Etan Butler is the charismatic Chair of Dalmore Group, a FINRA registered national Broker Dealer Investment Bank, founded in 2005.
Along with his leadership team, Etan has helped orchestrate the meteoric growth of Dalmore, as the NYC based broker dealer moved from providing traditional investment banking services to industry leading specialization in assisting companies that seek to raise investment capital from individual investors through the SEC’s Regulation D, Regulation A+ and Regulation CF. And they did it with a mix of traditional hard work, a deep understanding of financial markets, careful adherence to developing regulatory guidelines, refreshing creativity and an industry-challenging sales pitch that promised offerors that Dalmore could provide assistance and guidance with more individualized focus and support than its competitors, and could do it for a lot less than the competition. The results have been impressive.
Etan Butler has been the face and the voice of Dalmore as it has become the nation’s leading Broker Dealer for Regulation A+ offerings -- having already onboarded more than 230 such offerings – including some of the most successful Regulation A+ offerings in history.
Etan is a recognized pioneer in the Regulation A+ and Crowdfunding industry. He is a regular speaker on industry panels, programs and podcasts and brings a unique mix of motivation and practical guidance to his presentations. Etan’s insights into maximization of opportunities and benefits in the pursuit of funding programs under new opportunities provided by SEC-sanctioned programs have caught the attention of investors and offerors as they consider involvement in the expanding array of funding programs.
Q. What’s your current perspective of the industry? And where do you think things are going?
I guess I should begin by stating the obvious, because it is so fundamental to the segment of the financial market in which Dalmore is involved. The private capital markets have changed. Companies no longer rely exclusively on traditional venture capital and wealthy, accredited investors to finance their capital needs. Instead, potential funding can come from anyone over the age of 18. And the investors don’t have to be wealthy. These newly-empowered investors do exactly what the big guys were able to do for so long – they invest in businesses; they buy shares of valuable assets and they have the opportunity to make money on their investments -- they just do it on a smaller scale.
There are more than 27 million private companies in the US who need capital to finance their growth. Less than 1% of those companies are able (or interested) in raising capital from VC’s and either can’t afford or can’t navigate the traditional private offering process. So how can they get funding? That’s where Regulation A+ and Regulation CF come into play, as crowdfunding opportunities for growing companies.
The whole idea of crowdfunding – which allows individual investors to buy into a deal or buy a piece of some exotic or historic asset from the comfort of their living room couch -- accelerated through the pandemic. And now it’s a thing. The success of those programs – for both issuers and investors -- make it clear that those activities are going to continue to grow as a meaningful funding alternative.
In the process, we’re all getting smarter as we refine our game. And that goes for Broker Dealers like Dalmore, for issuers and for investors. As far as Dalmore is concerned, we have learned from our competition, and we have learned from our experience. We now provide more services than we ever thought we could develop – including a comprehensive array of analytics and network connections – which we saw modeled by some of the larger financial institutions. And because of our successes in other areas, we have doubled down on sustaining the Dalmore marketing approach and on price sensitivity for our services.
Similarly, a growing number of issuers are recognizing the benefits of hosting their offerings on their own website or app – a feature of Dalmore’s approach from the very beginning -- rather than listing their deal as one of hundreds of opportunities on one of the heavily promoted marketplace platforms. Along with the benefits of full analytics we are now able to provide and significantly lower transaction costs that has been the hallmark of Dalmore’s services. As a result, our clients are seeing an increase in the effective return on their advertising spend as they work to achieve their fundraising goals.
And, finally, sophisticated issuers are laser-focused on the true cost of raising capital. They parse the numbers to get a better understanding of transaction-related expenses including investor acquisition and technology costs, ACH and credit card processing fees. They have learned that it pays to do the math before choosing an offering platform for their offering. Cost sensitive issuers (yield issuers in particular) gravitate toward less costly, but equally effective alternatives that can save them up to 5% on their offering. (For a $75m Reg A+ offering, that can equate to a savings of some $3,000,000 that falls directly to the issuer’s bottom line.)
Syndication is another significant trend. Reg A+ issuers can host their offering on their own domain and co-list their offering on other marketplace platforms, on a commission only basis. This gives issuers the benefits of both worlds, as marketing, PR and ecosystem conversion is directed to the issuers site at low transactional costs and without the distraction of competing investment opportunities, while still enabling the issuer to benefit from tapping into larger networks of registered investors on marketplace platforms. We have seen significant success in these co-listing arrangements and expect them to continue.
Q. When it comes to the Reg A space, what kind of companies are you seeing starting campaigns?
Since 2019, Dalmore has onboarded over 230 Regulation A+ issuers and a fast-growing number of Regulation D and CF issuers. Dalmore has facilitated over one million Regulation A+ investments and over 100,000 Reg A+ secondary market trades. We work with private and public issuers spanning all sectors and industries, from startups to established companies – all of whom offer differing equity and yield structures to investors. So, we have seen a lot.
Our fastest growing cohort of Reg A+ issuers are “series issuers.” These are fractional share platforms which release an ongoing number of individual series offerings, each in their own dedicated corporate structure, which are then fractionalized to shares as low as $1 and made available to investors. We have more than 40 fractional share platform clients, and we marvel at their fast growth in niche areas including collectables, real estate, music, racehorses, vintage cars, jewelry, art, sports-related assets, precious gems, franchises, wine and NFTs. These issuers build communities of likeminded investors who are looking to build portfolios of shares in these assets and incorporate secondary market trading solutions on their apps as a path to potential liquidity for their investors.
Q. Why do you think some of these companies are choosing to do a Reg A instead of going through Venture Capital?
As I mentioned before, historically, less than 1% of founders have succeeded in attracting VC investment, and many simply don’t want to be subject to the terms and structures of many VC funds. We have seen this particularly for woman-owned and minority-owned companies who haven’t been able to attract VC capital. Today, through Regulation A+ and CF, founders can raise capital on their own terms, from their own communities and beyond by using approaches that allow effective marketing, promotion and conversion of their own customers and fans.
Q. What are you most excited about the 2022 Equity Crowdfunding Week?
At Dalmore, equity crowdfunding is in our blood. In fact, it is the engine that has fueled Dalmore’s significant growth over the past decade. Since the passage of the Jumpstart Our Business Startups (JOBS) Act opened the door to equity crowdfunding in 2012, Dalmore has focused on identifying, expanding and maximizing the unique opportunities offered by Regulation A+, CF, and D. We are so proud that Dalmore is among the industry’s leaders for the primary issuance and secondary market trading of private securities. That aspect of the business continues to grow, and it has been a phenomenal ride. We look forward to spending time with our industry friends and many of our clients who are attending, presenting and sponsoring this very special gathering. And of course, we look forward to sharing our Dalmore Shabbat Dinner with our friends.