Paul Elio Shares Reg A+ Experience with SEC; Learnings Will Help Shape Modifications to Policy, Help Investors, Entrepreneurs
For Paul Elio’s first appearance, however, he was as cool and composed as ever.
Elio Motors’ experience raising funds through Regulation A+ has given Paul and the company a unique perspective and expertise — so much so, in fact, that the Advisory Committee on Small and Emerging Companies invited him to the meeting to provide the Committee with valuable feedback from the issuer’s perspective.
The meeting was held to review the first year of amendments to Regulation A, made possible under Title IV of the 2012 Jumpstart our Business Startup (JOBS) Act. The amended regulation, often shortened to Reg A+, provides better access to capital through fundraising for small and emerging companies and provides investors – both large and small – with more investment choices.
Based on Elio Motors’ experience, Paul said that Reg A+ became a critical element in the company’s fundraising efforts. He said, “As soon as we found out about it, we thought Reg A+ was a natural fit. Since then, I’ve read The Innovator’s Dilemma, [a book about investing and innovation] and I think that the premise of the book really fits Elio’s experience.”
Paul explained one of the book’s examples from the disk drive industry. Established companies were afraid to invest in innovation, so they were continually beaten out by new and emerging companies. Today, a similar fear of risk is keeping big investors from funding big ideas from emerging companies. Reg A+ can help emerging companies – such as Elio Motors – find investment at critical junctures in their development.
Paul presented a very comprehensive review of how Elio Motors got to the validation and calibration stage where the company is now testing E-Series vehicles. He took the SEC group and the virtual audience through the Elio Motors’ value proposition, the growth of its reservation program and other fundraising aspects, as well as its retail strategy and regulatory victories.
While some companies might be skeptical about working with a government agency, Elio Motors found the process easy to navigate and the SEC easy to work with.
“The Reg A+ process was a great experience for us. The SEC was incredibly cooperative,” Elio said.
As an example of SEC cooperation, because no one has gone through the Reg A+ process before, there were several questions that arose in the “testing the waters” phase. For example, when Elio Motors’ fundraising went live, the company wanted to show the dollar amount pledged in non-binding commitments. This was something not clearly defined in regard to compliance. Contrary to the expectation that it might take weeks to hear back, the SEC responded within a few days, approving the dollar amount display. Paul said that as various questions arose, this quick-and-easy feedback loop with the Commission helped to ensure a smooth process was achieved with limited challenges.
Speaking of the importance of the Reg A+ process to the company, Paul said, “The single-biggest hurdle in creating Elio Motors was attracting capital. This is absolutely key to our continued success. Reg A+ put us over the hump,” referring to the fact that the company is now attracting the attention of institutional investors.
Elio Motors is still pursuing a variety of fundraising strategies, but the Reg A+ experience was positive, valuable, and showed what can be accomplished when government and business work together. Paul’s experience and discussion with the SEC will likely shape some future modifications to the program; all with the intent of helping other emerging companies and investors take advantage of this important policy.