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Crowdfunding Hands-on For Entrepreneurs WYNTK * (what you need to know)ASU Skysong, 8 March 2013 CJ Cornell – Propel Arizona
„Serial/Parallel Entrepreneur” 10+ companies $250M Funding 4 Exits (great !) $3B Revenues 4 Failures (awful !) Lots of lessons. Chaos, Pain and Joy. Investor/Venture Capitalist EIR, Venture Partner Angel Investor 5 Companies 9 Boards 3,000 Tylenol Caplets. Ego and Brain Atrophy.CJ Cornell University Professor@cjcornell Professor of Digital Media & Entrepreneurship Arizona State University, SJSU, Stanford (Lecturer) New York Institute of Technologycj@cjcornell.com Knight Center for Digital Media Entrepreneurship Research in digital media, behavior, entrepreneurship Advisor/Mentor, Author etc. ASU – Skysong, Venture Catalyst, RSS etc Arizona Commerce Authority / Venture ready Arizona Innovation Challenge Book: Age of Metapreneurship. Blog/Articles
Agenda1. Crowdfunding overview2. Crafting the Idea and Campaign3. Preparing the Visuals4. Perks and rewards5. Running the campaign6. Success factors www.propelarizona.com Crowdfunding Workshop
What is Crowdfunding? … and why should you care?
Concept to Product to GrowthEntrepreneur IPO $ VentureEntrepreneur Capital IPO $ $
The Kauffman Index of Entrepreneurial Activity is a leading indicator of newbusiness creation in the United States. In 2012 - The state with the HIGHEST level of Entrepreneurial Growth was … Arizona.
# 1 in Entrepreneurial Growth # 46th in Venture Capital $
Concept to Product to GrowthEntrepreneur IPO $ VentureEntrepreneur Capital IPO $ $ Angels, VentureEntrepreneur accel & incub Capital IPO $ $ $
Concept to Product to Growth Angels, VentureEntrepreneur accel & incub Capital IPO $ $ $ $ $ Crowdfunding
Concept to Product to Growth Angels, VentureEntrepreneur accel & incub Capital IPO $ $ $ $ $ $ Crowdfunding Crowdfunding
Concept to Product to Growth Angels, VentureEntrepreneur accel & incub Capital IPO $ $ $ $ $ $Crowdfunding $ Crowdfunding Crowdfunding
Concept to Product to Growth Angels, VentureEntrepreneur accel & incub Capital IPO $ $ $ $ $ $Crowdfunding $ Crowdfunding Crowdfunding Crowdfunding $
WYNTK(what you need to know) CrowdfundingSoliciting & Collecting relatively small amounts of money (“funding”) from a large number of people (“crowd”)
“Crowdfunding is a term used to describe individualscoming together to support – and directly fundprojects by other individual and organizations. “http://blog.intuit.com/trends/crowd-power-what-is-crowdfunding-infographic
Jumpstart Our Business StartupACT, Title III (JOBS Act).5 APRIL, 2012 (AND … AUGUST 2012, DECEMBER 2012 …)
Equity Crowdfunding - JOBS• Eliminates ban on general solicitation and general advertising in connection with private offerings to accredited investors under Regulation D (Rule 506) and to qualified institutional buyers under Rule 144A.• Exemption from Securities Act registration “crowdfunding” transactions (involving access to small amounts of capital through the internet).• Exemption to allow issuance of up to $50 million of securities in any 12-month period, up from the current $5 million threshold• An increase in the number of shareholders a company may have before being required to register its common stock with the SEC and become a public reporting company from 500 to 2,000 total shareholders (including up to 500 “unaccredited” shareholders)• Amount each person may invest in offerings of this type, tiered by the persons net worth or yearly income.
