Equity Crowdfunding for Ecommerce

Joe, thanks for joining us today.

0:12 Joe May

Awesome, thanks for having me.

0:14 Stephen Brown

Why don't you give us a little background on yourself? How you got into ecommerce, what you're doing right now. A lawyer in ecommerce, I don't see that very often. So tell me a little bit about your journey.

0:24 Joe May

Yes. About, I guess, 12 years ago, I graduated from law school, started practicing law and found it just to be absolutely insufferable.

So after about two years, I got an opportunity to jump into an ecommerce company and participate in ops and do in-house counsel kind of operations work, and went into an early stage startup called Freshly Picked. I was there right before they went on Shark Tank, got to see the just insane growth.

0:50 Joe May

And so this is about, I guess, 10, probably 11 years ago. Shark Tank just had a massive growth impact. And so we did 5X in revenue in my first year there and got to experience all the pain of ecommerce scaling, manufacturing, all the issues that came up with that.

1:11 Joe May

Ended up going on doing my own ecommerce startup from there, selling backpacks, did that for a number of years. Then I got into a marketing agency in more of a biz dev, helping people raise money type of role. And then from there I did a tech startup that didn't work out.

And then it kind of got to the end, started looking around and started a law firm focused primarily on capital transactions, because the last five or six years before I did this was all involved in raising money, helping other people raise money. So really taking that and pivoting that into a law firm has been what I've been doing the last year or so.

1:52 Stephen Brown

So 11 years ago in ecommerce, that was a whole different era.

1:56 Joe May

It was insane. Yeah, the founder would get the Kardashians to post these little leather moccasins on their babies and we'd do $70,000 in business the next day. It was, I don't even know if you could do marketing on Instagram at that time.

I mean, to tell you kind of where I was at, I didn't even have an Instagram account when I started working there. I hadn't ever gone on social media really. So I got into social media as part of my job. I started learning about that. But yeah, it was an insane time.

2:30 Stephen Brown

How many years were you there?

2:32 Joe May

So I was there about 18 months before I started my own ecommerce company that I then ran for about three years, three and a half years. Then transitioned into a partner in a marketing agency. And then I got to see a ton of high growth brands like Pillow Cube. I was part of Pillow Cube, Stairslide, we got to help out.

2:57 Joe May

I can't remember all the names of the companies right now, but the name of the agency is called Creatively. And so they've worked with a ton of those big YouTube commercials. Manly Bands is one of the ones that we'd worked with. Kizik, a lot of these kind of big brands that have come out of it and gotten a lot bigger from the big push on marketing.

3:14 Joe May

But even that's changed dramatically over the last 12 to 24 months on how you need to do marketing, with the re-emergence of [unclear]. I mean, TikTok is newer, but the re-emergence of being able to just create content and have that go somewhere.

So I've seen a bunch of different stages of ecommerce and marketing and growth. Just in the last 10 years, it feels like a hundred almost.

3:38 Stephen Brown

Yeah. The era you started was kind of nascent. It was the rise of social media as a selling platform. And we had the huge boom with COVID, and now it's been the post COVID, I don't know, doldrums, right?

And one of those challenges is raising money, right? Which is why we're talking here today.

3:58 Stephen Brown

One of the challenges we see with ecommerce businesses is banks don't like to lend, because they don't have a lot of tangible assets. They don't like to deal with intangible businesses and they don't like inventory. You get a lot of predatory lending from the merchant cash advance lenders.

But there's another vehicle. So let's talk a little bit about this alternate vehicle that you focus on, what it is, and let's dive in.

4:28 What equity crowdfunding is

Joe May

Absolutely. So it's called equity crowdfunding. It was created under the JOBS Act. I believe it was in 2008. [unclear] just as a refresher, or was it 2012?

So it was enacted in 2012. 2008 for whatever reason has been stuck in my head. But they created the JOBS Act, which is basically to help small businesses become more efficient and make it easier for them to raise money to operate.

5:02 Joe May

And one of the things they created was, at the time you could go out and raise money from non-accredited investors. And I think the max then was like 1.2 million or 1.8 million that you could raise. And it's now at five, but there are some different things that need to actually happen to be able to raise five. But you can essentially raise that $1.2 million on unaudited financials and from unaccredited investors.

