Crowdfunding,

Angel Investors

and Other New

Funding Strategies

to Grow Your Business

John Sechrest

@sechrest

Building the NW Startup Ecosystem

● Networking -> connect investors and

startupso Open Coffee

o geeks on a trail

● Lean Startup Seattle -> Stronger startups

● Seattle Angel Conference -> More Angels

● Impact Hub Kirkland -> Place to make

impact

(IANAL) - I am not a laywer

Definitions

● Startup

● Small Business

● ( Startup is not the same as Small business)

● Federal Definition of Big is > 500 employees

● Not all small businesses are the same

● Small businesses are not small versions of

big businesses

What stage are you at?

● Thinking about new business

● Have customers (Revenue)

● Have 1 employee

● Have 10 or less employees - Stage 1

● Have 10 to 100 employees - Stage 2

● Have 100 to 500 employees - Stage 3

● Have 500+ employees - Stage 4

General Startup Advice

Start Small

Test with small experiments

Don’t gamble more than you can afford

Customer Development preceeds Product Dev

Content Strategy preceeds Customer Dev

Build the food cart before the restaurant

Four things I expect from Startups

● Understand Lean CanvasProblem -> Customer

Solution -> Unique Value Proposition

Unfair Advantage

Key Metrics

Channels, Revenue , Expenses

● Cashflow projections

● Sale Funnel Visualization (AARRR)

● Content Strategy

Need Money for Business

● Capital Expense - (CAPEX)o fund equipment

o set up company

o Change productivity of company

● Operational Expenses (OPEX) o staff salaries

o supplies

o consumables

Sources of new money

● Revenue -> Sell Something

● Debt

● Grant

● Equity

Choices have consequences

● Interest (cost/expense)

● Equity/Control

● Overhead (reporting, admin, data)

● Liquidity

● Resources

● Duration

● Collateral

● Duration

Revenue

Start where you are

Use what you have

Do what you can

Solve a problem for a customer and get them to

pay you….. Today…..

Perhaps not the thing you imagine.

The cheapest place to find funding

is from

your customers

Crowd Sourcing

Selling product, perks, swag, sparkle to raise

funds

● Indiegogo

● Kickstarter

Use Crowdsourcing to Validate market demand

It works best if you have existing momentum

Debt

● Visa

● Bank Loans

● SBA backed loanso 504 -> building financing for owner occupied

● Micro Loan programs

● Revolving loan programs

New ways into Debt

● PayPal

● Kabbage

● Lendio

● Ondeck

● Peer Lendingo Prosper

o Lending Club

Grants

● Thousands of granting agencies

● Lots of competition

● Lots of hoops and restrictions

● Takes a lot of time and effort (low return)

● Perhapso Local agencies for small projects (odd fellows)

o SBIR.gov

o Grants.gov

Equity

Sell Stock in your company

● Subject to SEC Rules

● Registered stock (NASDQ) (very expensive)

● Excepto Reg A

o Reg D 506

o DPO -> (Direct Public Offering) (Reg D 504)

o Intrastate

Reg D 506

Must be Accredited investors

506(b) - Private Placement

506(c) - General Solicitation (JOBS ACT)

● Raise unlimited funds

● Easy paperwork

● Low liquidity

● Low overhead

What is Accredited?

SEC Rules for accredited investors

● Have $1M+ networth (not counting home)

OR

● Have regular income more than $200K

OR

● Have regular income with spouse over

$300K

About 9% in Washington have this status

Angel Investors vs Venture

Investors

● Angel Investorso Invest their own money direction

o Tend to be smaller amounts ($5k - $500K)

o Tend to be local (92% invest within 100 miles)

● Venture investors o Invest other peoples money

o Tend to be larger amounts ($1M-100M)

Both invest about $18B each year in the US.

Many more Angel Deals

Eleven Angel Groups in Seattle area

● Alliance of Angels

● Keiretsu (2)

● Element 8

● Wings

● TAGS

● Seraph Capital

● Puget Sound Venture Group

● Tacoma Angels

● Bellingham Angels

● Seattle Angel Conference

Take Funds for appropriate stage

Angel Investors and Venture investors look for

● high growth companies

● in Markets that are trending

● That have 10X or more returns

● This is less than 2% of all companies

● Angels invest in gas for the engine, not

building the engine

HB2023

● New WA law in effect as of November 1st

● Raise up to $1M

● Do it inside washington state only

● take funds from anyone in the state (non-

accredited)

● Has reporting and accounting issueshttp://www.dfi.wa.gov/sd/rulemaking.htm#crowdfunding

SCOR

● Raise Up to $1M

● In the Washington Only

● Market directly to the public (non-accredited)

● Merit based evaluation

● Some restrictions on stock

● lighter reporting and accounting

requirements

http://www.dfi.wa.gov/sd/scor.htm

KANBAN

Questions