Using a direct public offering (DPO), businesses and nonprofits can raise capital from the public from both accredited and non-accredited investors. To be able to do this, the organization applies for regulatory approval where investors will be solicited. These approvals generally last for one year.
At the end of 12 months or upon reaching their funding goals, some organizations may choose to discontinue their securities offering. Our client, Real Pickles, for example, raised $500,000 from 77 investors in two states in just 2 months. Since the amount Real Pickles raised was sufficient to achieve its goals, it concluded its DPO.
Other organizations, however, may find that there are advantages to continuing to raise capital for more than one year. For example, last year Cutting Edge Capital did the compliance work that allowed Farm Fresh to You, a northern California food distribution business, to offer “Green Loans” to its customers through a DPO. Through its DPO, Farm Fresh to You successfully raised over $300,000. Farm Fresh to You recognized that the Green Loans from customers were a great source of capital – low-cost and an effective way to get customers more engaged – so Farm Fresh to You decided to renew its DPO for another year!
Since the state regulators have already vetted the offering materials for the first offering, the approval process for an additional year is typically very fast (in most cases just several weeks).
Continuing to raise capital beyond the initial year of a DPO offering allows an organization to meet ongoing capital needs and to benefit indefinitely from the opportunity to allow its community, customers, and fans to become investors.