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What is “Testing the Waters” Prior to a Regulation A+ Offering?

testing the waters

In this discussion with Rod Turner, Founder, Chairman and CEO of Manhattan Street Capital, we discuss the concept of “testing the waters” prior to a Regulation A+ offering for raising capital for your private company.

Rod:  Testing the waters is a neat aspect of Reg A+ that hasn’t been used properly yet, in my view. I suggested this to the SEC in 2012. The idea is that you don’t have to pay for the audit. You don’t have to get a legal firm to do your filing and start the big bucks spend just to test your company out and see if it engages enough interest. That’s the idea.

What’s happened to date is, the companies that have used it, they are already committed. They’re already doing everything. They put the offering up and test the waters for a while to generate a lot of enthusiasm, so that when they turn on funding, it will be more successful.

Patrick:  It’s like pre-demand generation.

Rod:  Yes. In my view, you should only do it for a couple of weeks. If you do it longer, then it makes it harder to reengage those people because they went stale. They’ve been waiting for two or three months and they do something else with their money.

That’s what’s been done. What needs to be done, and what we’re offering, is what I’m calling test the waters audition. Companies can inexpensively check it out and put together an offering. We can help them test messages to see what the appeal is and then run a low-budget advertising campaign to see how much enthusiasm we get.

Patrick:  Is it like A/B testing?

Rod:  Yes. There are a few messages that are right on. You get a surprise sometimes. You think it’s going to work but it bombs miserably. That other one over there, it looks “hinky”, but ends-up being incredible.


This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matters.