Those in finance hear a constant drumbeat these days of the need for small business growth if we’re to ever see real economic growth. Of course, as any entrepreneur will tell you, that’s easier said than done. Oppressive regulations and bureaucracy has made accessing capital a seemingly insurmountable task for many startups. New laws like Reg A+ and Equity Crowdfunding, which resulted from the passage of the JOBS Act, were created to address the issue and help startups and entrepreneurs with new avenues to access capital.
The beauty of the free market is that there’s always an innovator looking to tackle even the most challenging problems - and that’s precisely what startup iDisclose seeks to do. iDisclose is a legal software platform that’s designed to empower founders and entrepreneurs with efficient and intuitive compliance tools necessary for financing and meeting SEC requirements. The platform guides users through the process, saving time and money that would otherwise be drained by attorneys and law firms. Equities.com recently spoke with Georgia Quinn, Co-Founder and CEO of iDisclose, to get a sense of precisely how the company aids entrepreneurs, investors and even lawyers.
EQ: The appeal of Reg A+ and equity crowdfunding has always been in leveraging technology to create more efficient ways for entrepreneurs to access capital and provide investors with a way to participate in startups. How is iDisclose essential to the viability of this model?
Quinn: iDisclose helps to take out the friction that’s placed by regulation. Anytime you're going to be offering and selling securities, you're going to have regulatory hurdles. And they're necessary, because we need the Securities and Exchange Commission to protect investors, and we need them to make sure that markets are efficient. But when you think about small and startup businesses, the burden of that regulation can oftentimes outweigh the benefits that they receive from the capital raise. It just becomes insurmountable early on.
So, by leveraging technology and streamlining the disclosure and due diligence process of conducting an offering, we take out a lot of the initial time and costs that a company would otherwise spend on hiring a lawyer and a law firm. We like to think of ourselves as the TurboTax of your SEC filing. You go into our app, you fill out a questionnaire, and based on your responses, it asks you questions. You fill it all in, and we create your SEC filing. From there, you just click "File Now" from your dashboard, and it’s submitted automatically to the SEC.
EQ: The appeal of iDisclose is that it helps to greatly reduce the cost and time involved in the legal process, allowing entrepreneurs to actually focus on their business. So, how do you balance the streamlining of the process on the platform with the unique needs of the individual startups using it?
Quinn: Well, that’s what's great about technology. In our system, we have the potential to build an infinite number of nuances for those companies based on the decision tree, and the way that they fill out the application. We actually feel that we enhance the compliance because we're empowering these companies to create quality diligence and disclosure documents, rather than trying to cut corners and prepare some kind of less compliant, less fulsome set of documents.
So, we feel that we're balancing individual companies' needs by using our technology and allowing them to respond, and then tailor things as they see fit. It’s not a one-size-fits-all platform. There are refined questions, and the questions are constantly being modified based on the responses they provide. The document that they then get is a modifiable document that they can then tailor to be as specific as they need it to be for their company.
EQ: Compliance and meeting regulatory requirements is obviously an ongoing process. How does iDisclose make sure its user are meeting all the requirements, not just for the raise, but as a going concern?
Quinn: It’s iterative, and we're working on that. But right now, we store all their information for them, and then on an annual basis, we remind them, "Hey it’s time to file your form AR”, and then they can just come back to the site, update any information that has changed, and then automatically file it.
EQ: How has your service evolved during the early stages of the maturation of the crowdfunding space? As an example, it seems that you're now, with some partnerships, offering legal services on demand.
Quinn: It’s more automated than that. It’s not just that, I can give you a list of people, but we have a network of extremely talented securities attorneys that are connected. They're all a part of our system. We call it the “lawyer upgrade”, and once the client selects a lawyer upgrade, they are matched with one of our attorneys, and the attorney has already pre-agreed to do that legal work for a flat fee.