5:26 Joe May

Now, most of the people listening to this have probably tried to raise money, or at least have some kind of rudimentary idea of what an accredited versus unaccredited investor is.

So an accredited investor is basically someone who has over a million dollars in assets excluding their house, or they're making over $300,000 a year. Now there's a married and single distinction, but it's people with enough money to write a sizable check into your company, is basically what an accredited investor is.

6:00 Joe May

An unaccredited investor, or kind of main street investors, they call it, is somebody who is making less than, yeah, I think the cutoff this year is like 300,000. So they're making less than 300,000 and they have fewer assets than a million dollars.

And so these are individuals that can write pretty good sized checks. There's a wide variety of them, because you have people kind of on the low end who could maybe only write like a hundred dollar check, and you have people who might be able to write a $10,000 check.

6:37 Joe May

And there are even regulations on how much you can take from people depending on how much they're making. But that should all be done by one of these platforms you could use to help you figure out how much you can collect.

So an unaccredited investor, main street investor, is somebody that might have a lot of cash, but maybe they don't have a million dollars in assets, or they're not making quite enough money a year to be considered an accredited investor.

6:57 Stephen Brown

Gotcha. Okay. So getting back to equity crowdfunding, this came about as a vehicle for small businesses to raise money outside of accredited investors. Let's keep diving in. Tell us more.

7:14 Joe May

Yeah. Essentially it allows you to raise money from them, and there are a bunch of different ways you can do it. You don't just have to give up equity. You can do it as a debt vehicle that you could actually use to replace your MCA.

I know as an ecommerce owner, I dealt with MCAs. I'm still dealing with them. I'm actually being sued by one personally [unclear]. They got me like six months before the statute of limitations ran, so they actually filed their lawsuit. So I'm still dealing with that.

7:41 Joe May

But it's something that basically you can lower the cost of your capital. And it's pretty innovative in what you can do, because you have these people that are already buying your products. You have their email, their address, you might even have their phone number. And you can put together an email campaign where you go out and you get people to commit. Hey, I'll give you a couple hundred bucks.

You get a thousand people to do that, and all of a sudden you can easily get to half a million dollars just from some of the users that are buying your products.

8:10 Joe May

And so it's a simplified way to raise money. It opens up a lot of opportunities in your ability to hire, your ability to take on inventory, and to just lower the cost of capital that you're currently paying.

8:21 Stephen Brown

Let's drill down a little bit. So you can raise debt, you can raise equity.

Anytime I think about raising money, I'm like, okay, what are the gotchas? What are the issues? How hard is this to do? What do you have to do from a, maybe let's kind of start with some of the compliance things that you need to do. Because this seems like it could be easily abused if not executed properly. So I'm sure there are some rules about how it's done.

8:45 Compliance and the Form C

Joe May

Absolutely. It's actually really well done by the SEC and FINRA, the two agencies that manage it. And they've kept the process relatively simple.

So there are platforms that have to be approved by the SEC and FINRA. And they're out there, you know, the big ones like StartEngine, Wefunder, DealMaker. I mean, if you Google equity crowdfunding, 2010 or so will pop up that you can use.

9:14 Joe May

And essentially you go to one of those platforms, you present, hey, I want to raise money, this is who we are as a company. They might ask to look at your financials, depending on the platform. And then they'll have, here's a cost, you know, you need to put up 10 grand for compliance. So they have like an initial fee you'll need to pay to be able to pay for the compliance piece.

9:35 Joe May

And basically that is it. You have to fill out what's called the Form C, and you have to explain all the risks that are associated with investing in your company, financials, key employees. Everyone who owns over 20% equity will need to be disclosed.

And so you have to make this public disclosure of your company. And basically what that is used for is, when someone's going to decide whether or not to invest, they can review your company. What are the financials? What's your growth rate year over year? Et cetera.

10:09 Joe May

So you do have to kind of [unclear], for lack of a better way to say it. You have to show people what's going on. You show them your profit margin.

