This presentation was given at LUISS Business School for the MBA program and the MBA Alumni, during an event managed by Prof. Paolo Boccardelli and his team. Thanks to Edward Mura for the organization.

1. Avv. Alessandro M. Lerro
November M. LERRO
Alessandro 27, 2013
Roma, November 15, 2013
LUISS – Scuola di Management – MBA ALUMNI
FUNDING START UPs
FINANCING START-UPs
EQUITY CROWDFUNDING

2. ©2013 A.M. Lerro

3. GARAGE BOYS
Student experiments, no professional
business planning, no expert teams,
no proof of concept, wishful thinking
FIRED or RETIRED FOLK
Wishful thinking, looking for
“something to do”
SMART START UPs
Good idea, professional business
plan, skilled team, MBAs, overall
quality
©2013 A.M. Lerro

4. FINANCING A START UP :
•
•
•
•
BOOTSTRAPPING
ANGEL INVESTING & VENTURE CAPITAL
DEBT
CROWDFUNDING
©2013 A.M. Lerro

5. ©2013 A.M. Lerro

6. BOOTSTRAPPING
©2013 A.M. Lerro

7. BOOTSTRAPPING TECHNIQUES:
• SAVINGS
• FAMILY & FRIENDS
• PERSONAL LOANS
• LENDING-BASED CROWDFUNDING
©2013 A.M. Lerro

8. ANGEL INVESTING
&
VENTURE CAPITAL
©2013 A.M. Lerro

9. - In 2012 global VC volume was $ 51,7 BL
- 58% is in the USA
- A USA VC usually looks into 200 deals/weak
- VC focus on $1/3 ML financing in average
- SYNDICATION is common
©2013 A.M. Lerro
ANGELS & VENTURE CAPITAL:

10. In ITALY investments are mostly allocated to
PRIVATE EQUITY operations.
Just a few early stage deals. Mainly:
- Buy Out;
- Expansion deals;
- Replacement deals.
©2013 A.M. Lerro
ANGELS & VENTURE CAPITAL:

11. ©2013 A.M. Lerro
Fundraising expected allocation:

12. Note: most are
intercompany
investments.
©2013 A.M. Lerro
Early stage investments:
€100ML

13. ©2013 A.M. Lerro
Investment distribution by stage
1° half Y2013:

14. ©2013 A.M. Lerro
Average invested amount per stage
1° half Y2013:

15. Everything ought to be 100% quality, but the
first impression will rule
©2013 A.M. Lerro
- FIND THE RIGHT TEAM
- INVEST ON YOUR BUSINESS PLAN
- INVEST ON YOUR ROADSHOW
- SELECT THE RIGHT INVESTORS’ PROFILES
- BEWARE SHAREHOLDERS’ AGREEMENT

16. ©2013 A.M. Lerro

17. DEBT
( Mini Bond )
©2013 A.M. Lerro

18. D.L. 83/2012 “Sviluppo” art. 32
EMPLOYEES
• > 10 employees
• < 250 employees
TURNOVER
• > 2 ML euro
• < 50 ML euro
ASSETS
• > 2 ML euro
• < 43 ML euro
WHO: SME (Small Medium Enterprises)
©2013 A.M. Lerro

19. “SPONSOR”
appointed
Audited
annual
accounts
To be distributed only
to qualified investors
(Art. 34 ter Reg. CONSOB
11971)
MINI-BONDS MAY be
eventually listed
on the Extra MOT by
Borsa Italiana
©2013 A.M. Lerro

20. “SPONSOR”:
Bank, SIM, SICAV, SGR,
Broker-Dealers art. 107TUF
Ought to subscribe and keep:
- 5% BOND (up to €5ML)
- 3% BOND (from €5ML to €10ML)
- 2% BONS (> €10ML)
©2013 A.M. Lerro

