1. Crowdfunding
Is there Safety in Numbers?
Randy Smerik
Founder/CEO, Osunatech, Inc.
randy@osunatech.com
Montreal Startup Festival Randy Smerik 1
July 11-13, 2012

2. It’s all about the Movement of Money
Entrepreneurs want to use it
Investors want to see it “do something”
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July 11-13, 2012

3. Typical Funding Sources Today
Traditional
VC’s
Super
Angels
Convertible
Debt
$$$
Angels
Seed &
Incubator Note: there is lots of overlap
Friends & between these categories in the
Family real world
Desire for Control/Information
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July 11-13, 2012

4. Enter: Crowdsourcing & Social Networks
Traditional
Super VC’s
Angels
Convertible
Debt
Angels
Seed &
$$$
Incubator
Social Graph
and Viral
Friends &
Family
Desire for Control/Information
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5. People with Money: What do they Want?
Equity $ $
Interest (%) $
$ Philanthropy – “Give Back”
$
$
Entrepreneur Product and Goods
Be part of something $
Fun, Passion, Status $
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July 11-13, 2012

6. Crowdsourcing Money
Equity • How it works today
with Crowdsourcing:
Interest (%) – Pledge and Donation
Platforms
– ArtistShare - RocketHub
Philanthropy – “Give Back”
– Oldest form of
crowdsourcing money
Product and Goods
Be part of something
Fun, Passion, Status
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July 11-13, 2012

7. Crowdsourcing Money
Equity • How it works today
with Crowdsourcing:
Interest (%) – Pledge and Donation
Platforms
– Kickstarter - Indiegogo
Philanthropy – “Give Back”
– Most Popular Today
Product and Goods
Be part of something
Fun, Passion, Status
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July 11-13, 2012

8. Crowdsourcing Money
Equity • How it works today
with Crowdsourcing:
Interest (%) – Micro-Lending
Platforms
– Kiva – FirstGiving
Philanthropy – “Give Back”
– Typically very small
amounts ($25-$100)
Product and Goods
Be part of something
Fun, Passion, Status
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July 11-13, 2012

9. Crowdsourcing Money
Equity • How it works today
with Crowdsourcing:
Interest (%) – Pee-to-Peer Lending
– Prosper - LendingClub
– Typical limits of $25K to
Philanthropy – “Give Back”
$35K
Product and Goods
Be part of something
Fun, Passion, Status
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July 11-13, 2012

10. Crowdsourcing Money
Equity Two Key Options:
• Accredited Investors
Interest (%) – Capital Marketplaces
– LocalStake - AngelList
Philanthropy – “Give Back” • Non-accredited Investors
– Crowdfunding (future)
Product and Goods – Seedrs (UK), 400+ getting
ready in the US
Be part of something
Fun, Passion, Status
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July 11-13, 2012

11. The Crowdfunding Dream
Equity General Non-accredited
Offering Solicitation investors
• provide real • Make the • not limited to
ownership in equity high net
the company available to a worth
large group of individuals
folks
This has been illegal in the United States since the
Securities Act of 1933
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12. The Dream is now (almost!) a Reality
• JOBS Act was approved by the US Congress
and Senate and signed into law in April 2012
– JOBS = Jumpstart of Business Startups
• The intent is to legalize Crowdfunding
• It is revolutionary – and a big surprise that it
happened so quickly – but also filled with
elements you need to be aware of
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13. And, What helped make this Dream
come true?
The latest chapter in this story started in
November 2009 …
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July 11-13, 2012

14. Michael Migliozzi had a Great Idea
• He read in Nov 2009 that
Pabst Brewing Company
was for sale for $300
million
• 5 days later he launched
BuyABeerCompany.com
• He started a crowdsource
campaign, and in 60 days
he had $210M in pledges
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16. Reality Swoops In …
• In March 2010, the SEC contacted Michael
• He was violating the Securities Act of 1933 by
offering a unregistered security through a
general solicitation to the public
– Serious Stuff for the SEC!
• A cease and desist order was issued, and the site
was shut down in June 2010
• Note: Michael did get $300M in Pledges first! 
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17. … But the Dream Prevails!
• Patrick McHenry (US Congressman) and others
watched what happened to Michael and used it
as a Rallying Cry for change
• In Feb 2011, legislative language was underway
• The Bill passed Congress in November 2011 – the
Senate in March 2012 – and President Obama
signed it into law in April
• 12 months from draft to law – very rare!
• The Jumpstart our Business Startups (JOBS) Act
was born
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18. JOBS Act of 2012
IPO On-Ramp
Crowdfunding
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19. JOBS Act of 2012
IPO On-Ramp
For Emerging Growth companies (<$1B sales)
• Confidential pre-review of registration filings
• Quiet period relaxed: research reports allowed
• 2 years of financials instead of 5
• Extended compliance time for new accounting rules
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July 11-13, 2012

20. JOBS Act – Crowdfunding!
• Creates a special exemption so companies can sell
securities (equity) by way of crowdfunding
• Can raise up to $1M in a 12-month period
• Must use an intermediary funding portal/platform
• Individual unaccredited investors have limits on their
investment
– If your income/net worth is less than $100K, then $2,000 or 5%
per year
– If greater than $100K, then 10% up to $100K/year
• The SEC has until Dec 2012 to write the rules on how
companies can use Crowdfunding and how Intermediaries
must function
– There are already 400+ Intermediaries engaged in the process
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21. The Good: (equity-based) Crowdfunding
• Entrepreneurs need access to money, and here is
another way to get up to $1M
• Investors gain visibility to lots of opportunities
• Good for companies not traditionally targeted by
VCs
• Good for folks in geographies without willing
investors
• Could be better capitalization structure than
having lots of “custom” friends & family and
Angel deals
• Potential “pipeline” for VCs
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22. The (potentially*) Ugly:
(equity-based) Crowdfunding
• Disclosure and Communication – imagine having to
share plans and status with 1,000 people
• Anyone can invest – your top competitor can invest
$100 and get all your info
• Financial & legal – need audited financials and a
potentially long list of legal docs
• Can only communicate on the Intermediary – no use
of Facebook or Twitter to solicit interest
• Scare off VCs –VCs may balk at 1,000 co-investors
• Exits – need to understand voting and other rights
*language still being written
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23. Crowdsourcing Money - Prioritize
What People with Money How it Happens Today
Example Players
Want with Crowdsourcing
Equity Crowdfunding Seedrs (UK)
(Mostly Non-accredited) (future) 400+ getting ready in US
Equity LocalStake, AngelList
Capital Marketplace
(Mostly Accredited) P2P Capital Markets
Prosper, LendingClub
Interest (%) P2P Lending
Zopa
Philanthropy – “Give Back” Micro-Lending Kiva
Pledging & Donation
Product and Goods Kickstarter, IndieGoGo
Platforms
Be part of something - Pledging & Donation
ArtistShare, RocketHub
Fun, Passion, Status Platforms
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24. Pebble Technologies is a
Huge (non-equity) Success Story
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July 13-15, 2011

25. Better the devil you know …
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July 11-13, 2012

26. My Advice
• Keep “traditional” funding as your “Plan A”
• Weave in social crowd-based methods if at all
possible to your funding strategy
– Really work to understand your audience and have a
plan; just as you would for target customers
– Prioritize Pledging Platforms like Kickstarter and
Capital Marketplaces like AngelList and LocalStake
• Watch what happens with Crowdfunding in the
US during this year as the SEC writes the rules
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27. Good Luck!
Bon Chance!
Thank You!
Merci Beaucoup!
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July 13-15, 2011

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