Fayetteville Firm Aids National Brand in General Solicitation

For the first time since the enactment of the Securities Act of 1933, a mere 80 years ago, private companies and business owners may legally seek to raise investment by taking out public advertisements to attract potential investors.

The new rules regarding general solicitation are a provision of the Jumpstart Our Business Startups Act — or JOBS Act — approved by Congress in 2012.

Since Sept. 23, under Title II of the JOBS Act, entrepreneurs have been permitted to publicly advertise — through various avenues including websites or social media — that they are raising money for their business, something that was previously not permitted under the Securities Act of 1933.

A myriad of rules are tied to the open solicitation, but should a company choose to generally solicit their fundraising efforts, with certain exceptions, they must allow only accredited investors into the funding round, and verify that the investors are accredited.

In general, an accredited investor is an individual who has made more than $200,000 per year, or a married couple that has made more than $300,000 per year for each of the last two years and expects to make at least that level of money in the current year, or an individual with a net worth of at least $1 million.

“In short, the JOBS Act was enacted with the top-line purpose of making it easier for companies to raise capital,” said Fayetteville attorney Jim Smith, a partner at Smith Hurst PLC. “It’s a huge change in the law, one of the most significant changes in decades.”

But one of the first companies to attempt to raise capital through a general solicitation isn’t a fledgling tech company or an ambitious entrepreneur.

The New York-based entertainment property Orange County Choppers, a motorcycle manufacturer that went mainstream as the subject of a reality television series, is taking advantage of the new law by seeking investors via its website.

The website, developed by new Fayetteville media and consulting company The Katadhin Co., had a soft launch Nov. 1. As of Nov. 19, the website had almost 5,000 page impressions and 247 downloads of the company’s investor prospectus.

“Considering we haven’t done a thing to call attention it, we have been getting a fair amount of downloads,” said Stephen Markovits, a New York attorney and OCC’s in-house counsel. “Once we ramp up, it should take off.”

Markovits said the company is offering 60,000 shares at $50 dollars each, a total of $3 million.

“We think we will be one of the first great success stories with this, and we think we will sell out the offering in 180 days,” Markovits said. “That is our expectation. We think we’re one of the very first offerings in the country.”

Katadhin is the latest venture of former Collective Bias co-founder and CEO John Andrews, who left the Bentonville emerging media company in June. He and Jay Thornton are the principals behind Katadhin, and have leased office space for the company in downtown Fayetteville.

As OCC’s marketing consultant, with a retaining fee of $50,000, Andrews is helping grow OCC’s digital audience to more than 5 million people in the next year, creating a digital media property that can be leveraged to drive advertising, product sales and extend its broadcast reach.

It is the goal, Andrews said, that through sales and marketing of OCC content and digital integration, potential advertisers can reach a coveted audience.

“It’s a different kind of focus right now, and it’s a great opportunity to build something that is really needed in the marketplace,” he said.

Because of its growing reputation as an entrepreneurial-minded region, Andrews would love to position Northwest Arkansas as a leader in direct solicitation.

“I love that we were one of the first [companies] to help set up a direct solicitation,” he said. “It’s very exciting.”

Smith said “without a doubt” he thinks Northwest Arkansas stands to gain from the open general solicitations from accredited investors.

“There is an intellectual and opportunity level here to do that, and Northwest Arkansas’ reputation on a national and international scale is growing,” he said. “And I think the mindset of people here is to take a risk and go stake their own claim. Some of the most successful people in the world created their own companies based here, and in the scheme of things it didn’t happen that long ago.”