So, you know exactly what you're going to get. That’s something that we haven’t talked about. It’s not just the fact that it’s a cost upfront for these businesses. In many cases, it’s an unknown cost because the lawyer is charging them by the hour at some billable rate, and they don’t know what it’s going to end up being. If they end up taking extra time on these matters, then that’s added expenses that they didn’t necessarily budget for. So, it creates surprises and uncertainties. So, all our lawyers have agreed to do the work at knowable fixed rates.
EQ: You’re working with a lot of funding platforms to integrate the iDisclose service into their process, which helps to simplify the overall experience for entrepreneurs. Can you tell us about some of the partnerships you’re working on?
Quinn: Right now, we are working with Republic, which is the AngelList spinoff. The unique quality of their platform and what they're doing is that they're focusing on minority and female-founded businesses, or businesses with a social purpose. So, it’s really great because it taps into all those investors out there who got into the crowdfunding space, not just because they wanted to potentially make a return on their investment, but also because they have a sense of community and giving back. I think it taps into the crowdfunding ethos, in the vein of something like GoFundMe and those types of sites where people can give money toward some charitable or beneficial cause. It kind of marries those two things together. I think that they're really onto something. It’s a great concept.
Another partner is Indiegogo, which is basically the founder of crowdfunding. They’re the very first crowdfunding site, and now one of the largest crowdfunding platforms in the world. They recently launched their Title III platform, and all issuers on their site use iDisclose. Our other partner is Funding Wonder, which is a brand-new platform that hasn’t launched yet. But they are focused on small business loans, and that’s a really interesting area. I think they've got a lot of potential there because they're kind of taking on the role that local and regional banks used to play. Today, a lot of banks have been acquired by the bigger banks, or they are so buried in Dodd-Frank regulations that they can’t even approach these types of loans and credits. So, they're really filling that gap. I think that they have an excellent model, and I’m hoping that they get some traction from it as well.
EQ: Republic, Funding Wonder, Indiegogo - these are all very different types of platforms. Equity crowdfunding has been championed as the democratization of capital, and with that comes a very diverse set of offerings and platforms. There are a lot of niche platforms coming out and appealing to the different needs of people, whether they’re financially or altruistically oriented. So, if this market ends up becoming more niche-oriented, do you believe you’re positioned to benefit from that?
Quinn: Definitely. That’s what’s great about technology. The way our system works is that the devil is in the details, and we are equipped to handle any type of security that’s offered from any type of company that wants to offer it. So, whether it’s a corporation or an LLC, or eventually some type of partnership or trust, we have the mechanisms in place to address those issues.
EQ: Lastly, are there any exciting news at iDisclose that we should look out for in the near future?
Quinn: We've got some awesome products in the pipeline, and some things that we think are going to help issuers and law firms, frankly, with the SEC process. People who have actually filed documents with the SEC know what a painful cost it can be, and we're working to streamline that process. We're talking about all types of transactions. For instance, forms for private placements and things that all filers have to go through that are a pain in the butt, we're going to make a lot easier.
To learn more about iDisclose, visit www.idisclose.com.
In the interest of full disclosure, we call the reader's attention to the fact that Equities.com, Inc. is compensated by the companies profiled in the Spotlight Companies section. The purpose of these profiles is to provide awareness of these companies to investors in the micro, small-cap and growth equity community and should not in any way be considered as a recommendation to buy, sell or hold these securities. Equities.com is not a registered broker dealer, investment advisor, financial analyst, investment banker or other investment professional. We are a publisher of original and third party news and information. All profiles are based on information that is available to the public. The information contained herein should not be considered to be complete and is not guaranteed by Equities.com to be free from misstatement or errors. The views expressed are our own and not intended to be the basis for any investment decision. Readers are reminded to do their own due diligence when researching any companies mentioned on this website. Always bear in mind that investing in early-stage companies is risky and you are encouraged to only invest an amount that you can afford to lose completely without any change in your lifestyle. Equities has been compensated with cash, common stock and/or warrants for market awareness services provided.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer