on the importance for investors to diversify when looking into Reg A+ deals.

Company Bio:

Founded in 2018, Issuance is a SaaS-based capital-raising platform utilized by issuers for regulation financings. The platform is built on a foundation of industry leadership and success, where Issuance has helped issuers raise over $250M of growth capital. Issuance offers a streamlined mobile and desktop-friendly investor experience that allows investors to check-out in under 1 minute using Apple Pay, Google Pay, as well as standard payment methods.

Resources and Links:

Timestamps:

00:00 Issuance, Inc. CEO Darren Marble

00:41 Business model of Issuance

02:09 Broker-Deal partnerships

02:29 What makes a Reg A+ offering successful?

05:09 What do successful Reg A+ offerings have in common?

07:18 How can issuers convert their audience base into investors?

Transcript

James West, Midas Letter CEO: Darren Marble joins me now. He’s the co-founder and CEO of Issuance, Inc. Darren, welcome.

Darren Marble, Issuance Co-Founder & CEO: Thanks, James. Great to be here. How are you?

James West: I’m great. Thanks for asking. Darren. Tell me a bit about the business model of Issuance Inc.

Darren Marble: So Issuance is a SaaS capital raising platform. We license our software to companies that are raising capital online, primarily raising capital under the Reg A+ securities exemption, but also regulation D, 506(c), and soon Reg CF. And the common denominator in all of these capital raising tools is they allow the issuer or our client to generally solicit or otherwise market their deal. Kind of our claim to fame in this industry is that we’re the only platform that allows retail investors to check out securities in under a minute. In other words, when companies license our software and they’re raising capital online, from the moment an investor clicks invest in that particular offer to purchase securities in that issuer, those investors can check out from their phone, tablet, laptop in under 60 seconds, and they can buy securities using Apple Pay or Google Pay. We’re moving and really pioneering a one click checkout, are going to get as close to that model as we can. We charge processing fees on credit card, ACH, and wire in a small monthly license fee. It’s the cleanest pricing model that the industry has really seen, and our fees are going to net out to three to four percent effectively on the back end of the deal. So company that raises 10 million on issuance is going to pay out three to $400,000 to our firm over the course of that campaign.

James West: Okay. And so you also provide the broker dealer function?

Darren Marble:

We don’t provide the broker dealer function. We want to be a best in class platform. So we partner with firms like Rialto and Dalmore Group. These are firms that specialize in compliance and administrative services and provide the broker dealer for the deals that we do.

James West: Sure. Okay. Now, my audience in particular has had quite a bit of exposure to reggae and the exposure has been uniformly dismal except for a few companies like Boxabl, Brewdog, obviously, there’s another one: Atlas Motors Inc. Has been successful. It went public, it trades on NASDAQ now. And so I’m curious as to, in your experience, what is the ratio of successful regulation a offerings?

Darren Marble: Well, look, it depends on how you define success. And obviously if you just define it as a CEO raising the target amount of capital in the funding round, you’d be missing the bigger picture, right? Which is, well, how do the investors in the deal do? And ultimately, like in any investing sport, it’s hard to win. You know, you look at traditional venture numbers and a firm like Sequoia is lucky to win one out of 10 times. And these are professional investors often with decades of experience. So investing in an equity crowdfunding deal or an online capital raise is no different. The odds are in fact against you that if you invest into a deal, you’re going to lose money. And therefore you need to have some kind of diversification strategy where if you decide you want these alternative assets or exposure to alternatives and you’re looking to invest in privately held companies, you might wanna invest in 10, 20 or even 30, rather than put $10,000 into one deal. Maybe you put $500 into multiple deals, or if you’re a bigger investor, you’ve got a hundred thousand dollars to play with, maybe you’re putting $10,000 into into 10 deals, etc. So, there have been dozens of companies since 2015 when Reg A went into effect that have effectively gone on to list their shares to a national securities exchange like NASDAQ, the New York Stock Exchange, OTC markets. We’re now seeing more publicly traded companies that are already listed on an exchange or use reggae to raise capital. And my sentiment is that the industry is slowly but surely improving from a deal quality standpoint. We’re now seeing companies that are venture backed, have firms like A16 on the cap table or represented on the board. That obviously doesn’t mean that there’s a guaranteed win there, right? That’s not true, either. But at a minimum it means that institutional capital is, is present in a lot of the deals that we’re seeing now. And so I think over time the quality of deals will continue to improve and will increase the likelihood of success for the retail investors that participate in these offerings.

