These slides were used by Devin Thorpe at Kickercon to provide training on investment crowdfunding.
The presentation provides a summary of crowdfunding laws and a basic guide for how to raise money via crowdfunding.
6. Crowdfunding will…
• Empower women and minorities
• Level the playing field for ordinary investors
• Facilitate growth in the developing world
– Enabling the developed world to invest in high
growth opportunities in emerging markets
– Allow impoverished individuals to raise small
amounts of capital for microenterprises
7. U.S. Securities Law
Securities Act of 1933
Securities Act of 1934
JOBS Act (2012)
8. Securities Laws Before
2012
No advertising or public announcements
No “General Solicitation”
Private securities typically offered only to
rich investors
Most private securities transactions require
accreditation
Accredited investors have one of the following
$1 million net worth excluding a primary residence
$200,000 per year of personal annual income
$300,000 per year of household annual income
Ordinary (non-accredited) investors are largely
excluded
9. The JOBS Act
• Title II: General Solicitation
• Title III: Crowdfunding
• Title IV: Regulation A+ (Mini IPO)
10. SEC Rulemaking
General Solicitation Rules
Effective September 23, 2013
$35 billion in transactions completed in the first
seven months
Crowdfunding Rules (Title III)
As of today, final rules have not been issued
Draft rules released in the fall of 2013
Rules viewed as challenging for small businesses
and startups
11. State Laws
Many states are acting
Texas among them
Rules are less
restrictive than JOBS
Act Title III
States pressure
congress and SEC
Catch
12. Reg D 506C Filings
• September 2013 through March 2014
• Filed: $98 Billion
• Funded: $35 Billion
Source: Offerboard
15. How Angels Invest
Angels typically invest in groups
Some groups create pools or funds of money
Some groups allow members to invest directly
16. What Angels Invest In
Angel groups often specialize
Most invest exclusively in early-stage
startups, often before sales begin
Invest in the sorts of things that made them
rich
Popular investments: internet, hi-tech, clean-tech,
scalable
Things that typically don’t work: retail
17. All Angels Are Rich
Accredited
Angel
Investors
Investors
19. Cost of Audits/Reviews
The cost of audits varies enormously
A brand new startup with virtually no history and
no revenue could cost less than $10,000 to audit
Fortune 500 companies spend millions on audits
Geography matters: An audit in New York City costs
more than one in Houston
A review includes an opinion of the auditors much
like an audit and still requires work and risk
Expect to pay 50 percent as much for a review as for
an audit
20. Cost of Legal Work
Cost of legal work varies widely
Big, “expensive” firms don’t necessarily cost more—
they’ve done this before
Some will fix fees, but most work by the hour
“Ball park” estimate of your fees:
$5,000 + 2 % of money you hope to raise
Note that investors may require you to pay their
fees, too
21. Platform Fees
Investor Carry Model
Up to 20 percent of the investment gain
Percentage of Raise
Expect to pay 5 to 10 percent
Listing Fees
Expect to pay $100 per month or more if you pay no other
fees
Some portals may charge a combination of fees
22. Other Fees
Investor accreditation fees
Escrow fees
Document signing fees
Due diligence fees
Travel costs
Printing costs
Like staying at a five-star resort—you’ll get
charged for everything
23. When Fees Are Paid
Accountants typically collect after but may
require a deposit
Lawyers typically collect monthly
Platform’s carry is collected when sold
Platform’s success fee is paid at closing out of
proceeds
Platform’s listing fees are paid monthly
Other fees generally paid as incurred
25. Friends and Family
If you are approaching only Accredited
investors, make no exceptions among
family and friends
Reach through your family and friends
to their Accredited investor network
Pitch individually over coffee or lunch
Direct prospects to your online offering
on the platform
26. Angel Investors
To raise a round over $100,000 you’ll likely need to
recruit angel investors
Work your network for introductions
Apply on angel network websites
Pitch angel networks according to their rules
Invite them to lead the round on your online
offering
This really means that they get to price the round
Other investors will be more likely to follow
27. Start Before You Start
No one wants to be the first to invest
Get at least 10 percent of your goal
committed from family and friends
