Startup America Crowdfund Investing July 2012

CROWDFUND INVESTING(a.k.a. How 3 Guys Changed Securities Laws in 460 Days)

WHO WE AREJason, 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

DEFINITIONCROWDFUND INVESTINGA large number of unaccredited investorsmaking modest investments in a smallbusiness in exchange for equity or debtsecurities.

CROWDFUND INVESTING CURRENT CURRENTCROWDFUNDING BUSINESS NEEDDONATION-BASED EQUITY FUNDING • Small businesses & GAP start-ups • Up to $1M THIS IS WHERE CROWDFUND INVESTING COMES IN

Everyone we talked to said it would never happen… “The House and Senate will never agree” “Don’t waste your time” “What can 3 regular guys get done in Washington?” “Who’s gonna pay for this?” “You’re crazy…”

WHAT WE DID 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 CommitteesNovember 2011 House passes the first version of the lawNovember 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

AGENDA1/ What Crowdfund Investing is2/ The JOBS Act – Structure of the Law3/ Rulemaking timeline for CrowdFund Investing4/ Best practices and issues

HOW IT WORKS1/ THE BIG IDEASmall business owner has a high-potential idea2/ WEB 3.0Leverages social media for community financing3/ CROWDFUND INVESTINGCrowdFund Investing provides funds at a crucial growth point4/ GO PROSuccess attracts professional investment5/ THE CYCLE CONTINUESMore entrepreneurs follow, transforming Main Streetthrough ‘localvesting’

THE U.S. OPPORTUNITY New small businesses each year 500,000 % getting VC funding <1% VC funded in 2011 3,673* % with CrowdFund Investing 5% CFI funded (SMB and startup) 25,000 Small businesses with funding 28,673 ~8x 2011 level*gigaom (http://gigaom.com/2012/01/19/2011-q4-moneytree-vc-funding-web-startup-figures)

Donation/Equity/Debt Platforms Platform LinksExamples of Donation-Based Crowdfunding Platforms :•www.rockethub.com•www.kickstarter.com 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)

LEGISLATIVE FRAMEWORK SMALL BUSINESS SEC OWNERS• Raise up to $1M per year • Regulate websites for all with ‘all or nothing’ terms CrowdFund Investing • State registration pre-emption CROWDFUND INVESTING FRAMEWORK UNACCREDITED SELF-REGULATING INVESTORS ORGANIZATIONInvest at 1 of 2 levels: • CfIRA, CfPA Boards•Lesser of $2K or 5% income (<$100K • Engaged with FINRAincome) • SEC negotiations•Greater of $100K or 10% income • NASAA engagement(>$100K income)

THE FUTURE OF CFIApril 2012JOBS Act signed into law July 5 2012 General solicitation begins for accredited investors2012 2013 January 2013 270-day rulemaking process by SEC Q1 2013 FINRA rulemaking begins Q2 2013 (best guess) CrowdFund Investing begins

BEST PRACTICES FOR CFI PLATFORMS1/ Criminal and securities background checks2/ Easy to understand T&C, investor agreements and disclosures3/ Robust investor education4/ Social connectivity tools5/ Investor communication tools

QUESTIONS FROM MAIN STREET1/ 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 onthis?

Coming Soonwww.crowdfundcapitaladvisors.com

REGULATORY UPDATESStartup Exemption Framework:www.startupexemption.com/exemption-framework#axzz1vANkx2lLSEC JOBS Act Comments Page:www.sec.gov/spotlight/jobsactcomments.shtmlSEC FAQ for Crowdfunding Platforms:www.sec.gov/divisions/marketreg/tmjobsact-crowdfundingintermediariesfaq.htmCrowdfunding Professional Association (CfPA) Launch Release:www.prnewswire.com/news-releases/crowdfunding-pioneers-launch-professional-association-in-concert-with-regulatory-advocacy-group-150451405.html

WHAT WE LEARNED1/ PUT A STAKE IN THE GROUND2/ SHOW UP3/ SELL WHAT PEOPLE ARE BUYING4/ STAY ON POLICY & OUT OF POLITICS5/ SUCCESS HAS MANY FATHERS

AND ON THE 460TH DAY…

THANK YOU QUESTIONS?EMAIL JASON@CROWDFUNDCAPITALADVISORS.COMWEB CROWDFUNDCAPITALADVISORS.COM

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Startup America Crowdfund Investing July 2012

by Crowdfund Capital Advisors on Jul 27, 2012

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