James West: Sure. All right, let me rephrase that a bit. I’m interested in defining success in the Reg A from the corporate perspective, which indirectly affects the investor perspective because if an issuer sets out to raise a target amount of money and raises nothing, then they’ve just squandered all of the money it costs them to do that Reg A. So what is the common denominator among the Reg A issuers who might not necessarily reach the maximum target that they set out to reach but raised a significant amount of capital? What is their Reg A approach all have in common?

Darren Marble:

You know, look, the companies that are raising capital in this industry kind of fit one or two molds. One, they’re marketing their offering to a built-in audience of customers, fans, and followers. So if you’re a consumer products company, a retail type business, a subscription business, you’ve got 10,000, 50,000, a hundred thousand paying customers, you’re going to have success. If you don’t fit that profile, then the other type of companies that are generally having success are engaging top marketing firms. Firms like our partners Market One or Driven IQ, these are the top investor relations firms that are actively running lead generation and awareness campaigns for Reg A issuers. Companies have to be willing to invest usually several hundred thousand dollars at minimum to generate the right type of exposure to drive dollars into the deal. So those are the companies that are having success. And then the opposite is true as well. If you don’t have a natural audience of customers, fans, followers, and you’re not willing to engage a top tier marketing or investor relations firm, your chance of failure increase. In fact, they may be extraordinarily high. So I’ve always said that Re A+ as a capital raising tool discriminates it will favour the consumer company. It will favour the company that has an audience. It will favour a company that has a cult following, in which case the company could be pre-product, pre-revenue, and it will favour a company that is willing to invest heavily into the marketing or lead generation campaign to drive awareness with the right type of investors for the offer.

James West: So then let me ask you this. The Reg A companies or the Reg A offerings that succeed do they necessarily need a sort of celebrity attachment or a high visibility representative in the public eye to achieve sort of a total success?

Darren Marble: No, not at all. I mean, we have a client right now, Aptera Motors. This is a solar electric car company in San Diego, no celebrity attachment, right? $60 million raised on issuance. More than 15,000 individual investors, not 600,000, not 6 million, 60 million dollars US raised on issuance over about a year and a half. So these are the types of successes and the companies that are listing on Issuance, and honestly, these are deals that aren’t mainstream news. Silicon Valley may not be aware of this, that this kind of being raised by thousands of self-directed investors who are able to seamlessly engage Aptera and purchase securities in under a minute using Apple Pay, Google Pay as checkout, there’s no celebrity there. Now what does Aptera have that a lot of companies don’t have? They have a built-in audience. They have more than 10,000 people who have pre-ordered their vehicle. So they’re again, kind of a natural fit to raise capital online.

James West: Right? Okay. So that’s who they’re raising their money from is the people who have also paid some advanced towards getting one of these vehicles.

Darren Marble: Absolutely. And that’s in, you know, totally intuitive and, and kind of a natural fit. Who better to invest in your brand than your existing customers? Right? So companies that have a community are inherently stronger fits are more likely to raise capital, and those are the kinds of companies we often look to partner with.

James West: Okay. Well that’s interesting Darren. We’re gonna leave it there for now. I really appreciate your time today. We’ll come back to you and do course. Thank you.

Darren Marble: Thank you so much.

James West:  You bet. Bye for now.

Disclosure

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

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