startup america crowdfund investing july 2012

CROWDFUND INVESTING

(a.k.a. How 3 Guys Changed Securities Laws in 460 Days)

Jason, Zak & Woodie •3 entrepreneurs, co-founders of the Startup Exemption•Co-authors of the CrowdFund Investing Framework•Inc. 500 awards – among fastest growing private companies in US•Together raised over $100M in VC/PE capital•In contract for CrowdFund Investing book (Wiley)•Co-Founders and Board members of CfIRA and CfPA•Co-Founders Crowdfund Capital Advisors

WHO WE ARE

CROWDFUND INVESTINGA large number of unaccredited investors making modest investments in a small business in exchange for equity or debt securities.

DEFINITION

CURRENT CROWDFUNDING

CURRENT BUSINESS NEED

DONATION-BASED

EQUITY FUNDING

• Small businesses & start-ups• Up to $1M

GAP

THIS IS WHERECROWDFUND INVESTING

COMES IN

CROWDFUND INVESTING

Everyone we talked to said it would never happen…

“The House and Senate will never agree”“Don’t waste your time”

“You’re crazy…”

“What can 3 regular guys get done in Washington?”

“Who’s gonna pay for this?”

January 2011 Jason, Zak & Woodie have an idea to make it easier for small businesses to raise capital

Summer 2011 Testify in front of House Committees

November 2011 House passes the first version of the law

November 2011 Rally in D.C.

February 2012 Participate in Senate Committee hearings

March 2012 Senate passes the final version of the law

April 2012 President Obama signs JOBS Act

460 DAYS

WHAT WE DID

1/ What Crowdfund Investing is

2/ The JOBS Act – Structure of the Law

3/ Rulemaking timeline for CrowdFund Investing

4/ Best practices and issues

AGENDA

1/ THE BIG IDEASmall business owner has a high-potential idea

2/ WEB 3.0Leverages social media for community financing

3/ CROWDFUND INVESTINGCrowdFund Investing provides funds at a crucial growth point

4/ GO PROSuccess attracts professional investment

5/ THE CYCLE CONTINUESMore entrepreneurs follow, transforming Main Street through ‘localvesting’

HOW IT WORKS

New small businesses each year500,000

% getting VC funding<1%

3,673*VC funded in 2011

% with CrowdFund Investing5%

25,000CFI funded (SMB and startup)

28,673Small businesses with funding

*gigaom (http://gigaom.com/2012/01/19/2011-q4-moneytree-vc-funding-web-startup-figures)

~8x 2011 level

THE U.S. OPPORTUNITY

Examples of Donation-Based Crowdfunding Platforms:•www.rockethub.com•www.kickstarter.com

Platform Links

Examples of CrowdFund Investing Platforms:•www.seedinvest.com (equity based)•www.crowdfunder.com (equity based)•www.somolend.com (debt based)•www.gatetechnologies.com (broker dealer platform)

Donation/Equity/Debt Platforms

SMALL BUSINESS OWNERS

•Raise up to $1M per year with ‘all or nothing’ terms

UNACCREDITED INVESTORS

Invest at 1 of 2 levels:•Lesser of $2K or 5% income (<$100K income)•Greater of $100K or 10% income (>$100K income)

• Regulate websites for all CrowdFund Investing• State registration pre-

emption

SELF-REGULATING ORGANIZATION

• CfIRA, CfPA Boards• Engaged with FINRA• SEC negotiations• NASAA engagement

SEC

CROWDFUND INVESTING FRAMEWORK

LEGISLATIVE FRAMEWORK

April 2012JOBS Act signed into law

July 5 2012General solicitation begins for accredited investors

January 2013270-day rulemaking process by SECQ1 2013

FINRA rulemaking begins

Q2 2013 (best guess)CrowdFund Investing begins

2012

2013

THE FUTURE OF CFI

1/ Criminal and securities background checks

2/ Easy to understand T&C, investor agreements and disclosures

3/ Robust investor education

4/ Social connectivity tools

5/ Investor communication tools

BEST PRACTICES FOR CFI PLATFORMS

1/ Why shouldn’t I just go “perks based”?

2/ How do I determine valuation?

3/ What are the 3 parts of a successful pitch?

4/ How quickly can I get my hands on capital?

5/ Where can I get more information on this?

QUESTIONS FROM MAIN STREET

Coming Soon

www.crowdfundcapitaladvisors.com

Startup Exemption Framework: www.startupexemption.com/exemption-framework#axzz1vANkx2lL

SEC JOBS Act Comments Page:www.sec.gov/spotlight/jobsactcomments.shtml

SEC FAQ for Crowdfunding Platforms:www.sec.gov/divisions/marketreg/tmjobsact-crowdfundingintermediariesfaq.htm

Crowdfunding Professional Association (CfPA) Launch Release: www.prnewswire.com/news-releases/crowdfunding-pioneers-launch-professional-association-in-concert-with-regulatory-advocacy-group-150451405.html

REGULATORY UPDATES

1/ PUT A STAKE IN THE GROUND

2/ SHOW UP

3/ SELL WHAT PEOPLE ARE BUYING

4/ STAY ON POLICY & OUT OF POLITICS

5/ SUCCESS HAS MANY FATHERS

WHAT WE LEARNED

AND ON THE 460TH DAY…

QUESTIONS?JASON@CROWDFUNDCAPITALADVISORS.COMEMAIL

CROWDFUNDCAPITALADVISORS.COMWEB

THANK YOU