But it's not as hard as it sounds. And it really depends on what levels you're going to go for. Because if you're raising below 1.1 million, you don't have to show audited financials. If you go above 1.2 million, you need to have audited financials. And then there are some other requirements you'll need to do.

10:38 Joe May

But you could actually raise that first 1.2 million tranche, use some of that money to go get the audited financials, and then keep running the campaign. So there's a lot of flexibility. And that's really built into it to be able to help small businesses with how to do the fundraisers.

11:24 Stephen Brown

Let me just take a little financial detour, since this is the finance podcast. Audited financials, how many years of audited financials?

11:32 Joe May

I think it might just need to be one, but please don't quote me on that. I mean, that's something you'll at least need, one year of it, the last year.

And some of these companies are brand new. Some people are utilizing it, this is part of how they're raising their initial seed capital, so they don't have any audited financials.

11:49 Stephen Brown

Yeah. And for those who aren't familiar with audited financials, typically what that means is you pay thousands, sometimes tens of thousands of dollars to a CPA firm. And they'll go in and they will turn over every stone in your financials and essentially determine that they are legitimate.

It's kind of a really poor man's way to describe audited financials if you've never had to do that, or maybe you don't really understand what they're doing, but they're basically validating that what you have in your financials is accurate.

12:18 Stephen Brown

So that, like in this case, an investor, so for example the publicly traded companies are having their financials audited all the time because people are buying stock in those companies. So this is kind of a similar thing.

And usually what we see with audited financials, you only do it when you're going to get invested in, and a lot of times when you go to sell your business you need to do that.

12:41 Stephen Brown

It is a good practice to have your financials audit ready, even if you're not going to have an audit. Meaning you're putting things in accrual accounting. You are doing things the right way. They're clean. Because if you don't, you're going to pay extra money to a firm like LedgerGurus to fix things up.

12:57 Stephen Brown

All right, so let's go back to this. So you submit some information, there's a threshold for which you have to have audited financials. A lot of this information is somewhat public in nature. Is this open information, or can you kind of keep your information semi-private as you're going through this process?

13:16 Joe May

Well, yeah, once you do the raise, the information's put out there for everybody to review that's potentially going to invest.

So there is some level of public disclosure that I know is uncomfortable. Even having been an ecommerce owner, I couldn't imagine putting out my financials. But that's part of the process of opening up to main street investors.

13:38 Joe May

You mentioned a public company. It's basically starting the process. I mean, technically some people call it kind of opening up a mini IPO, once you start doing the Reg CF, because you're bringing on, in a lot of instances, I mean, there are a lot of sophisticated unaccredited investors, but there are also a lot of unaccredited investors who don't understand what a financial statement is.

14:07 Joe May

And so there are a lot of, for lack of a better word, unsophisticated investors that you're bringing on. So they need to be able to see all the disclosures and potential risks associated with running one of these campaigns.

14:26 Stephen Brown

So you used a term that I want to define, Reg CF. What is that?

14:32 Joe May

So under the JOBS Act, they created Reg CF, which is equity crowdfunding. That's where the vehicle exists, under the Regulation CF that was made by the SEC.

And so, yes, thanks for catching that. I get kind of caught up in these terms all day long, using them and not slowing down to explain.

14:53 Voting rights, SPVs, and governance

Stephen Brown

A lot of times when you're raising equity, you are giving up voting rights. How does it work in an equity crowdfunding? Let's say you go raise and you have 500 investors. Are they able to make decisions around your business, or how does that work?

15:08 Joe May

Yeah, so the way the SEC, within the last couple of years, well, I think it was five, six years ago, because it used to be that those 500 investors would go directly onto your cap table. And yes, they needed to have common voting rights, whatever they needed.

And basically, I haven't seen an equity crowdfunding where somebody gave up more than 20% of their company. So as far as voting rights, you're not exactly giving up control of your company. Now, if you had 10 of you that each own 10%, you could in theory give up ownership to this equity crowdfunding where they could kind of control the company.

15:46 Joe May

Now, what has happened in the last couple of years is the SEC has allowed you to create what's called an SPV. Which I'll define, an SPV is essentially called a special purpose vehicle. It is an LLC that people use. People will create these to raise money to invest in specific projects. It's very common for a venture capital firm or a private equity firm to create an SPV to invest alongside them, or to do a follow on fundraise.

