Equity crowdfunding is a powerful way for cannabis companies to raise capital Many cannabis companies are considering launching an equity crowdfunding campaign to fuel their companies' growth. Shari Noonan the CEO of Rialto Markets has created a business-friendly platform that enables companies to host their campaign on their website. She joins Dan Humiston to explain the innovative way that their platform allows investors to sell their shares. Produced by PodConx MJBulls - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston Rialto Markets - https://rialtomarkets.com/ Shari Noonan - https://podconx.com/guests/shari-noonan
Equity crowdfunding is a powerful way for cannabis companies to raise capital
Many cannabis companies are considering launching an equity crowdfunding campaign to fuel their companies' growth. Shari Noonan the CEO of Rialto Markets has created a business-friendly platform that enables companies to host their campaign on their website. She joins Dan Humiston to explain the innovative way that their platform allows investors to sell their shares.
MJBulls - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Rialto Markets - https://rialtomarkets.com/
Shari Noonan - https://podconx.com/guests/shari-noonan
Dan Humiston & Shari Noonan:[00:00:00] Today, I'm MJ bulls. We are joined by Sherry Newnan, the CEO and co-founder of RTA markets. Sherry. Welcome to the show. Thank you so much. Thanks for having me excited to be here. I appreciate you taking time out today. Rialto markets is a FINRA registered broker dealer that enables companies in their private market capital raises via self-hosted solution and institutional investor networks.
You also offer an alternative trading system for secondary trading across private markets, which we will get to in a minute. But I wanna talk about equity crowd funding. Most of our listeners know that equity crowd funding is a great way to raise capital for their business. And there are many equity crowd funding sites that host campaigns.
Unfortunately, many of these sites have fees and restrictions that make it hard for some companies to get started. Can you explain some of these shortcoming? Sure. Absolutely. So . As you mentioned, [00:01:00] we and member broker, so work across the primary markets, we help companies raise funds in.
Regulation CF or regulation a campaigns, the way that we do that that's different than the portals or when most people think about crowdfunding campaigns is it's through a self-hosted solution. So it looks like the, the company's website. And we're just managing everything behind the scenes. So they'll be sort of an invest now button on the company's website.
When you click that invest now button you're redirected. Either to a site that's within the Rialto markets infrastructure, that still is branded and looks like the company site or their own site that is also branded as them. And then the investors can be taken through the questionnaire and invest.
So, so that's really the difference. And there's some key benefits to that. One. As you're investing in digital marketing and building your community, , the companies are able to retain all of that data associated with those investors coming to the site. Being able to do better AB testing around marketing [00:02:00] campaigns and understands sort of who's coming to the site and, and what's working.
And, and two, as you're building a community, you're able to able to better build your community three. Our fees are slightly different. We charge 4% for equity crowd fund raise. We're success based. We do have a small retainer upfront to, to set. Things up, everything else are pass fees, whether that's ACH or wire fees credit card charges are about 2.8, 5%.
But it's a largely success fee based, which is 4% for an equity crowd fund for a regulation. A plus it's either two or 3%. Again, success fee that's based on the amount that's raised based on the amount of operational support that the company is for as opposed to some of the portal solutions which have , higher fees, we also do plug into the portals.
Should you want to access those investor networks as well? And we do work with cannabis companies and, and can support , the escrow and payment rails for those companies. which [00:03:00] is great news, especially for cannabis companies, because we know how challenging it is and having the it right on your own website.
So you can track all the activity, everybody that looks at it, and also more important. People do not leave your site to go to another site and potentially see other deals that may take their attention away from your deal. You don't want, 'em investing in a different deal when they started looking at your deal.
So I think it's really important. The campaign is remains on your website. Now, if a company wanted to start this process, what is it like to work with your company?
Absolutely. So you can simply reach out to Realto markets. We have a form , on our website, or you can reach out to support@realtomarkets.com. We'll have an initial call, which is this sort of intake call where we'll review the company, make sure you're sort of at the right stage. And it makes sense.
Make sure you've got all of the right information that's available and you understand the process around what's required.
So we bring [00:04:00] together a whole ecosystem. So we work with a legal filing firm that will handle the legal filings. If you should need an escrow we've got escrow, we've got payment rails for credit card processing.
We've got Auditors, if you happen to need an auditor. So we've got all of those service providers that we can bring together and provide you with pressing sheets on all of.
So we've been focused on companies. Let's switch and talk about investors. Traditionally, crowdfunding is a long term investment and investors have to wait for a liquidation event to occur. So their money is most likely tied up for years and years. You've actually created a marketplace to solve this problem.
How does it.
