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Invest Like the Pros: Adding Venture Capital to Your Portfolio for Performance, Diversification, and Tax Benefits

ORIGINALLY BROADCAST ON 02/03/2022

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Q&A from the Webinar:

Q: How do I make money? I get how the firm will make money, but will I get a special dividend when companies are sold?

A: The goal is for you to make money three ways, and to be exempt from taxes in certain circumstances too.

You’re correct about special dividends or distributions when companies get sold. We hope there will be at least one and maybe more unicorns – small companies with billion-dollar valuations – along the way.

Next, if we create companies that generate cash flow, we expect to make distributions from that cash flow too.

In both these regards, you could think about Berkshire Hathaway. That well-known company makes money from growing companies it owns and then selling them, and it also has cash flow to distribute from  assets it controls.

Outside of distributions from operations, if you sell your shares of Seismic, that will be a third possible money maker for you as well.

Lastly, Seismic issues Qualified Small Business Stock at this stage of our growth, so when you do sell your shares (if you do), your profit, in most cases, is shielded from federal capital gains taxes.

Q: Does the share price go up and down based on how well these companies are doing? And if so, how does that help me if they are private shares?

A: One of the things we have to do as a holding company is to value the assets we hold twice a year. Assuming we create value in the companies, that should be reflected in the stock price.

All our shares are held with our transfer agent, KoreConX, and there is a capacity on the platform to trade our shares. Currently there is no trading because all our investors are buying directly from the company. Down the road that should change. Now is the time to get the shares from the company before the first investments start to gain momentum.

A goal we have is to take Seismic public after it’s had a chance to grow. Then the shares would be public, and you would be able to trade them wherever they are listed.

Q: If you have 10–15 companies, and half are making money, will we get dividends on profit sharing in earlier years, before firms are sold? If not, what will happen to those profits?

A: Like any established company, we’ll have to balance the current and future needs against our strong desire to reward our investors for backing us. As noted earlier in the Q&A, cash flow from operations likely could be a source of distributions before we sell a company or take it public.

Q: Hi, Steven! How will you work with your start-ups to help with marketing?

A: Hi, Peter – thanks for the question. We have several great resources in that regard.

First, Seismic is represented by E5A Integrated Marketing, one of the strongest digital agencies operating today. The resources of E5A will be available to our portfolio companies. Seismic also is represented by FischTank PR for our outbound messaging strategy. FischTank also will work with our portfolio.

Second, our board of advisors is strong on marketing mentorship. To name two, Mitch Berman, our entrepreneur in residence, has helped many young companies make their presence known. Roxanne Taylor, our marketing/corporate communications advisor, was named one of Forbes Magazine’s “World’s Most Influential CMOs” (chief marketing officers). Both Mitch and Roxanne are on hand to provide guidance.

Lastly, happy to have you pitch in!

Q: Can you talk about examples of current investments?

A: Hi June – we’re still raising our initial capital. We’ll have some announcements shortly. Up first, we will likely invest in two companies: one in online gaming and the other in women’s health. Both companies are led by amazing Founder/CEOs with tremendous track records.

Q: What are some of the time frames of your investments? How long is their runway?

A: Our first round of funding for most of our investments will cover two years of growth. That will give the companies a good runway to do the job right, not just fast. And we expect that is the right amount of time to determine when it’s the right time to sell or take public, and if the metrics are right, we might just reinvest for another round. We intend to be the capital source for our companies all the way through. Likely many will be with us for less than two years.