16:19 Joe May

And so what you can do now under the SEC is you actually will create an SPV, you'll create a separate LLC where the money will be fundraised, and then that LLC will invest that money into your company.

So that saves you on a couple of things. One, on your cap table management, which can get very costly if you continue to raise money, just having to deal with how complex your cap table is. So you'll just have one line item on your cap table.

16:49 Joe May

And then that SPV, yes, if you need stockholder consent and that SPV holds 10%, you would need to go do some voting or some compliance with the individuals that invested in your company.

But as far as giving up an amount of control that someone should be worried about, I just don't think you would have that level of ownership that you would raise under an equity crowdfunding campaign, [unclear] or they could potentially start appointing board members and running your company.

17:21 Stephen Brown

Let's talk about ongoing. There's a term that maybe a lot of small business owners aren't aware of, governance. Governance is basically a lot of the rules for how a company is managed. What kind of governance requirements are there when you do equity crowdfunding?

17:38 Joe May

Yeah, so you're going to need to put out continued, you'll need to at least once a year let people know what's going on. You need to send out updates.

When you have a public company, I believe it's called, and it's not a K1, so the K10?

17:53 Stephen Brown

10-K.

17:55 Joe May

Okay. So it's like a U10 compliance or a U something, but you need to send it out about once a year. Just send out an investor update on what's going on with the company and financials. And that obviously would include the financials, just an update on how the company is doing.

It'd be similar to if you have investors, sending out an investor update to let them know here's key information about the company.

18:25 Joe May

Since there are not a lot of liquidity opportunities, you don't need to have all the disclosures that you would have with a public company. And when I talk about liquidity, that essentially allows for individuals to be able to sell the equity that they bought from you.

There are a couple of platforms that do have marketplaces where people can sell their equity, which is another great opportunity for your investors. If they put in money and over five, six years the value keeps going up, they'd be able to sell those stocks.

18:55 Joe May

But the liquidity is pretty limited, so you don't have to do all the disclosures you would have to do for a public company. But you do need to inform them, send out a basic investor update every year.

19:07 Valuation, entity type, and debt vehicles

Stephen Brown

Another thing usually with investment is valuation. Do you have to do a formal valuation as part of equity crowdfunding, or do you get to kind of just be like, hey, this is what I think the value of my company is? How does that work?

19:20 Joe May

Yeah, so it depends on the platform. Some of the platforms make you do a 409A valuation, but with a lot of the others it's just kind of beauty is in the eye of the beholder type of thing. If people will invest at that valuation, yeah, I think that's kind of the valuation you're setting for your company.

19:41 Stephen Brown

Gotcha. And then the people that invest, are they getting common shares in the business? Is that essentially what they're getting when you're doing the equity side of it?

19:49 Joe May

Yes, so they would essentially be getting common shares. If you decide to create a different class, that can raise some red flags, but essentially it would be common shares in your entity.

20:00 Stephen Brown

And typically when companies raise money, they have to be a C corp. Is there a requirement on the type of entity that you have to be to do equity crowdfunding?

20:11 Joe May

No, but I do recommend to people that they do a C corp. Because even though you have this separate LLC that people are investing through, it is nice to have the C corp in place.

Now, there are people who use equity crowdfunding to raise money to buy properties. And a lot of times they'll do an LLC just because the investors want to be able to pass back through depreciation.

20:35 Joe May

But the majority of people, in this instance we'll be thinking about it for an ecommerce company, it would be recommended that you have a C corp. Just for the simplicity, raising money around the C corp is much better than an LLC.

20:48 Stephen Brown

Yeah. What about the debt side of things? You said you can also use this to raise debt. How does that work?

20:54 Joe May

Yeah. So basically you just create a debt vehicle and you create the fixed rate of return that you're going to pay people back.

Well, I'll finish this thought and try to jump into the next one. So say you're on an MCA, you're paying 30% interest or 27% interest, whatever, and getting crushed. But your overall debt is $800,000. You could in theory go raise a Reg CF debt vehicle for 1.2 million, pay off what you currently have that's probably sinking your company, and then have the additional $400,000 debt vehicle at a much more manageable 12 to 15%, whatever that is that you're able to raise money under.