WYNTK (what you need to know)BEFORE - (SEC “Reg D” Rule 504, 505, 506, 144a) … Since 1933 – 35 Unaccredited Investors (max), Unlimited Accredited – 500 Shareholders (max) – $1M max per 12 months, or $5M+ w/Reporting & restrictions – No “General Solicitations”AFTER - (JOBS Act) … 2012/2013, maybe – General Solicitations – to accredited investors – 35 Unaccredited Investors (max), Unlimited Accredited – 500 Shareholders (max) – $1M max per 12 months, or $5M+ w/Reporting & restrictions – No “General Solicitations” www.propelarizona.com
But,if you think the JOBS actmoves the SEC intothe 21st century …
SAN FRANCISCO, Dec 6 (Reuters) - Netflix Inc said on Thursdaysecurities regulators warned they may bring civil action against thecompany and its chief executive for violating public disclosure rules witha Facebook post …
Fraud, Deceit, Scamming Widows,Retirees and Helpless Babies.
Fraud?• Case One: Australia – Equity Crowdfunding• The Australian Small Scale Offerings Board (www.ASSOB.com.au), founded in 2007, is the largest investment crowdfunding platform in Australia and one of the largest in the world. It is an equity crowdfunding platform that has successfully served both accredited and non-accredited investors since its inception over 5 years ago, raising $130,409,669 since 2007. 132 companies have been funded to date and not a single case of fraud has been reported. ASSOB operates within the current securities structure in Austral• Case Two: UK – Equity Crowdfunding• Crowdcube (www.crowdcube.com) is the largest equity-based crowdfunding platform in the UK has been operating since February 15, 2011 with no reported fraud. Crowdcube operates within the current securities framework within the UK and allows issuers to raise equity capital using an online portal.• 29 pitches have been funded with £4.25M. Average raise is £146,552. Average equity given up is 16%. Average numbers of investors is 63. Average days to fund are 51. Average age of entrepreneur is 40 and total number of registered investors is 24,023. No fraud has been reported.• UK based, Funding Circle (www.fundingcircle.com) was founded in 2010. It is an online marketplace enabling savers and investors to sidestep banks and directly lend to small businesses. Funding Circle differs from other lending platforms in that it facilitates loans to businesses, rather than consumers while also proving easy access to investors’ money at any time. It provides low cost finance for small, UK firms frustrated by the loan terms offered by the http://www.crowdfundcapitaladvisors.com/resources/26-resources/120-crowd-detects-fraud.html
Fraud?• Case Four: US - Fraud Derailed• An example of fraud that was derailed on a portal is a campaign on Kickstarter called Mythic. FromTechdirt.com:• “A recent video game project on Kickstarter that turned out to be fake. As BetaBeat reports, the crowdsourcing scam was exposed by a crowdsourced investigation:• ... a campaign for an action video game, MYTHIC: The Story Of Gods and Men, has just been busted by forum users at Reddit, SomethingAwful and Rock, Paper, Shotgun. The creators claimed to be an independent studio, “Little Monster Productions,” of 12 industry veterans in Hollywood. “Our team has done a significant amount of work on the World of Warcraft series as well as Diablo 2 and the original Starcraft,” says the project page. Bull____, said the Internet. Turns out the art was cribbed, the text for backer rewards was copied and pasted from another Kickstarter project, and even the office photos were from another game studio, Burton Design Group.• When people brought their accusations to the Kickstarter comments, the developers made a few weak attempts at deflection then quietly shut down having raised just under $5,000 (far short of their goal, so that money wont actually be released). With Kickstarter gaining more attention every day, were sure to see more attempts at scams—and maybe even some successes—but with a savvy community that polices itself like this, the scammers face an uphill battle.” http://www.crowdfundcapitaladvisors.com/resources/26-resources/120-crowd-detects-fraud.html
Bull____, said the Internet. Turns out the art was cribbed, the text for backer rewards was copied and pasted from another Kickstarter project, and even the office photos were from another game studio, Burton Design Group.http://www.crowdfundcapitaladvisors.com/resources/26-resources/120-crowd-detects-fraud.html