If you can’t get 10 percent, you certainly
can’t raise 100 percent
Don’t jump the gun—get your 10 percent
28. Build Your Audience
Reach out to customers
Use your real world networks to build
your online networks
Leverage your investors as each one
commits
29. Email is the King of Online
Communication
Before you start using social media, be sure you
reach out to your network by email
Carefully, thoughtfully personalized email gets
answered
Using your email newsletter isn’t nearly as effective
as personal, one-on-one communications
Use email to schedule even more personal
communications like phone calls, video chats and
face-to-face meetings
30. Build Social Media
LinkedIn, Twitter, Facebook and Google+ are
required
LinkedIn is great for reaching your network of
professionals
Twitter is the best for shared interests
Facebook is pay-to-play model for business
Google+ is helpful for search results
Be active where you are
31. Tell the Story Everywhere
Connect with your LinkedIn network
Post regularly on your personal Facebook
page as well as your company page
Tweet at least daily about the business and
regularly about the campaign
Post at Google+, too
Use a tool like HootSuite or BufferApp
32. Prepare a Cool Video
You will give investors a lot to read
Give them a video that tells the whole story
Summarize the business plan
Create a clear sense that you will solve a problem
Note that without investment you can’t solve it
Promise that with the money you will solve it
Be cautious about making projections
Review your script with counsel before shooting
33. Leverage Your Platform
Platforms will vary in their tools and their
investor audiences
Use whatever tools they offer
Build a relationship with the platform The
platform will likely reciprocate
They’ll give you training, support and insights
They may introduce you to their proprietary
network
34. Small Group Meetings
Pitch new investors everyday at lunch
Have a presentation ready on your iPad
Help people understand the problem
you solve and your solution
Guide them through your projections
Explain the offering process
Explain the offering and valuation
Qualify and close
35. Large Group Meetings
Hold one or two large group meetings
Do it after you have commitments for 1/3
Invite all interested investors to participate
Include remote participants via Google Hangouts
Use the same script you use at lunch
Use paper forms to qualify and commit everyone
Use online forms to qualify and commit online
36. Follow Up
As a general rule, even the most excited investors
will need your help
Follow up with every candidate investor personally
Answer questions
Ask, “What additional information do you need
before you are ready to commit?”
Follow up with the requested information and ask
again until they commit
37. Collecting the Money
An online escrow account is likely to be used
Money collects there until a threshold
defined in the agreements is collected
Money is then dispersed according to the
agreements
Most money goes to you
Any platform related or other fees charged to you
will be deducted
38. Before we Conclude/Q&A
Visit devinthorpe.com/kickercon to download
these slides and get a free download of my book
Your Mark on the World.
Notas del editor
A few of you may recall when in 1976, the Teton dam in Southeastern Idaho failed, damaging or destroying about 80 percent of the structures in the small town of Rexburg. Living then as I do now in Salt Lake City, my father invited me to join him and a volunteer group to Rexburg where we helped dig mud out of a basement and otherwise work to salvage a home. As an 11-year-old kid that was a lot of fun. The whole trip took about 24 hours, leaving about 2:00 AM, arriving at dawn, working all day, leaving at dark and returning after midnight. Now, I’m not a big guy. Picture me as an eleven-year-old standing next to a shovel—I wasn’t as tall as the handle and just lifting the empty shovel was a task for me. I’m sure I was of virtually no real help that day, but the experience has come to define my life. I felt so good helping people that day that I promised then I would never miss an opportunity to .serve.
Of course, I have missed many opportunities to help. I was, perhaps, distracted by building a successful finance career, but ever since I was let go from my position as the CFO for a global food and beverage company three years I have focused on channeling the enthusiasm of my youth to do my part to make the world a better place.
When was the last time you sent an email asking a friend to lunch that didn’t get answered?