21:43 Joe May

I mean, it essentially allows you to level up the type of debt vehicle you could get. If you're more of a wholesale business that has AR that people would give you money on, there are some opportunities around that. And there are actually equity crowdfunding platforms that specialize in debt vehicles instead of equity.

22:00 Joe May

And you have payment options. One of the things you can do with equity crowdfunding, I don't know how familiar people are with a SAFE or what is called convertible debt. A SAFE is just a simple agreement for future equity. It's a very common contract that's used to raise money very early on in a company, or for speed and efficiency when people don't want to do a formal 409A valuation, but they want to have a value cap.

22:26 Joe May

You can actually raise under a SAFE through equity crowdfunding, and you can also raise under convertible debt. So basically it's debt, but the holder of it, the person who raised, has the option to convert that into equity at a later date.

And so that can actually simplify the process pretty dramatically, because then you don't have to have everything figured out right away.

23:04 Joe May

You could just say, hey, we're doing 10 million a year revenue, maybe we don't want to go do a 409A valuation, and we'll do a 15 million pre-money value cap SAFE that we'll raise under, and we'll try to raise 400 grand or 500 grand or something like that.

And so it can really simplify the process, or you can make it very complicated. And that's something that with the JOBS Act, that was really the objective, simplifying the process for small businesses to be able to raise money and be able to use it.

23:32 Why to work with an attorney

Stephen Brown

Let me pull on that thread a little bit, because it definitely sounds like an easier vehicle, but it doesn't sound like something you want to go figure out on your own, which is probably why you're doing what you're doing, right?

Are you basically helping businesses walk through this process? And would you recommend that you use a professional who's familiar with these things to do it?

23:51 Joe May

Yes, I would. Now, if you go to StartEngine or some of these platforms, they'll tell you not to use an attorney.

Here are a couple of reasons why I recommend people work with me when they're doing this. Number one is for cap table management planning. What it means if you take a round under common stock now versus a SAFE. What are some implications around that?

24:17 Joe May

The second thing that I think is kind of lost, and it's starting to come more into focus for people, is the type of investors. One, you don't know exactly who your customer is and who uses your product and who would potentially invest in you.

So Gozney Pizza Ovens just ran an equity crowdfunding campaign out of the UK. They raised over $3 million. I think it was 2 million in change in British pounds, which converted to 3.5 million or whatever in US dollars.

24:45 Joe May

One of the things that Tom Gozney, the founder, mentioned is that one of the co-founders of Instagram actually invested in it.

And what I recommend that people do is, yes, set up the equity crowdfunding, the Form C. That's not a heavy lift for an attorney to put together a Form C. Really an entrepreneur can do that. You just have to fill out the information, risk disclosures, that type of stuff. Most people can do that on their own.

25:12 Joe May

What I actually recommend is that they also do a 506C raise. And sorry to throw in another SEC term there, but a 506C raise basically allows you to raise money from accredited investors publicly.

So there are two types of fundraisers. There's what's called a 506B and a 506C. A 506B is only people you know. A 506C you can talk about publicly.

25:43 Joe May

And so what's going to happen is you're going to get out here and start fundraising, and you're going to have people show up that are accredited investors that have the ability to write a bigger check, love your product, might be able to see the vision along with you and want to participate in the upside.

I recommend to people they have a 506C fundraise set up alongside their Reg CF fundraise so that they can redirect those people into a 506C.

26:08 Joe May

And that can open you up to getting a bigger check. It also helps, not only on the current fundraising round. If you need to raise money subsequently in different fundraising rounds, now you have access to additional potential investors who can write bigger checks.

And so when I work with people, I do recommend they at least have a conversation. Let's go through your Form C, let's think more holistically about your company. What are you trying to achieve? Are you trying to have an exit in five years? How does that work with what you're currently doing?

26:45 Joe May

But also, I recommend that people set up a 506C fundraise. Because if you can go out and raise a million dollars from your users, that's amazing. But why not also go out to a bunch of accredited investors and say, hey, we were able to raise a million dollars from people who buy our product. Would you like to invest alongside those investors?