So we operate an alternative trading system across private markets. And we do that in both traditional and digital form. And all that means is we can handle blockchain based securities as well as just traditional. Paper based securities across private markets. And, we, we really feel strongly that this is required to scale [00:05:00] private markets that it's really gonna bring it to the next level and help grow the markets out because , with most companies you're really tying the investor to the exit strategy of the corporation.
The corporate exit strategy. And so, as companies are staying private longer we know that it used to be, if you think back to Microsoft, Amazon, Google, they went public very early in their growth phase. Right. And and you sort of see if, if you had purchased those companies on the IPO, you, you did quite well as a retail investor.
Now , Companies are staying private longer because of a number of different factors, but they're staying private longer. They're raising more money privately. And by the time they sort of hit the, the public markets, all of that. Growth is gone and that, that exit strategy, , isn't quite the same exit strategy for investors.
So to have a secondary market where you're divorcing the exit strategy of the corporation from the exit strategy of the [00:06:00] investor, you're really giving the investor the opportunity to monetize that investment based on their timetable, not on the corporate time table. , and that is quite powerful.
Yeah. Okay. So let's put this in practical terms. Let's say I invested in company X, Y, Z. I invest $5,000 into the crowdfunding campaign this year, and then say five years from now, I needed, I don't know a new car and I wanted to get my 5,000 plus whatever growth I've seen. Then I would go and I would say, I'm gonna sell my shares and there's gonna be a buyer out there that says, oh, I wanna buy your shares.
Is that how it works?
So, yeah, the way that it works, we connect into transfer agents or cap table management systems. So all of the issuers that we work with are working with a a cap table management or a transfer agent. That's holding the beneficial ownership. Of that security.
So that there's an official source of truth as to who owns all of those shares for the company. We connect into that, and then as we [00:07:00] onboard and we work directly with the retail investors, so you're not having to hold your shares at a brokerage house. . We work directly with the retail investor. So , you would go , and you would put on a sell order to, to sell those shares. We would check with the transfer agent to make sure you held those shares. Freely tradeable , and there were no en conferences on them.
And then it would be placed up on the ATS. We have two trading modalities. The first is our lit order book. So it's just a lit order. Everyone can see it up there. It's up on the system, much. Like you see sort of the New York stock exchange in NASDAQ what most people are familiar with Anyone then , can take that order , and transact with that order.
, we check to make sure they've got the funds to pay for it, obviously. And then you would receive those funds. The other modality is an auction methodology, and that's usually for larger sums. , when a larger investor is looking to exit position we also have that in an issuer could request.
For an auction on any type of basis, whether that be quarterly or [00:08:00] just call it for a particular point in time. And I do wanna say, this doesn't mean that these markets are.
These are still, from a market cap perspective, relatively illiquid securities. However, what this is doing is it's really transforming , the capability for investors to monetize , their securities. That's one, two, it's bringing additional investors into this asset class That's two and three. And this is what I get excited about. If you think about back in the day, , when equities sort of moved from voice to electronic, it was only after that happened, that products such as ETFs and other product development really was. Was started. I really see the growth in private markets developing where other products are built upon the foundation of this, where you can really start building new products within this space.
But we need to start from somewhere. And I [00:09:00] think from there you'll just get more and more Involvement from other types of investors. that just blows my mind. It just blows my mind. The possibilities are endless. We've been talking about a crowdfunding campaign. I'm thinking, how do I invest in your company?
Are you raising capital? We we are, we are, we actually have our own crowdfunding campaign , we raised a reg D and so the crowd fund was really to start our own community because that's what I see with crowdfunding that that's something that's quite different is that companies are.
Embarking upon crowdfunding campaigns, not just for the dollars, but really to create a community around them. So we said, this is really interesting. We're working with so many of these companies that have either built really. Really active communities and really interesting communities or are building really interesting communities.
Why don't we embark upon the same community building exercise? And so we've just started our own. [00:10:00] Crowdfunding campaign to embark upon the same exercise. Now I'll note that when you're doing a regulation CF, as a broker dealer, you cannot host your own. If, if we were doing a regulation, a we could, but as a CF, we cannot.
So it's actually at net capital, which is a crowdfunding portal. But that is the way that you can invest , the valuation. On the crowd fund. We actually made the same as the regulation D that we closed with our strategic investors. So we wanted to make sure that everyone was coming in at the same valuation and everyone felt good about that.
Ah, that's great. That's great. Well, we'll have links to your crowdfunding campaign in our show notes. We'll also have links to Rialto market. So if anybody wants to learn more about possibly doing a crowdfunding campaign or investing, please. Go to their show notes and click the links and share it. we have a lot more to discuss.
We'll have to probably have you on to do another interview, but I think [00:11:00] we've given our listeners enough to wet with their whistle. So for now, at least we can build off of this and have you on again soon, but I appreciate you doing this. Thank you. Well, thank you so much for having me have a great day.