Crowdfunding and Startups: Why Angels & VC's Should Love Crowdfunding

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Crowdfunding and Startups: Why Angels & VC's Should Love Crowdfunding was a presentation given by Manolis Sfinarolakis, the Founder of Reality Crowd TV Media Corporation, at MIT in front of Venture Capitalists, Angel Investors, and Startup Companies.

For Startups: Gives specific examples of why startups should considering using crowdfunding for their business.

For Venture Capitalists / Angels: Gives specific reasons of why venture capitalists / angels should see crowdfunding as a benefit to their investment plans.

Crowdfunding and Startups: Why Angels & VC's Should Love Crowdfunding

  1. 1. CROWDFUNDING AND STARTUPS By Reality CrowdTV Media Corporation Presenter: Manolis Sfinarolakis, Founder, Reality CrowdTV Media Corporation
  2. 2. INTRODUCTIONTOTHE SPEAKER  Manolis Sfinarolakis, Founder, Reality CrowdTV Media Corp.  Member of Crowdfunding ProfessionalAssociation (CfPA), Crowdfund Intermediary Regulatory Advocates (CFIRA), and National Crowdfunding Association (NLCFA)  Multiple speeches given on the topic of Crowdfunding in states across the U.S., including Connecticut, NewYork, Georgia, Denver, Seattle,Texas, Washington D.C., and Florida  Insurance Industry experience withThe Hartford Insurance Group within the Internal Audit Department. Received SEC Press release on October 23rd onTitle III EquityCrowdfunding.  Big 4 Accounting Firm experience with Deloitte &Touche. Auditing S-1 documentation for broker/dealer that raised 1.2 billion during IPO.  BS in BusinessAdministration, Concentration in Accounting from University of Connecticut
  3. 3. WHAT IS CROWDFUNDING?  “Crowdfunding is converting social capital into actual capital through the internet.”
  4. 4. WHY USE CROWDFUNDING?  Banks/VC’s are not investing / lending as they use to  CustomerValidation / Proof of Concept – easier to raise capital from banks /VC’s in the future  Great tool to learn marketing, communications, and business development  Forces early adoption of Social Media & PR  Instantly go global (The World is your Patron)  Depending onType – Don’t Give Up Equity /Take On Loan  Shift balance of power: Startups who appropriately prepare have leverage / options
  5. 5. CROWDFUNDING BENEFITSTOVC / ANGEL  Eliminates Risk – successful crowdfunding campaigns tend to attractVC / Angel investment to handle the customer demand.  Maintain Relations (Just In Case)– instead of completely dismissing startups because they are not yet ready for Angel /VC backing, encourage them to prove it through crowdfunding, then invest once successful  Seed + Crowdfund – invest in early stage startups to provide them the seed capital needed to market / execute their crowdfunding campaign to increase the likelihood of success.  Economic Growth – the crowdfunding ecosystem is generating massive amounts of economic activities, from entrepreneurs, to consultants, to service providers, to funding portals. There is huge opportunity to invest in infrastructure plays (HINT HINT).
  6. 6. THE 9 STAGES OF CROWDFUNDING  Successful campaigns take at least 3 months of pre-launch activities before they launch their project (to go into detail later in the presentation):  Business Planning  Intellectual Property  Social Media  Public Relations  Campaign Strategy  Networking &Team Building  Website Development  Profile &Video  Fulfillment
  7. 7. REWARDS CROWDFUNDING OVERVIEW  Contribution in exchange for a reward. Used by many different non-profits, businesses, artists, film makers, and entrepreneurs. The crowdfunding of choice for Startup companies. Capital raised without giving up equity / taking on debt!  Top websites used for rewards based crowdfunding:  Kickstarter.com  IndieGoGo.com  Highly dependent on social capital and relationships.  PR is most important, followed by social media.  Video must be top notch to tell a compelling reason why they should invest in the person’s project, especially if it is a for profit enterprise.  Must reach 30% of funding within the first week of the campaign (90% success).
  8. 8. EQUITY CROWDFUNDING OVERVIEW  Investment in exchange for equity. Title II,Title III, andTitle IV of the 2012 JOBS act.  Title II allows for the general solicitation of Accredited Investors for investment in small businesses via the internet / crowdfunding websites.  Title III will allow for the general solicitation of Un-Accredited investors for investment in small businesses via the internet / crowdfunding websites.  Title IV allows for general solicitation of both Accredited and Un-Accredited investors, however, it is state by state crowdfunding and takes months to close.  Top websites used for equity based crowdfunding:  Angellist.com  Realtymogul.com
  9. 9. DEBT CROWDFUNDING OVERVIEW  Investment in exchange for bond. Title II,Title III, andTitle IV of the 2012 JOBS act.  Title II allows for the general solicitation of Accredited Investors for investment in small businesses via the internet / crowdfunding websites.  Title III will allow for the general solicitation of Un-Accredited investors for investment in small businesses via the internet / crowdfunding websites.  Title IV allows for general solicitation of both Accredited and Un-Accredited investors, however, it is state by state crowdfunding and takes months to close.  Top websites used for debt based crowdfunding:  Patchofland.com  LendingClub.com  CircleUp.com
  10. 10. ROYALTY CROWDFUNDING OVERVIEW  Investment in exchange for future revenue (royalties) of the company / individual.  Both secured (collateral) and unsecured (based on trust).  Top websites used for royalty based crowdfunding:  UpStart.com  Empowrr.com  Bolstr.com  Royalty based crowdfunding is not only focused on the business, but rather, the confidence in the management team running the business. They are investing in the future prospects of YOU.
  11. 11. SUCCESSFUL CROWDFUNDING EXAMPLES  The Pebble Watch: https://www.kickstarter.com/projects/597507018/pebble-e- paper-watch-for-iphone-and-android  Chups LLC: https://www.kickstarter.com/projects/2029729541/a-ketchup- revolution  Bohemian Guitars: https://www.kickstarter.com/projects/366997931/bohemian- guitars-oil-can-guitars  TreeSleeve: https://www.kickstarter.com/projects/283056097/treesleeve- designed-to-reforest-the-world

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