Q&A from the Webinar:
Q. I looked at investing in a venture fund a while ago, and I would have had to set aside a lot of money to cover possible capital calls. Will I have to do that with Seismic?
A. There are no capital calls with Seismic. Once you make your investment, that’s it, unless you want to invest more. Unlike a typical venture fund, Seismic Capital does not require you to leave cash on the sidelines in case we need it.
Q. You said you would be announcing some investments. When will that happen?
A. We expect within a month. We are finalizing now.
Q. Can I make periodic investments? I was thinking quarterly.
A. Yes. Any frequency you’d like … monthly, quarterly, yearly, just let us know what you’d like to do. Please contact our CFO, Alice Neuhauser, at email@example.com to arrange. It also is possible to invest in Seismic though an IRA account, and Alice can provide details on that as well.
Q. What is the end game for Seismic? I’m sure you ask prospective portfolio companies what their expected exit is.
A. Our plan is to build Seismic Capital with excellent companies, and to create dividends from cash flow and distributions from sales of our companies within the portfolio. We hope that if we do our job right, Seismic will be able to have a public offering of its shares (an IPO). Our model is Berkshire Hathaway, which operated as a private company for many years, then went public and became one of the most highly valued stocks on Wall Street.
Q. How do you avoid the 144 lockup period?
A. We point you to this article on the SEC website, https://www.sec.gov/reportspubs/investor-publications/investorpubsrule144htm.html. Rule 144 is one avenue to resell securities not acquired in a public offering (restricted securities) and securities held by affiliates of the issuer (control securities) without the need to comply with the registration requirements of the Securities Act of 1933. However, among other things, Rule 144 generally requires that, if the issuer is not a reporting (public) company, the holder must hold the securities for at least one year (measured from the time they were fully paid for) before sale. It is not possible to avoid this requirement and rely on Rule 144. However, Rule 144 is not the only way to effect resales of restricted securities. Such sales also may be made in so-called private sales, which are not subject to a holding period. Our transfer agent is preparing to support such private sales. If you wish to sell before you have held our shares for one, you may do so by providing us with an opinion of your counsel that the sale of your shares is exempt and the restrictive legend on your share certificate(s) does not prohibit transfer.
Q. Can you say again how much money you are raising?
A. Yes. We are raising $49 million through our SEC-qualified offering, and that offering is available to just about everyone … accredited and non-accredited investors alike. The minimum investment is $1,000, and shares can be purchased through our website at https://seismic.company/investoroffering/.
In addition, we are offering $50 million of our shares, to accredited investors only, shares through a private placement. In this case, the minimum investment is $50,000, and the shares are discounted from $5.50 a share to $5.00. For investors who wish to purchase $250,000 of shares and above, we will issue three-year warrants to purchase an additional 10% of shares at the current price ($5.50). For details, please email our CEO, Steven Weinstein, at firstname.lastname@example.org.
Q. I didn’t exactly understand the Qualified what was it, and how does that protect me on taxes.
A. Qualified Small Business Stock is a program that entitles most investors to avoid paying federal capital gains taxes when they sell their shares after a five-year holding period. Consult your tax advisor. Key components of QSBS include (1) the company issuing the shares must have a Net Asset Value less than $50 million at the time the shares are issued, (2) it cannot be involved in certain industries such as banking or farming, and (3) the investor must purchase the shares directly from the company (not on a secondary market).
With Seismic, there is no requirement for any investor to hold shares for any period of time, except to qualify for the QSBS benefit. If you hold you shares for less than five years, you may still qualify for a partial exemption.
Q. I have an idea for a company. Would Seismic be interested in hearing about it?
A. Yes. Please contact Eric White, our president and the head of our investment team, at email@example.com. A typical Seismic investment is at the late-seed / early Series A round, when a company has a product and a customer. Since Seismic follows a diversified investment strategy, we’re interested to look at companies across the spectrum, so please be in touch.
Q. You all seem like you really get along. Have you had to make management changes while you were building in order to create this team? It seems terrific.
A. Thank you. We really do get along, and our team is experienced enough, in our working lives and in working together, that we are really good about covering for each other, if need be. We’ll be building out the team over time, and our goal is to continue to foster good relationships across the company.
Q. Do you rely on a lot of outside help?
A. Yes. We have an extensive team of advisors, attorneys, accountants and diligence experts. They’re all important. The diligence team is comprised of former Lehman Brothers bankers who evaluate prospective investments for industry and company, technology experts who look at infrastructure and patents, and security consultants who review the leadership of the companies. We know how easy it is to fall in love with a prospective investment. We rely on our diligence team to make sure we are seeing the whole picture before we invest.
Q. You said you follow the principles of being a B corporation. Do I need to worry that might cut into profits?
A. We believe firmly that our companies will do better by following these principles. We are committed to making our communities and the world a better place.
Some statements herein, including information incorporated by reference, discuss future expectations or state other forward-looking information. Forward-looking statements are typically identified by use of terms such as “may,” “will,” “should,” “expect,” “could,” “intend,” “anticipate,” “plan,” “estimate,” “believe,” “potential,” or the negative of such terms or other comparable terminology. Such statements are subject to known and unknown risks, uncertainties and other factors which are beyond Seismic Capital’s control. Actual events and results could differ materially and adversely from those expressed or implied in forward-looking statements. The forward-looking statements included in this email are based upon Seismic Capital’s current expectations, plans, estimates, assumptions and beliefs. Although Seismic believes that such forward-looking statements are based on reasonable assumptions, those assumptions may prove to be unfounded or inaccurate in whole or in part and Seismic Capital’s actual results may differ, significantly and potentially negatively, from the results discussed in the forward-looking statements. Factors that might cause such material and adverse differences include, but are not limited to, the Risk Factors discussed in our Offering Circular: https://tinyurl.com/SeismicOC202208 Seismic Capital is under no obligation to update forward-looking statements even if circumstances or management’s estimates or opinions should change. Prospective investors are cautioned not to place undue reliance on any forward-looking statements contained herein.
Seismic Capital Company and its affiliates do not provide legal, accounting, tax or investment advice, and nothing herein should be construed as such. Investors are encouraged to confer with their own advisors when making investment decisions.