Raising capital as a startup Energy Company has more struggles than I had ever anticipated. From the Post Hotel cigar/scotch $4,900.00 evenings to the Cattle Baron dinners, where do I start?
Over the past few years, the market conditions have grown stronger, yet the ability to raise capital has been challenging to say the least.
Past colleagues, empty promises, and over the top expensive evenings do not buy capital. In fact, it assures your exit from the market place and your position in our company.
I have had to open and close the door on individuals who have abused the position even though they were asked to humble themselves. Extensive promises over a bottle of scotch do not sit well with me when the expense far exceeds your pay grade.
In Calgary, our market for equity investors is very small unfortunately, so we have had to turn to the vast North American market place. Although within this market, I still find Calgaryâ€™s pockets deeper than most as long as the investor can touch his/her investment (view the AMI (area of mutual interest) as to where companies are drilling).
Raising capital at the wood is simply that in Calgary. A casual beverage, be it a soda or whatever you desire, can bring capital into the company as long as what your are telling the investor is true and backed with supporting documentation.
The Calgary Stampede, for example, can open minds, wallets, and equity investors who have a taste for oil and gas exploration. Back in 2011, I raised over $750,000.00 during the Stampede, so I always welcome that time of year. Since 2009, we are close to $14,000,000.00 in private equity to date and still have no bank or institutional debt whatsoever.
Having said that, as a rule of thumb, if you are selling your own securities (shares in your company), you are required to file a comprehensive disclosure document called a prospectus. We have utilized allowable â€œexemptionsâ€ to this standard format.
What I mean by that is, under the guidelines of the Securities Commission, one would have to operate in a manner outlined in detail by the commission. Stormhold Energy Ltd, although private, operates as a public entity with audited financial statements, corporate governance, and an independent board of directors as well as a complete advisory board.
We take great pride in this position and follow the government guidelines in its entirety.
â€¢ As a private issue
â€¢ To employees, directors, officers and consultants
â€¢ To family, friends, and business associates
â€¢ Under a minimum amount
â€¢ To an accredited investor
â€¢ Under an offering memorandum
â€¢ You have no more than 50 shareholders (excluding employees), and your company has only sold securities to accredited purchasers with net worth over a certain dollar amount
â€¢ Directors, officers, employees, or control persons of the company
â€¢ Family members (spouse, parent, child, etc) of directors, executive officers, or control persons
â€¢ Close personal friends and close business associates of directors, executive officers, or control persons (see discussion below)
â€¢ Accredited investors
With all of that said, raising capital â€œat the woodâ€ in Calgary can be strategic and effective if, and only if, your intensions are completely transparent.
Skiing trips, Post Hotel encounters, and cigar evenings only paint the wrong impression to investors, if one did not have oil and gas experience.
Please follow my next article when I touch on â€œunder the table transactionsâ€, which involve multiple onsite services, servicing for cash percentages, following the â€œlast nameâ€ of individuals, and over budget AFE (Authorization for Expenditure) inside the Calgary oil and gas industry.