Agenda1. Crowdfunding overview IP & Crowdfunding2. Crafting the Idea and Campaign3. Preparing the Visuals4. Perks and rewards5. Running a successful campaign Practical Crowdfunding www.propelarizona.com Workshop
WYNTK (what you need to know)• Debt Crowdfunding – microloans – P2P lending• Donation Crowdfunding – Charity/Causes – Kickstarter Model – Rewards Based – Pre-Order/Presumer• Equity Crowdfunding – JOBS act www.propelarizona.com
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
Lessons from Ethan Mollick‟s “The Dynamics of Crowdfunding: Determinants of Success and Failure”
3 Why’s …There are three main reasons why people unconnected to a project or business would support it:• 1. They connect to the greater purpose of the campaign• 2. They connect to a physical aspect of the campaign like the 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/
Overall (Crowdfunding) Why’s• Passion – For the technology – For the industry – For the cause – For the product• 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 www.propelarizona.com
WYNTK (what you need to know)(when crowdfunding …) “its not what you do, but why you do it,” www.propelarizona.com
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
HOW to Crowdfund?1. PRE - Preparing2. PUSH - Running the campaign3. POST – Delivering on your Promise
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
• 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.
7 habits of highly successful crowdfunding campaigns1. They already have fan bases2. They build off of something familiar3. They are simple4. They are (usually) NOT about the company5. They appeal to a specific interest ….6. They are BUZZWORTHY ….7. They work really hard at it!
Before you start, remember …• For your target, – Its about emotion – It’s about “eliteness” – … being part of the cool group – feeling like youre important - – feeling powerful! Influential
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
Checklist1. Idea-check: (focus on target) – About “them” not you. – Emotional appeal: Passion, exclusivity, emotion.2. Funding Level – Realistic (for you and them) – Use of proceeds3. Timeframe4. Possible perks (not yet)
1. Idea – What’s the story – What’s the emotional appeal, benefits2. Who are the targets – Benefits. Connections3. Describe, tell story.4. What visuals should you provide.5. How much, how long? When done?
• $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
1. What is important to your target?2. What rewards can connect them to you or your project3. What rewards are part of your project4. What unique rewards can you think of (that others are not doing)5. What rewards will get them talking to others!
• 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, including their second and third degree connections.• http://www.forbes.com/sites/tanyaprive/2012/11/27/what-is- crowdfunding-and-how-does-it-benefit-the-economy/