TechShop Menlo Park is raising $3 million, and it isn’t afraid to say it.
The company filed a 506(c) with the SEC, which following the lift on the ban of general solicitation that permits startups to publicly (and legally) announce that they are fundraising.
VentureBeat got word on Sept. 22 that TechShop would take advantage of the new JOBS Act regulations, the day the lift went into effect. The organization announced that it would be seek $60 million in funding to expand into new cities around the country.
TechShop is a significant player in the resurgence of the hardware/maker movement.
It consists of a chain of work spaces where people pay a monthly fee in exchange for unlimited access to a wide range of hardware tools, ranging from drill presses and lathes to CNC laser cutters and 3D printers. It’s an attractive place for do-it-yourselfers, fledgling hardware startups, artists, and hobbyists to hang out and work on their projects.
TechShop recently found out that it had to move its Menlo Park location and would need $2.5 million to set up a new location there.
It set up a $250,000 Indiegogo crowdfunding campaign but struggled to come anywhere near its goal until Intel offered $250,000 as a corporate sponsor.
However, under the new regulations, TechShop doesn’t have to be “hush hush” about raising capital. According to the SEC filing, TechShop Menlo Park has raised $150,000 and is seeking $2.85 million more in financing.
TechShop currently has locations in San Francisco, Menlo Park, and San Jose, and it has opened outposts in Detroit, Pittsburgh, and Austin. It generally uses heavyweight local partners, like Intel, Ford, Autodesk, and Lowe’s, to provide a majority of the funding.
The former restriction on general solicitation meant TechShop couldn’t go out and canvass individuals and local businessess. As TechShop’s CEO Mark Hatch told VentureBeat, it was an inefficient and slow process.
Now thanks to the JOBS Act, it’s far easier to rally community support.
“We can go into every community and say, ‘If you guys are interested in funding your local TechShop, we now have a way of making that happen,’” Hatch said.
President Barack Obama pushed the Jumpstart Our Business Act (JOBS Act) as an effort to stimulate the economy by making it easier for small business to raise money. One of its provisions updated the eighty-year old regulations about general solicitation. Another provision will enabled nonaccredited investors to buy shares of private companies, which will open a whole new can of fundraising worms.
Startup that choose to take advantage of 506(c) need to be careful though.
Along with lifting the ban, the SEC issued a new, stricter set of requirements to verify that investors are accredited. Before “self-accreditation” was permissible. Now official documentation, such as tax forms and statements from CPAs or attorneys, will be required.
Startups must also notify the SEC 15 days before they publicly discuss raising money, file documents with the SEC every time they update their offering materials, and include legal boilerplates every time they talk about their financing publicly
Many influential people in the tech community have spoken out against these regulations, saying that they are too difficult to follow and could hurt startups who accidentally break the rules.
General solicitation, like crowdfunding, and other alternative methods of raising money, is not for everyone or every company.
But for those like TechShop, that have their roots in the community, it is a useful option.
TechShop currently has 5,500 paying members and will bring in $10 million in revenue this year. It will soon open up a location in Chandler, Ariz., in partnership with Arizona State University.