Capital formation in a Post-COVID environment has seen several dramatic changes:
- 2-3x year over year growth in utilization of online investment platforms like SeedInvest, WeFunder, Start Engine, Etc. – this enables accredited and non-accredited investors to buy in early stage companies, seed rounds, series A, and late stage pre-ipo rounds.
- A 531% increase in IPO capital formed through the SPAC structure in 2020 ($59.2b YTD) vs. the prior four-year average of $9.375b (as of Nov 16, 2020)
- Increases in the size of available funding rounds through a late-year SEC rule change allowing $5m in crowdfunding (up from $1m) and $75m in a Reg A+ mini-ipo (up from $50m)
These innovative capital structures help middle-market business owners look at formation capital, growth capital, and exit capital with a new set of options previously unavailable.
In the case of an online offering, combined with new SEC rules, a middle-market business who would typically obtain growth capital via private equity can tap their network, their clients,
and a growing global shareholder base to raise capital with potentially more favorable terms.
In online offerings, the business owner sets valuation, terms, and markets the offering. If the crowd buys the stock, the offering is a success. If there is not interest, the terms
clearly did not meet the needs of the market. This strategy also allows a business owner with a rabid fan base of customers to turn those customers into co-owners.
Our business has pursued this strategy as a pre-cursor to a future IPO. By engaging the wider crowd we work with we are converting customers into owners and shareholders into potential
When a company is ready to exit, a sale to private equity may not be the only option. SPACs, which are publicly listed shell businesses with a sponsorship team (board and executive
managers) and a pool of capital – typically $100m-$1b. They are on the hunt to buy one or more private companies and take them public quickly and efficiently, a strategy that is often a pre-curser to an industry roll up.
A sale to a SPAC does not necessarily require the business owner and existing management to cede control of the company and often the SPAC sponsorship is looking to leverage their resources
and network to rapidly expand an existing business.
9 of the most recent 13 SPACs that have raised capital and are searching for acquisition targets (as of Nov. 16 2020) are targeting leisure, hospitality, real estate, entertainment,
and sports – all hard hit industries from COVID-19.
The capital markets pre and post-COVID is an untold story that needs to be shared. Middle-market business owners would be wise to dust off their capitalization strategy in 2021 and
examine how they plan to finance their business going forward.
By Chris Loeffler, CEO + Co-Founder
Caliber is offering securities through the use of an Offering Statement that has been qualified by the Securities and Exchange Commission under Tier II of Regulation A. A copy of the Final Offering Circular that forms a part of the Offering Statement may be obtained from: Caliber: https://www.seedinvest.com/calibercos