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Washington Companies

Raise Capital from Washington State Residents

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As of March 28th, 2014, the Washington JOBS Act was signed into law by Governor Inslee.

As of November 1st, 2014, the Washington Department of Financial Institutions (DFI) has published their final rules allowing businesses to begin pursuing Crowdfunding.

If you are a business owner interested in raising capital from Washington residents you are encouraged to apply below. We will reserve your WSX symbol for you until your application can be reviewed.

You will still be required to also be approved by the DFI before we can permanently approve your symbol. As the Portals allowing this public fundraising become active next year we will position approved WSX companies onto the first Portals available.

Washington Security News Network

If you are a Washington resident, business owner, politician or anyone interested in keeping up-to-date on this emerging, new market please subscribe with us below.

FAQ

Basic Information

Is equity crowdfunding legal?

  • Yes, the Washington JOBS Act (HB 2023) was passed by the legislature and signed into law by Governor Inslee allowing all Washington residents to begin investing in Washington's private companies.
  • You can find the full bill here.

As an investor, why is this different than Kickstarter, Indiegogo or other similar platforms?

  • For 97% of Washington residents, this will be the first time you have been allowed to invest to become a co-owner of an emerging business. In the past, only the 3% of wealthiest Washingtonians were readily allowed to make such investments.
  • You will be investing in these businesses with the intention of making a financial return. Rather than receiving a gift, you will be purchasing securities that entitle you to a portion of the income if a business is sold or makes distributions.
  • In March of 2014, Facebook purchased a non-equity crowdfunded business called Oculus VR for over $2 billion. The non-equity investors who crowdfunded Oculus VR instead received an Oculus Rift visor. If Oculus VR had been funded with equity crowdfunding instead, the return on investment for original investors has been estimated between 145-200x. An investor who invested $1,000 would have received $145,000 to $200,000 in the acquisition.
  • While a highly unusual example, it illustrates why the 3% have benefited from investing in these kinds of private businesses, and why this market is now being opened up to the other 97% of Washington residents.

As a business, how does it work?

  • With the passage of the Washington JOBS Act all Washington State residents are now eligible to invest in private companies that choose to “Crowdfund.”
  • After one year, Washington residents may be eligible to transfer their securities.
  • The restriction allowing only accredited investors to invest in private companies no longer applies in the same way it did prior to the Washington JOBS Act.
  • A company can choose to sell their securities to the public.
  • There are new requirements that companies using the Washington equity crowdfunding exemption must follow. We encourage you to consult relevant legal counsel.

What type of business entity do I have to be? Does my company qualify?

  • Your company must be organized and doing business in Washington State.
  • Your company should be looking to raise money from Washington State Investors.
  • You may be a corporation, centrally managed limited liability company or limited partnership.

What if I am not currently a Washington business? What is required to be considered "organized and doing business in Washington"?

  • The DFI has defined this as a company that is resident and doing business within Washington at the time of any offer or sale of securities.

How much money can I raise?

  • As the law stands now, companies can raise up to 1 million dollars per year from the public. This amount can be raised in multiple rounds or all at once. It can also be raised in conjunction with traditional capital fundraising such as accredited investors and venture capital firms.

How much will my shares sell for and what are shares of my company sold via equity crowdfunding actually worth?

  • The company will set the price per share and number of securities they wish to sell. The public market will decide whether or not they desire to purchase the securities at that price. The Washington Security News Network will publish ongoing guides with current Washington market averages to assist companies in this process.

When do I get my money?

  • Company funds are held in escrow and will be released when their total goal has been reached. For example, if your company seeks to raise $10,000, it will not be able to access any of the funds, until total funds sought are put in escrow. Once reached, the funds will then be released to your company immediately.

To whom am I selling shares of my company?

  • Your securities will be sold on an open market to any Washington State resident.
  • Once your security has been successfully sold, the ownership of that security must be held by the purchaser for one year beginning on the date of purchase. This security may only be transferred to one of the following:
    • back to the issuer of the security, or
    • to another accredited investor, or
    • as part of a registered offering, or
    • to a member of the family of the purchaser or the equivalent, or in connection with the death or divorce or other similar circumstances, in the discretion of the director.

After that one year is over, who may that security be sold to?

  • After holding these securities for one year, Washington residents may be eligible to transfer their securities.

Do I need to keep my new shareholders informed of the status of the company?

  • Yes, you will be required to provide a quarterly report to your shareholders and the director by making such report publicly accessible, free of charge, at your companies internet web site address within forty-five days of the end of each fiscal quarter.

What information must I provide to the portals, exchange, State and potential investors under the law?

You are required to provide:

  • A description of the business, including the type of entity, location, and business plan (if any)
  • A description of how the proceeds will be used
  • Names of officers, directors, managing members, and "ten percent beneficial owners" (as applicable)
  • A description of any existing outstanding securities
  • A description of any litigation or legal proceedings involving the company, its officers, directors, managing members, or ten percent beneficial owners (as applicable)

When can I get started?

  • You can work with your attorney now to get your company approved for Crowdfunding with the DFI.
  • It is likely in early 2015 the first online Portals will appear that will enable you to more easily sell securities to the public. By subscribing to the WSNN, you will be among the first informed when the Portals become live.
  • The City of Bellevue is envisioning building the first non-commercial "Marketplace" to support this new legislation to affect the success of local startups and to allow Washington State residents the opportunity to make investments in our local economy.
  • You are not required to participate in this process in order to sell your securities. You can continue to raise securities through traditional means or raise securities from the public under the Washington JOBS Act on your own. However, you must operate within the strict guidelines of the law and we would not advise trying to take advantage of the Washington JOBS Act without the guidance of a corporate and securities attorney.

What if I am a non-profit or a social purpose corporation? What if I'm just looking for a loan?

  • You should subscribe to WSNN to be informed of any new crowdfunding options that may become available in the future.

We have provided this information, and will continue to do so, as a service to Washington residents and business owners. It is neither a legal interpretation nor a statement of the Washington State Jobs Act or the Department of Financial Institutions. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law and understands your exact circumstances.

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