Kickercon: Devin Thorpe's How To Raise Money With Crowdfunding


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These slides were used by Devin Thorpe at Kickercon to provide training on investment crowdfunding.

The presentation provides a summary of crowdfunding laws and a basic guide for how to raise money via crowdfunding.

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  • A few of you may recall when in 1976, the Teton dam in Southeastern Idaho failed, damaging or destroying about 80 percent of the structures in the small town of Rexburg. Living then as I do now in Salt Lake City, my father invited me to join him and a volunteer group to Rexburg where we helped dig mud out of a basement and otherwise work to salvage a home. As an 11-year-old kid that was a lot of fun. The whole trip took about 24 hours, leaving about 2:00 AM, arriving at dawn, working all day, leaving at dark and returning after midnight. Now, I’m not a big guy. Picture me as an eleven-year-old standing next to a shovel—I wasn’t as tall as the handle and just lifting the empty shovel was a task for me. I’m sure I was of virtually no real help that day, but the experience has come to define my life. I felt so good helping people that day that I promised then I would never miss an opportunity to .serve.

    Of course, I have missed many opportunities to help. I was, perhaps, distracted by building a successful finance career, but ever since I was let go from my position as the CFO for a global food and beverage company three years I have focused on channeling the enthusiasm of my youth to do my part to make the world a better place.
  • When was the last time you sent an email asking a friend to lunch that didn’t get answered?
  • Kickercon: Devin Thorpe's How To Raise Money With Crowdfunding