21. At the moment only LARGER companies are on the market ©2013 A.M. Lerro

22. CROWDFUNDING
©2013 A.M. Lerro

23. Joseph Pulitzer
©2013 A.M. Lerro

24. ©2013 A.M. Lerro
REWARD
LENDING
EQUITY
DONATION
FONTE:
©2013 A.M. Lerro

25. 1000
©2013 A.M. Lerro
FINANZIAMENTI
1200
800
600
400
200
0
REWARD
LENDING
EQUITY
DONATION
FONTE:
©2013 A.M. Lerro

26. ©2013 A.M. Lerro

27. 2012 C.F.
VOLUMES
“BUSINES”
MOTIVATION
“BUSINESS”
VOLUMES
Reward-based
383,000,000
16,3%
62,477,000
Lending-based
1,169,700,000
54,2%
633,977,000
Donation-based
979,300,000
12,8%
125,350,000
Equity-based
111,700,000
TOTAL
2,643,700,000
111,700,000
≈35%
933,500,000
35% OF THE 2012 CROWDFUNDING VOLUME
HAS BEEN COLLECTED
IN THE BUSINESS AND ENTREPRENUEURSHIP CATEGORY
©2013 A.M. Lerro
CROWDFUNDING
MODEL

28. By 2025 the volume of
INVESTMENT CROWDFUNDING
will be:
> $92 billions
= 1,6% of household savings
≈ 2 x total Venture Capital volume
©2013 A.M. Lerro

29. ©2013 A.M. Lerro
REWARD - BASED
CROWDFUNDING
©2013 A.M. Lerro

30. ©2013 A.M. Lerro
400
350
300
250
200
150
100
50
0
REWARD-…
2010
2011
2012
FONTE:
©2013 A.M. Lerro

31. PLEDGES
CATEGORY
$ 10,266,845
High Tech
OUYA: videogame consòle
$ 8,596,474
Games
Veronica Mars
$ 5,702,153
Movie
Torment: Tides of Numenera
$ 4,188,927
Games
Reaper Miniatures Bones
$ 3,429,235
Games
Double Fine Adventure
$ 3,336,371
Games
Form 1: 3D professional printer
$ 2,945,885
High Tech
Wasteland 2
$ 2,933,252
Games
Homestuck Adventure Game
$ 2,485,506
Games
Oculus Rift
$ 2,437,429
High Tech
3Doodler: 3D pen
$ 2,344,134
©2013 A.M. Lerro
PROJECT
High Tech
PEBBLE – watch for iPhone / Android
©2013 A.M. Lerro

32. ©2013 A.M. Lerro
PREORDER
DONATION
with PERKS
ROYALTY
BASED
REWARD
©2013 A.M. Lerro

33. Rotterdam Bridge
• Pedestrian Bridge, 350
m., 17.000 boards by Y2042
• Y2012: ca. 100.000€, 1300
boards
• Civic Crowdfunding
©2013 A.M. Lerro
DONATION
with PERKS
©2013 A.M. Lerro

34. • Y2005 – no platform
• LP: 300.000R =
27.000€
• 20.161 PLEDGES
• Preorder LP: 150R
• Purchase LP: 116R
©2013 A.M. Lerro
PRE-ORDER
Verity Price
©2013 A.M. Lerro

35. SELLABAND
• Y2006 
• Min. invest.
10$
• Target:
50,000$
• “Believers”
• 10% reward
©2013 A.M. Lerro
ROYALTY
BASED
©2013 A.M. Lerro

36. ©2013 A.M. Lerro
EQUITY - BASED
CROWDFUNDING

37. JOBS Act was the first law
in the world to regulate
equity crowdfunding (apr.
2012)
TIT. 2: accredited investors
Implemented
Tit. 3: retail investors
Waiting for SEC regulation
©2013 A.M. Lerro

38. LAW:
LAW n. 221, Dec. 17, 2012
“2.0 Growth Decree”
REGULATION:
CONSOB Reg. n. 18592
June 26, 2013
©2013 A.M. Lerro

39. LEGAL FRAMEWORK:
CONSOB has the supervision and is
entitled to impose penalties
Platforms ought to be registered with
CONSOB
Platfoms ought to meet reputation and
competence requirements
Investment is subject to MIFID and
operated through BROKER-DEALERS
©2013 A.M. Lerro

40. TARGET CO.:
ONLY
INNOVATIVE START UPs
ARE ALLOWED
TO RAISE EQUITY
FROM THE CROWD
(…for now)
©2013 A.M. Lerro

41. You can raise
€ 5.000.000,00
per company, per year
©2013 A.M. Lerro

42. PROBLEM/OPPORTUNITY:
!?
- The market is too small
- High Tech is too difficult for investors
- High Tech is a risky business
- Wider markets could generate more
opportunities of investment, value
creation and new jobs
©2013 A.M. Lerro

