startup america crowdfund investing july 2012
DESCRIPTION
Jason Best and Sherwood Neiss of Crowdfund Capital Advisors share how they changed a law in 460 days and how it will benefit start-ups and small businesses everywhere: Crowdfund InvestingTRANSCRIPT
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…