WYNTK (what you need to know)• Equity Crowdfunding - not in the USA (yet)• JOBS act (April 2012) technically enables CF – but has not yet been approved by SEC.• No documented fraud in USA or other areas.• Equity CF is for “high growth companies” seeking significant funding from experienced investors• Will dramatically change in 3-5 years (CJ prediction) www.propelarizona.com
Kickstarter (2012)2.2 million people pledged a total of $319,786,629(up 221% from 2011)Backers pledged $606.76 per minutePeople in 177 countries backed a project in 2012(Thats 90% of the countries in the world)
Lessons from Ethan Mollick‟s “The Dynamics of Crowdfunding: Determinants of Success and Failure”
3 Why’s: 1. They connect to the greater purpose of the campaign three main reasons why people unconnected to a 2. They connect to a physicalproject or business would aspect of the campaign like the support it: rewards 3. They connect to the creative display of the campaign’s presentation What Is Crowdfunding And How Does It Benefit The Economy - Forbes http://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy
• Passion – For the technology – For the industryThe Real – For the cause (Crowdfunding) – For the product Why’s • Affinity – For the Entrepreneur – For the region, industry etc • Connection • Every reason BUT R.O.I. …
WYNTK (what you need to know) Crowdfunding is about …emotional ROI. Not financial ROI
WYNTK (what you need to know)(when crowdfunding …) “its not what you do, but why you do it,”
WYNTK(what you need to know)1. Crowdfunding = New “1st Money” for ventures ($10k - $50k average– but wild exceptions)2. Equity Crowdfunding is Still Far away3. Rewards based Model IS Crowdfunding today4. All or Nothing Crowdfunding – Standard5. Perks and Rewards: Pre-order Crowdfunding6. Social Media & Content Intensive www.propelarizona.com
• The iPhone-friendly Pebble watch earned $7.6 million more than its $100,000 goal.• And the Galileo iPhone platform closed its Kickstarter campaign at $702,000, far surpassing its $100,000 goal.
• Ouya raised $2 million in one day for a new Android gaming console (it’s raised more than $5 million to date),• the Nifty MiniDrive, external memory for Apple MacBooks. The tiny storage company is more than 2,000% above its $11,000 goal with 15 days left in the campaign.
Successful campaigns took an average 11 days preparing for their launch.http://blog.indiegogo.com/2013/01/12-insights-for-2012.html
Campaigns ran an average 49 days in 2012, as opposed to 60 in 2011.Successful campaigns fundraised for 39 days.
Crowdfunding Myths & Mistakes• Myth #1: If You Build It, They Will Come• Myth #2: Cash is Free• Making it about you• Unrealistic Expectations• Lack of clarity• No call to action• Expecting to be found: (No Marketing)• Ignoring Small Donations/Donorshttp://kickstartershq.com/articles/5-project-crushing-kickstarter-mistakes-how-to-avoid-themhttp://www.crowdsourcing.org/document/3-big-crowdfunding-myths-via-funderhut/23804
Successful Crowdfunding Campaigns Focus on The new 4 P‟s … WYNTK (what you need to know) the 1. the the the2. 3. 4. www.propelarizona.com
The new 4 P‟s of the WHO are they? What motivates them?Crowdfunding .. 1. focus on “them” – not your company Interests, Values … the the the2. 3. 4. You are pitching to “them” $$ Value is a negative driver ! It‟s a daily/hourly effort … TELL A STORY !! UNIQUE SOCIAL MEDIA WHY is more important than $$ It‟s about THEM It‟s a conversation … VIDEO(s) & VISUAL(s) EXCLUSIVE UPDATES, BLOGS, NEWS Tell the story in small „chapters‟ And what is important to “Them” Provide Value, and Talking Points VIDEO(s) & VISUAL(s) FIRST RE-POST, TWEETable And even smaller “sound bites” Make sure it is … It‟s about … for their network Give them a Story they BUZZWORTHY VALIDATION & EVIDENCE can tell to others. www.propelarizona.com
WYNTK(what you need to know)1. Crowdfunding takes work, new skills.2. It takes a strategy, and preparation.3. The rules are different.4. You can’t just post and run …5. It’s a public success or failure – that “stays on your resume” www.propelarizona.com
Title & Short Description • (repeatable & compelling) Long Description (“The Pitch”) • Make it a story … about “them” Visuals: Video, Photos, Images Team, Deliverables, Details Perks & rewards Funding Goals: Amount and Timeframe Updates & SOCIAL MEDIA CAMPAIGN • Repeatable Messages • Daily “routine” • Traditional marketing too
First: Who What Why When …• The 3 Who’s: – Who are the donors? (affinity & passion) – Who is benefits? (the market) – Who are you?• The 3 Why’s – Why would your donors care? – Why does the market care? – Why are you the right team to do it?
