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CrowdfundingWYNTK* (what you need to know)Hands-onFor EntrepreneursCJ Cornell – Propel Arizona
10+ companies$250M Funding 4 Exits (great !)$3B Revenues 4 Failures (awful !)Lots of lessons. Chaos, Pain and Joy.„Serial/Parallel Entrepreneur”EIR, Venture PartnerAngel Investor5 Companies 9 Boards3,000 Tylenol Caplets. Ego and Brain Atrophy.Investor/Venture CapitalistProfessor of Digital Media & EntrepreneurshipArizona State University, SJSU, Stanford (Lecturer)New York Institute of TechnologyKnight Center for Digital Media EntrepreneurshipResearch in digital media, behavior, entrepreneurshipUniversity ProfessorAdvisor/Mentor, Author etc.ASU – Skysong, Venture Catalyst, RSS etcArizona Commerce Authority / Venture readyArizona Innovation ChallengeBook: Age of Metapreneurship. Blog/ArticlesCJ Cornell@email@example.com
Concept to Product to Growth$Entrepreneur IPO$VentureCapital$Angels,accel & incubCrowdfunding$$
Concept to Product to Growth$Entrepreneur IPO$VentureCapital$Angels,accel & incubCrowdfunding$$ Crowdfunding$
Concept to Product to Growth$Entrepreneur IPO$VentureCapital$Angels,accel & incubCrowdfunding$$ Crowdfunding$ Crowdfunding$
Concept to Product to Growth$Entrepreneur IPO$VentureCapital$Angels,accel & incubCrowdfunding$$ Crowdfunding$ Crowdfunding$ Crowdfunding$
CrowdfundingSoliciting & Collecting relatively small amountsof money (“funding”) from a large number ofpeople (“crowd”)WYNTK(what you need to know)
http://blog.intuit.com/trends/crowd-power-what-is-crowdfunding-infographic“Crowdfunding is a term used to describe individualscoming together to support – and directly fundprojects by other individual and organizations.“
5 APRIL, 2012 (AND … AUGUST 2012, DECEMBER 2012 …)Jumpstart Our Business StartupACT, Title III (JOBS Act).
Equity Crowdfunding - JOBS• Eliminates ban on general solicitation and general advertising in connectionwith private offerings to accredited investors under Regulation D (Rule 506) and toqualified 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-monthperiod, up from the current $5 million threshold• An increase in the number of shareholders a company may have before beingrequired to register its common stock with the SEC and become a public reportingcompany 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 networth or yearly income.
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 …
• Equity Crowdfunding - not in the USA (yet)• JOBS act (April 2012) technically enables CF – but hasnot yet been approved by SEC.• No documented fraud in USA or other areas.• Equity CF is for “high growth companies” seekingsignificant funding from experienced investors• Will dramatically change in 3-5 years (CJ prediction)www.propelarizona.comWYNTK(what you need to know)
“THE KICKSTARTER MODEL”Rewards-based, Donation Crowdfunding:
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 countriesin the world)
Lessons from Ethan Mollick‟s “The Dynamics of Crowdfunding: Determinants of Success and Failure”
3 Why’s: 1. They connect to the greaterpurpose of the campaign2. They connect to a physicalaspect of the campaign like therewards3. They connect to the creativedisplay of the campaign’spresentationthree main reasons whypeople unconnected to aproject or business wouldsupport it:What Is Crowdfunding And How Does It Benefit The Economy - Forbeshttp://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy
The Real(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. …
emotional ROI.Not financial ROIWYNTK(what you need to know)Crowdfunding is about …
(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 Intensivewww.propelarizona.comWYNTK(what you need to know)
• The iPhone-friendly Pebble watch earned $7.6million more than its $100,000 goal.• And the Galileo iPhone platform closed itsKickstarter campaign at $702,000, farsurpassing its $100,000 goal.
• Ouya raised $2 million in one day for a new Android gamingconsole (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 average11 days preparing for their launch.http://blog.indiegogo.com/2013/01/12-insights-for-2012.html
Campaigns ran an average 49 days in2012, as opposed to 60 in 2011.Successful campaigns fundraised for39 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
focus on “them” –not your companyWHO are they?What motivates them?Interests, Values …the1.The new 4 P‟s ofCrowdfunding ..www.propelarizona.comthe2.You are pitching to “them”TELL A STORY !!WHY is more important than $$VIDEO(s) & VISUAL(s)Tell the story in small „chapters‟VIDEO(s) & VISUAL(s)And even smaller “sound bites”Give them a Story theycan tell to others.the3.$$ Value is a negative driver !UNIQUEIt‟s about THEMEXCLUSIVEAnd what is important to “Them”FIRSTMake sure it is …BUZZWORTHYthe4.It‟s a daily/hourly effort …SOCIAL MEDIAIt‟s a conversation …UPDATES, BLOGS, NEWSProvide Value, and Talking PointsRE-POST, TWEETableIt‟s about … for their networkVALIDATION & EVIDENCE
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?
• $25 perk is the single most claimed perk,representing nearly 25% of all perks that areselected.• While the $25 dollar perk is only responsiblefor raising 11% of total funds.
• $100 perks raise more money than any otherperk price and make up nearly 30% of totalfunds. A $100 perk combined with the nextthree perk price points: $50, $500, and $1000makes up about 70% of total money raised byperks