43. CROWDFUNDING PLATFORMS:
ONLINE PLATFORMS,
WHOSE EXCLUSIVE PURPOSE
IS TO HELP
COMPANIES
TO RAISE EQUITY
FROM THE CROWD (art.1.5.9 TUF)
©2013 A.M. Lerro

44. SMALL INVESTMENTS
• Directly managed
• MIFID exempted
BIG INVESTMENTS
• Partner with a BROKER-DEALER
• Investment profile to match with
proclivity to risk investment
©2013 A.M. Lerro

45. SMALL INVESTMENTS:
INDIVIDUAL:
< 500€ per investment
< 1000€ per year
COMPANY:
< 5.000€ per investment
< 10.000€ per year
©2013 A.M. Lerro

46. PROBLEM/OPPORTUNITY:
!?
Crowdfunding is limited to
EQUITY.
DEBT could be an other good
opportunity.
©2013 A.M. Lerro

47. BROKER-DEALERS:
BANKS and INVESTMENT Co.s
Take in charge the PAYMENT,
the execution of the investment,
once the investor has decided
to pledge.
(… at least…)
©2013 A.M. Lerro

48. BROKER-DEALERS:
BANKS and INVESTMENT Co.s
CAN EITHER:
MANAGE A
CROWDFUNDING
PLATFORM
THEMSELEVES
PARTNER WITH A
CROWDFUNDING
PLATFORM
©2013 A.M. Lerro

49. MIFID PROCEDURE:
IDENTIFICATION OF
THE CLIENT
ANTI-LAUNDERING
RULES
INVESTMENT
PROFILE TO MATCH
WITH PROCLIVITY
TO RISK
INVESTMENTS
MIFID = European Union Directive, Markets in
Financial Instruments and investment services
©2013 A.M. Lerro

50. ADVISING:
Broker-Dealers may advise
and give suggestions, within
their general rules.
Platforms may not provide
recommendations suitable
to influence pledges.
PLATFORMS
BROKER-DEALERS


©2013 A.M. Lerro

51. PROBLEM/OPPORTUNITY:
!?
FOREIGN BANKS and INVESTMENT Co.s
are in principle allowed to operate in
Italy, but the absence of Monitoring
Agreements between CONSOB and
foreign Authorities inhibits such
opportunity.
©2013 A.M. Lerro

52. INVESTORS:
ITALIAN LAW PROVIDES
A ROBUST LEGAL FRAMEWORK
OFFERING PROTECTION
TO INVESTORS
©2013 A.M. Lerro

53. There is
NO PERSONAL
INVESTMENT
LIMIT
MIFID regulates any NON SMALL investment
©2013 A.M. Lerro

54. SET OF WITHDRAWAL RIGHTS:
WHO
WHEN
WHY
RULE
Retail Investors
Bank Foundations
Registered Incubators
7 days from the
investment
No reason or explanation:
they just changed their
mind
§13.5 Reg.
Consumers*
14 days from the
investment
No reason or explanation:
they just changed their
mind
Consumer
Code
Retail Investors
Bank Foundations
Registered Incubators
7 days from the
news, but before
the campaign
closed
Material mistake or
§25.2 Reg.
something new happened,
suitable to influence the
investment decision
* The only case where platform are allowed to withold costs
©2013 A.M. Lerro

55. SHAREHOLDERS AGREEMENTS:
INFORMATION
RIGHT
Any Shareholders Agreement
must be notified to Investors
TAG ALONG or
WITHDRAWAL
RIGHT*
If the Founding Shareholders
sell the business or anyhow
wave control
* Only for RETAIL INVESTOR
As long as the Company enjoys Innovative Start Up status
©2013 A.M. Lerro

56. PROBLEM/OPPORTUNITY:
!?
Foreign investors in principle are
allowed to invest, but the lack of a Treaty
about jurisdiction and conflict of laws
could generate conflicts with foreign
Authorities. This problem might severely
limit investment opportunities.
©2013 A.M. Lerro

57. LAWS AND MATERIALS:
www.CrowdfundingInItaly.com
©2013 A.M. Lerro
©2013 A.M. Lerro

58. WWW.LERRO.IT
ROME
Alessandro M. Lerro
alessandrolerro
alessandro@lerro.it
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