First: Who What Why When …• What is your project & goal? – Understandable & Simple – Compelling & Intriguing – Repeatable & Memorable• How and When – How will you achieve your goal? Realistic? – When, after funding? When will I get my perks?
Other Tips• Tell a story• Make it about them• The History of the idea is intriguing• What is the Impact? – why is this important?• Try a FAQ• Call to action – get them involved!
Crafting your PitchTitle & Short Description The 3 Who’s: •(repeatable & compelling) Who are the donors? (affinity & passion)Long Description (“The Pitch”) Who is benefits? (the market) •Make it a story … about “them” Who are you?Visuals: Video, Photos, ImagesTeam, Deliverables, DetailsPerks & rewards The 3 Why’s Why would your donors care?Funding Goals: Amount and Timeframe Why does the market care?Updates & SOCIAL MEDIA CAMPAIGN •Repeatable Messages Why are you the right team to do it? •Daily “routine” •Traditional marketing too What is your project & goal? Understandable & Simple Compelling & IntriguingTell a story Repeatable & MemorableMake it about themThe History of the idea is intriguing How and WhenWhat is the Impact? How will you achieve your goal?Why is this important? Realistic?Try a FAQ When, after funding?Call to action – get them involved! When will I get my perks?
Pitch Notes - 1• Who (donors, market) • Impact (on the market)• “Why” – the story • Impact (on the donors)
Pitch Notes - 2• Story, and History … • Perk Ideas (what’s important to donors)• FAQ • Calls to Action
The Importance of Visual Media• 64% of successful campaigns in had pitch videos.• Campaigns with videos under 5 minutes were 25% more likely to reach their goal than those with videos that were longer.• Average campaign video length for campaigns was 3 min, 27 seconds. Campaigns that reach their goal are 16 seconds shorter.• On average, successful campaigns uploaded 6 media to their gallery.• http://blog.indiegogo.com/2013/01/12-insights-for-2012.html
• $25 perk is the single most claimed perk, representing nearly 25% of all perks that are selected.• While the $25 dollar perk is only responsible for raising 11% of total funds.
• $100 perks raise more money than any other perk price and make up nearly 30% of total funds. A $100 perk combined with the next three perk price points: $50, $500, and $1000 makes up about 70% of total money raised by perks
Discussion• How much should we raise? – Have you raised money before? Return? – Do you/did you work at a highly visible position? – *** Your social network? Large? Followers? – Idea - big market? How unique? – How much (marketing) work will you do?
HOW to Crowdfund?PUSH - Running the campaign• Social Media• Comments & Updates• Networking• Personal Pitches
Your mission: To get them talking about your project
Now that you‟ve launched … Continue the story
Social Engagement– Transparency & Trust– Social Proof & Viral FX – Engagement & “The Fundamentals” – Twitter – Facebook – Blogging
most successful projects receive about 25-40% of their revenue from their first, second and third degree of connections. This could include friends, family, work acquaintances, or anyone that the owner is connected to.• http://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy/
1. Create: (of course)- A Facebook Account- A Twitter Account (for your campaign)
2. Tweet & Post –Frequently –Uniquely –Personally
3. Post Updates & Blog •About your progress •About the subject •About the industry •About the People
4. Go 1-1 •Reply to comments •Retweet/Repost Your fans and donors are your most powerful advocates!
5. Target, Measure & Adjust • Different Messages for different groups • Google, Hootsuite, others • Learn and Adjust focus
the importance of google analytics to track and improve performance• + perks from fivvr•• http://www.perlsteinlab.com/blog/anatomy-of-a-crowdfund-week-3-slow-and- steady
Campaign CheckistSocial Media What to Communicate:Create a schedule 2-5x / week 1. Your ProgressUse an automated tool 2. Successes, Evidence of success Eg Hootsuite 3. Ammunition for your supportersPost interesting info – Not just pleas for money 4. Industry Info, Factoids Not just updates 5. People InfoVary your targetsCall to action 1/3-1/2 timeUse analytics and other metrics Plan, Schedule & UpdateTraditional MarketingPitch EventsPress ReleasesDemos Your Social Network is a ForceTestamonialsUse an automated tool Multiplier – but you have to give them help.