And you can give them different preferences, preferential treatment, not better terms, but they can get preferred shares as part of that. So there's a way to incentivize accredited investors to write bigger checks, and they can have a huge impact on the company. So that's why I recommend that people come and talk to me, because I can set them up on that and help guide them through that process.

27:28 Costs, adoption, and how investors get paid

Stephen Brown

So let's talk about some of the costs. I mentioned audited financials. In our experience, audited financials range from thousands to tens of thousands. Although if you're a really simple early stage business, it won't be too bad.

The bigger issue I see from audited financials is, are your financials in good shape? A lot of times what we see is they're not. And then they have to work with somebody like us, and doing a cleanup can be thousands of dollars. And maintaining good financials, investment ready financials, if you're thinking it's going to be hundreds of dollars a month for your business, unless you're super small, you're probably misguided. Usually our engagements are thousands a month, because we are doing audit ready financials.

28:14 Stephen Brown

How much do these platforms typically take as part of the process?

28:20 Joe May

So it depends on the platform. Some of them are more heavily weighted on how much you raise. And so they might take between 8% and 15% on your fundraise. Some of them have an initial upfront cost of $10,000. And that will be more inclusive and they'll help you fill out your Form C and get everything ready. And then they might charge a little bit less on the back end.

28:45 Joe May

So it's not cheap to do, but it opens up your opportunity to get to capital that can solve a lot of problems that you wouldn't have had access to otherwise.

28:56 Stephen Brown

And then if somebody wanted to work with an attorney like you who specializes in this, there's probably more cost upfront getting it going. I'm assuming, do you support the annual filing as well?

29:04 Joe May

Yeah, we do. We have kind of a template that we help them with. It's something that we can help them review, but it's really not as heavy of a lift as it sounds as far as compliance that you would expect. Like I mentioned, the difference between an IPO or a public company versus someone who's gone Reg CF. But yes, we do support them with that.

29:27 Stephen Brown

So the initial fundraise is where more of the cost would be. What's a ballpark? I know this is always hard. People say, how much do you cost? I'm like, well, there's a range, right? But for us it's anywhere from $100 to thousands of dollars a month. We've even done some large customers where they're paying over $10,000 a month.

Maybe give me a ballpark of what it would be like to work with somebody like you on a fundraise.

29:54 Joe May

Yeah. Like you said, it depends. For a very simple company who needs to come and get a Reg CF, it could start anywhere from around $1,500 and then it can go up from there, depending on the complexity.

If you have 30 people on your cap table currently that we need to review, because if you're already a C corp it's simple, but if you show up and you're an LLC, you're going to want to convert to a C corp. There are costs associated with all those things.

30:26 Joe May

So it could be all the way up to $30,000 if it's very complex. You need to do a lot of things, maybe you need to do corporate cleanup. But from the very simple side, from $1,500.

30:45 Stephen Brown

You gave us one public example. Any other examples of people that have used this vehicle to raise money that might be brands that are well known or easy to look up?

30:58 Joe May

There are a couple I've seen on there that, and of course I can't remember when I'm on here with you, but if you go through these equity crowdfunding sites, you'll be surprised at some of the names of these companies that are on there.

I think that there is a lot of fear that these are kind of like, people view these as scams, or stuff that, nobody wants to take advantage of their customers, obviously. They want to provide value back to people, not only in the products they're doing, but if they were to come in and invest in their company.

31:38 Joe May

So you've got to be smart about it. Obviously you don't want to overvalue, you don't want to over promise, but there's a real opportunity.

And I think this is something that's slowly been adopted by companies, because people want to control the destiny of their company. And you're giving up a small enough equity that shouldn't impact your control of your entity.

31:59 Joe May

It's a very unique opportunity for a lot of these ecommerce brands. Some of them have hundreds of thousands of customers who bought their products over the years, who still use them. So why not give these people an opportunity to participate in the upside of your company and solve some of the financial issues that you're dealing with as a company?

32:16 Stephen Brown

All right, one last question. Why do you think that we're not seeing more ecommerce brands use this vehicle to raise money?

