Secondary Trading Tech Firm GUARDD Looks to Raise up to $2 Million on SeedInvest

GUARDD, a Fintech that was co-founded by Sherwood “Woodie” Neiss, Doug Ellenoff, and Jim Dowd, is looking to raise up to $2 million in growth capital on SeedInvest.

For those of you in the know, Neiss, Ellenoff, and Dowd are Fintech superstars, each active in the online capital formation industry. Neiss and Ellenoff were key advocates of the JOBS Act 0f 2012, the legislation that legalized securities crowdfunding. Neiss is also the co-founder of Crowdfund Capital Advisors, Ellenoff is the managing partner of the law firm of Ellenoff, Grossman, and Schole, and Dowd is the founder of North Capital – a broker-dealer working with crowdfunding providers.

GUARDD is pursuing a side-by-side Reg CF and Reg D funding round. For a minimum of $1000, an investor may purchase a convertible with a valuation cap of $6 million. For retail investors, $1.235 million is being raised under Reg CF, with the balance expected from the Reg D offering. Some Reg D investments may take place off platform as there is no need for an intermediary.

The “Seed Note” will convert into preferred equity shares following a defined equity funding round. Preferred securities are frequently demanded by professional venture capital investors to back a private firm as these incorporate more rights for the investor.

So what does GUARDD do?

In the private securities market, the Securities and Exchange Commission (SEC) streamlined the process for primary offerings.  Where the regulator (and other policymakers) fell short was in the secondary trading part of the equation. While an investor in a private firm may want to hold their investments until the company is acquired – or pursues a public offering (IPO) – some investors may want to sell the securities before one of these events. Unfortunately, this entails a challenging process as each state in the US has different rules for secondary trading of private securities adding cost and friction to a process that should only be limited to technology. This is where GUARDD steps in.

For shares to trade on an ATS [Alternative Trading System] – somewhat similar to a regulated exchange- financial information must be made available in a National Securities Manual (recognized by 43 states). This information is akin to the disclosure publicly traded firms produce in quarterly filings.

GUARDD explains that there are only two National Securities Manuals; Mergent and OTC Markets. Neither of these work with private companies, nor are they ATS agnostic. Hence, the common way (historically) for a company to publish its current and ongoing disclosures was to become a registered or reporting firm – a public company – a very expensive endeavor. GUARDD is fixing all of this with a streamlined, cost-effective way for private companies to publish ongoing disclosures. This process allows investors to trade securities on any ATS.

GUARDD reports solid growth in 2021, generating revenue of $205,000 versus $31,000 the year prior. While still small, GUARDD reports that it recently signed a deal with Masterworks, a Reg A+ platform that has gained traction in the fine art market. GUARDD reports that over 500 securities have been traded on secondary markets using their services. At the same time, many industry observers expect the digital asset sector (NFTs, etc.) will soon be required to adhere to existing securities law, because the SEC claims all digital assets are securities (minus Bitcoin).

Of course, there is always the risk of other competitors doing the same, or the SEC/Congress could decide to eliminate the state review process – but that is not going to happen during the current administration. If you are interested, you may review the offering page here. The GUARDD Offering Statement for the Reg CF offer is available here.


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