Russian Software Entrepreneur Draws Backing Through Specialty Offering
Excerpts. TheDeal is a media channel of TheStreet.com
...a New York-based software startup called TransparentBusiness Inc. has drawn backing from Fortune 500 executives through a relatively new type of securities offering called 506(c) as part of an effort to raise $10 million this year.
Alex Konanykhin, CEO of TransparentBusiness, said he decided to reach out directly to accredited investors by purchasing ads in financial publications. One particularly bold ad includes the figure, 90,000%, with a question mark next to it.
Konanykhin said the ad speaks to the large market opportunity for his company's software, which helps governments eliminate fraud by verifying billable hours charged by outside contractors...
Thus far, TransparentBusiness Inc. has raised about $500,000 under the 506(c) offering plus an earlier round of about $1.5 million through a convertible offering. It's currently offering 10 percent of the company for $10 million, with a minimum investment of $50,000.
The company's investors in the convertible offering include: ... Javier Polit, CIO, Procter & Gamble ($100,000); Ken Arredondo, former President of CA Technologies and a TransparentBusiness. board member ($150,000); Jorge Titinger, former CEO of SGI ($100,000); Ximena Querol, CEO of Sector3 Social Venture Group ($125,000) and Andrew Winn, former portfolio manager at BarclaysGlobal Investments and now senior vice president of TransparentBusiness ($110,000).
One of the investors, Ken Arredondo, told The Deal he invested in TransparentBusiness and agreed to serve on its board of directors because of the company's strong management team and the huge market opportunity to increase transparency of outsourced contracts worldwide. He believes in the company's product and said it's unique.
"It's a Saas-based, easy-to-use tool," he said. "There are a lot of technology players out there that are a lot bigger, but none of them have what they have. There will be competition, but they have the product now. They have first-mover advantage.
Arredondo plans to keep his investment in the company for at least two to five years. By then, the company could be large enough for an IPO or a sale.
A 506(c) offering, unlike other private offerings such as private-investments-in-public-equity, or PIPE deals, don't carry the same restrictions around the marketing of private offerings. The 2012 JOBS Act laid the foundation for these offerings, to allow more public marketing around private offerings to stimulate investment and economic growth.
Konanykhin said some U.S. states are in the process of introducing legislation to monitor billable hours, which would mandate the use of TransparentBusiness's software as the only platform available to do this.
The passage of any of the bills would drive new business at the company, which uses block chain technology in its software to track billable hours.
Konanykhin has led the company since 2015, said the 506(c) offering and accompanying ads will help raise the brand profile of the company and help it reach out to more state and local governments.
It's not his first business, by a long shot. He was once known as the Russian Bill Gates as Russia privatized under Boris Yeltsin.