32:23 Joe May

I think there's a perception of fundraising. I was recently talking to a friend of mine and they are doing 20 million a year revenue, trying to raise 5 million from investors. And I asked them, I said, why aren't you doing equity crowdfunding? And they didn't want to disclose their financials, because they were afraid of competitors taking advantage of them.

32:46 Joe May

It's similar to a crowdfunding campaign that you would see on Kickstarter, that a lot of companies kind of have this sense of, well, I'm a grownup brand, I don't do Kickstarters. And I think it's similar to, I'm a grownup brand, I don't need to raise money through equity crowdfunding. Which I understand, there is a certain maturity in a company and where you see how you fit into things.

33:09 Joe May

But I just think it's something that is so underutilized by companies. And one, because it's not widely used. The adoption curve has been slow. There's a nervousness of putting out all your financials, having people actually buy your equity. I think those are the fears around it.

33:25 Joe May

But I think this is something that we're going to see over the next five to 10 years, even as fundraising for ecommerce brands specifically is really slowing down because of some of the big failures, or lack of return, that have happened in that space. There's going to be, people need to get creative. And this is an area where people can get creative, raise money from their users, and allow those users to participate in the ride and get some upside beyond just buying one of their products.

33:56 Stephen Brown

And from my perspective, I think awareness is a big issue. I was very vaguely familiar with this concept. I think most ecommerce business owners are familiar with crowdfunding, but I don't think they're familiar with equity crowdfunding. So I think part of the problem is just awareness, which is one of the reasons we're talking now, is to raise awareness on this vehicle.

34:16 Stephen Brown

I actually had one more question. We've talked a lot about how it benefits the business. For the investor, let's say an equity investor, how do they get their money back?

I'm assuming that the business has to go through some sort of a liquidity event, which is a fancy term for, there's got to be a sale of the business typically, or another investment in the business that will buy the shares of the investors. Is that the appropriate way to say how a retail investor is going to get their money back?

34:46 Joe May

Yeah, that's going to be the simplest way that they can do it. I mean, there's a world where somebody runs a Reg CF and then they follow it up with a Reg A, where they're actually able to provide people who own shares an opportunity to get liquidity. And a Reg A allows you to raise more money. You can raise up to $75 million instead of $5 million. There's obviously more compliance that goes into that than you see on the Reg CF.

35:08 Joe May

Yeah, essentially it needs to be a liquidity event, whether it's fundraising more money, or you get sold, or you go through an IPO, which would be the best case scenario. Not best case scenario, but it provides your stockholders an opportunity to sell their stock on a NASDAQ or a similar exchange.

35:32 Joe May

But there are, with that said, StartEngine and a couple of these platforms do have a marketplace for people to sell their shares on a secondary, the marketplace being considered a secondary market.

So there are ways they can do it. If you buy the shares, you have to hold them for 12 months before you can sell them. Once that 12 months is over, you can sell them. So there are marketplaces, and then any other liquidity event that could come along with those.

36:06 Stephen Brown

That's awesome. Are you personally invested in any of these companies?

36:09 Joe May

I have not. I was going to get into the Gozney one, but you had to live in the UK to be able to buy in. And so I did not, because as a user of my Gozney pizza oven, I was pretty excited about that.

36:23 Stephen Brown

I'm going to start paying attention, seeing what's out there. This has been really awesome. I'm hopeful that we will be able to help brands that had no idea find a new vehicle.

If somebody wanted to connect with you, what's the best way to do it?

36:33 Joe May

You can reach out to me on LinkedIn. I'm on there, Joe May, I make a lot of posts about pizza on there. Or you can reach out to me directly at May Law Group. My email is Joseph at May Law Group. And reach out directly to me, I'd love to talk to you about what we're doing.

I don't have a lot of other social media going on for my law firm at this point, but yeah, reach out to me through LinkedIn or directly through my email.

37:01 Stephen Brown

Awesome. Well, thanks for joining us today, Joe, and look forward to seeing how we can help the industry learn and hopefully raise some additional capital using this incredible vehicle.

37:12 Joe May

Yeah, absolutely. Awesome. Thanks for having me on.