    1. 1. Crowdfunding: Changing the World for Good Devin D. Thorpe August 29, 2014 @devindthorpe
    2. 2. How big will crowdfunding be in 2014?
    3. 3. $100 billion
    4. 4. A little about me
    5. 5. Teton Dam
    6. 6. Crowdfunding will… • Empower women and minorities • Level the playing field for ordinary investors • Facilitate growth in the developing world – Enabling the developed world to invest in high growth opportunities in emerging markets – Allow impoverished individuals to raise small amounts of capital for microenterprises
    7. 7. U.S. Securities Law  Securities Act of 1933  Securities Act of 1934  JOBS Act (2012)
    8. 8. Securities Laws Before 2012  No advertising or public announcements No “General Solicitation”  Private securities typically offered only to rich investors Most private securities transactions require accreditation Accredited investors have one of the following $1 million net worth excluding a primary residence $200,000 per year of personal annual income $300,000 per year of household annual income Ordinary (non-accredited) investors are largely excluded
    9. 9. The JOBS Act • Title II: General Solicitation • Title III: Crowdfunding • Title IV: Regulation A+ (Mini IPO)
    10. 10. SEC Rulemaking  General Solicitation Rules Effective September 23, 2013 $35 billion in transactions completed in the first seven months  Crowdfunding Rules (Title III) As of today, final rules have not been issued Draft rules released in the fall of 2013 Rules viewed as challenging for small businesses and startups
    11. 11. State Laws  Many states are acting  Texas among them  Rules are less restrictive than JOBS Act Title III  States pressure congress and SEC  Catch
    12. 12. Reg D 506C Filings • September 2013 through March 2014 • Filed: $98 Billion • Funded: $35 Billion Source: Offerboard
    13. 13. Lots of Platforms Source:
    14. 14. Angel Investors
    15. 15. How Angels Invest  Angels typically invest in groups  Some groups create pools or funds of money  Some groups allow members to invest directly
    16. 16. What Angels Invest In  Angel groups often specialize  Most invest exclusively in early-stage startups, often before sales begin  Invest in the sorts of things that made them rich  Popular investments: internet, hi-tech, clean-tech, scalable  Things that typically don’t work: retail
    17. 17. All Angels Are Rich Accredited Angel Investors Investors
    18. 18. Estimating the Cost of Investment Crowdfunding
    19. 19. Cost of Audits/Reviews  The cost of audits varies enormously  A brand new startup with virtually no history and no revenue could cost less than $10,000 to audit  Fortune 500 companies spend millions on audits  Geography matters: An audit in New York City costs more than one in Houston  A review includes an opinion of the auditors much like an audit and still requires work and risk  Expect to pay 50 percent as much for a review as for an audit
    20. 20. Cost of Legal Work  Cost of legal work varies widely  Big, “expensive” firms don’t necessarily cost more— they’ve done this before  Some will fix fees, but most work by the hour  “Ball park” estimate of your fees:  $5,000 + 2 % of money you hope to raise  Note that investors may require you to pay their fees, too
    21. 21. Platform Fees  Investor Carry Model Up to 20 percent of the investment gain  Percentage of Raise Expect to pay 5 to 10 percent  Listing Fees Expect to pay $100 per month or more if you pay no other fees  Some portals may charge a combination of fees
    22. 22. Other Fees  Investor accreditation fees  Escrow fees  Document signing fees  Due diligence fees  Travel costs  Printing costs  Like staying at a five-star resort—you’ll get charged for everything
    23. 23. When Fees Are Paid  Accountants typically collect after but may require a deposit  Lawyers typically collect monthly  Platform’s carry is collected when sold  Platform’s success fee is paid at closing out of proceeds  Platform’s listing fees are paid monthly  Other fees generally paid as incurred
    24. 24. Hybrid Approach
    25. 25. Friends and Family  If you are approaching only Accredited investors, make no exceptions among family and friends  Reach through your family and friends to their Accredited investor network  Pitch individually over coffee or lunch  Direct prospects to your online offering on the platform
    26. 26. Angel Investors  To raise a round over $100,000 you’ll likely need to recruit angel investors  Work your network for introductions  Apply on angel network websites  Pitch angel networks according to their rules  Invite them to lead the round on your online offering This really means that they get to price the round  Other investors will be more likely to follow
    27. 27. Start Before You Start  No one wants to be the first to invest  Get at least 10 percent of your goal committed from family and friends If you can’t get 10 percent, you certainly can’t raise 100 percent Don’t jump the gun—get your 10 percent
    28. 28. Build Your Audience  Reach out to customers  Use your real world networks to build your online networks  Leverage your investors as each one commits
    29. 29. Email is the King of Online Communication  Before you start using social media, be sure you reach out to your network by email  Carefully, thoughtfully personalized email gets answered  Using your email newsletter isn’t nearly as effective as personal, one-on-one communications  Use email to schedule even more personal communications like phone calls, video chats and face-to-face meetings
    30. 30. Build Social Media  LinkedIn, Twitter, Facebook and Google+ are required  LinkedIn is great for reaching your network of professionals  Twitter is the best for shared interests  Facebook is pay-to-play model for business  Google+ is helpful for search results  Be active where you are
    31. 31. Tell the Story Everywhere  Connect with your LinkedIn network  Post regularly on your personal Facebook page as well as your company page  Tweet at least daily about the business and regularly about the campaign  Post at Google+, too  Use a tool like HootSuite or BufferApp
    32. 32. Prepare a Cool Video  You will give investors a lot to read  Give them a video that tells the whole story  Summarize the business plan  Create a clear sense that you will solve a problem  Note that without investment you can’t solve it  Promise that with the money you will solve it  Be cautious about making projections  Review your script with counsel before shooting
    33. 33. Leverage Your Platform  Platforms will vary in their tools and their investor audiences  Use whatever tools they offer  Build a relationship with the platform The platform will likely reciprocate They’ll give you training, support and insights They may introduce you to their proprietary network
    34. 34. Small Group Meetings  Pitch new investors everyday at lunch  Have a presentation ready on your iPad  Help people understand the problem you solve and your solution  Guide them through your projections  Explain the offering process  Explain the offering and valuation  Qualify and close
    35. 35. Large Group Meetings  Hold one or two large group meetings  Do it after you have commitments for 1/3  Invite all interested investors to participate  Include remote participants via Google Hangouts  Use the same script you use at lunch  Use paper forms to qualify and commit everyone  Use online forms to qualify and commit online
    36. 36. Follow Up  As a general rule, even the most excited investors will need your help  Follow up with every candidate investor personally  Answer questions  Ask, “What additional information do you need before you are ready to commit?”  Follow up with the requested information and ask again until they commit
    37. 37. Collecting the Money  An online escrow account is likely to be used  Money collects there until a threshold defined in the agreements is collected  Money is then dispersed according to the agreements Most money goes to you Any platform related or other fees charged to you will be deducted
    38. 38. Before we Conclude/Q&A Visit to download these slides and get a free download of my book Your Mark on the World.