By Marc Kneepkens
Soon after I
first heard about the ‘Financial
Architect ®’ program I wanted to talk to the creators at Commonwealth Capital Advisors. My first
response was “this is what I’ve been looking for, it’s exactly what the ‘start
up’ community needs. I want to know all about it. Can a start up company really raise its own capital by issuing securities and marketing them directly to investors?
I downloaded the free eBook and started reading the foreword by Jeffrey H. Canfield, the attorney who patented the ‘Financial Architect ®’ program. His intro was very impressive, and so was the rest of the book.
In my opinion, this has the potential to create a revolution for start-up companies and for all others looking for funding for development and expansion, even for those creating funds such as REIT’s and venture funds.
Next, I chatted with Mr. Charles Dreher, the executive vice president of the company causing me to introduce this new funding tool to my visitors: “Turning the Tables: Successfully Raising Capital for Startups with Financial Architect ®”.
Then, I had the chance to interview with Mr. Hogan, the creator of the
book “The Secrets of Wall Street. Raising Capital for Start-Up & Early
Stage Companies” (download your free eBook here)
Here is the interview.
MK: When you developed the 'Financial Architect®' program, what was your intent?
Timothy D. Hogan: It was first developed to assist us in servicing our clients.
MK: Were you trying to empower the startup community and give them a new and valuable tool?
Timothy D. Hogan: No it was for increasing our own internal
efficiencies and productivity, through speed and financial accuracy when
performing our corporate finance advisory services for our clients.
MK: Was the situation unhealthy with too many good ideas never finding funding?
Timothy D. Hogan, CEO and Chairman of Commonwealth Capital Advisors, LLC.
Timothy D. Hogan: The situation was more frustrating and disappointing that academia has completely missed the boat on this critical aspect of correctly capitalizing start-up and early stage companies.
MK: Did Wall Street firms hide behind secrecy and complicated procedures?
Timothy D. Hogan: Not really, Wall Street simply won’t touch start-ups and early stage companies, so the industry is quite indifferent in this matter.
MK: Or was it simply too complicated to go through all of the hoops?
Timothy D. Hogan: Yes, for those attempting to do this on their own.
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MK: Wasn't it a virtually impossible task to try to compress the securities business into a comprehensible and practical package for many to use?
Timothy D. Hogan: Great observation. “Absolutely,” would be an extremely understated response. It’s taken us over 11 years and more money than we’d like to admit.
MK: How new is this product?
Timothy D. Hogan: Fairly new, after beta testing it with a handful of universities and entrepreneurs a few years ago, we continued to make improvements..
MK: Have you used it and refined it over many years?
Timothy D. Hogan: Yes we update it annually or as markets or laws dictate. After the final rules of the JOBS Act of 2012 were published by the SEC last October, 2014 we upgraded it again and we’re finalizing another major upgrade to it so that entrepreneurs can compete for start-up capital from our new venture capital fund.
MK: Is it mainly a simplified 'best practices' guide for do-it-yourselfers?
Timothy D. Hogan: Yes, on steroids!
MK: It is a well know fact that only 1-2% of start-ups will ever get funded. Teaching them the way to raise their own capital is giving them a powerful tool to use. It would allow great ideas to take off and find more real chances to move forward and to realize those ideas. What is your guess as to the % of companies that could get funded using the 'Financial Architect ®' program, how would it affect that success ratio up from only 1-2%? What is the potential?
Timothy D. Hogan: “ If we realize our vision for the entrepreneur, the concept of raising capital through selling securities, which started with the ancient Egyptians by the way, will be a mainstay undergrad college course in every major and respected university in the US and abroad, and the first approach every entrepreneur attempts. The current problem is, 1-2% get funded because 98% don’t understand the entire capitalization process. We hope to reverse that percentage, so that 98% of legitimate start-ups get funded to the degree they need.”
MK: Have you worked with many start-ups from many sectors applying these principles/guidelines?
Timothy D. Hogan: Seventy-eight over the last seventeen years, and we plan on phasing out our corporate finance advisory services as Financial Architect ® grows into what we envision it to be as the years go on. If we do our job, there will be no need for our corporate finance advisory services, as Financial Architect®’s process has become sufficient in the start-up or early stage. We’ll continue to let the Wall Street broker dealers handle the later stage companies.
MK: I read somewhere that you would put any company in your portfolio that would be able to apply the processes described in 'Financial Architect ®' and raise a first seed funding round. Would you explain that please, expand on that?
Timothy D. Hogan: It’s a fairly simple concept, that any company that can meet our venture capital fund’s Investment Policy Statement, and proceed with the 'Financial Architect ®' system accordingly, barring any serious concerns, we’d match the $500,000 they raise from their personal and professional investor contacts. If they have the understanding, the willingness, the backbone and investors who already trust them, most of our due diligence has been inherently handled.
MK: It seems to be a great product for startup companies. Does it really work also for film producers, REITs, oil&gas companies, and VC funds?
Timothy D. Hogan: The “Fund Producer” programs are relatively new, as is our experience with them. The concepts and deal structures within those programs are fundamental and will work if applied correctly. So much so, we guarantee it.
MK: Would it work for just about any project, such as a renewable energy project or any kind of development project?
Timothy D. Hogan: Yes, any project other than Real Estate, Film or Oil & Gas would fall under the term Venture and our Venture Capital Producer™ would enable one to complete that capitalization effort.
MK: How can foreign companies or projects get funded with Financial Architect® or with Commonwealth Capital Advisors?
Timothy D. Hogan: Financial Architect® is constructed to comply with Regulation D Rules, 504,505 & 506. These exemptions from registration enable any company in any country that is recognized as a normal traded partner with the US, to raise capital from US investors.
MK: Do they need a presence in the US? A corporation?
Timothy D. Hogan: No but it would be wise for a foreign company to register a US subsidiary company to be located in the US, with a US bank account, because US investors are cautious enough when investing in foreign start-ups. So anything that can further legitimize a foreign company’s existence here in the US would be recommended.
Mr. Hogan, thank you for your time and for creating such an outstanding service for entrepreneurs.
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