Startup companies are a dream of people and institutional investors. Alongside lower food costs and a high potential of return on investment, startup companies also give more adaptability than a set up business. Regardless of the high failure rate associated with startup companies, their capability to develop with minimal resources and scalability to direct the growth toward any path has settled on them a popular investment choice. However, the intellectual property of startup companies plays an important role in choosing the value of the organization. While 75% of the value of a public organization depends on it intellectual property, 100% of the value of a startup depends on its intellectual property. This dependency of investor enthusiasm on the intellectual property has forced startup companies to search for fresher approaches to raise capital, for example, direct registration, reverse mergers, self registration etc.
A startup company may purchase such “shell”s and keep to use the trading public stock. Though this is the fastest way to go public, it also had a lot of burdens, for example, the new organization stock trading without complete disclosure. In order to prevent abuse of the reverse merger option, the SEC review measure orders the submission of a Form-8K inside four days of the merger. Since this was the same that responsible a public offering, the startup companies were now forced to find better alternatives.
Direct registration is a process where startup companies giving the offers hold the offers, and the purchaser is recognized as the owner of the offers. Direct registration refers to enlisting the purchaser’s name in the books of the organization and should be possible by straightforwardly buying shares from the organization. While similar to owning paper certificates, it also reduces the burden of paperwork. However, a minor disadvantage is that the shares cannot be sold at any time. Since the offers have been purchased from the organization, the offer selling may happen once at the end of the day, week or month.
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