The New Era of Investor Relations
#JOBSAct
Doug Ellenoff is a partner at Ellenoff Grossman & Schole LLP. Mr. Ellenoff is a
corporate and securities attorney with a s...
Joy Schoffler is the founder and principal of financial technology services
public relations firm Leverage PR and is an ac...
Judd Hollas is a pioneer in the field of crowdfunding with multiple patents
granted for web-based capital marketplace syst...
Judy Robinett served as the CEO and president of a publicly-traded biotech
company for eight years. She now works with ear...
Disclaimer of Liability
• The information which is being shared with you today seeks and may
answer some questions of your...
What is Crowdfunding?
Types of Crowdfunding
#JOBSAct
Donation or rewards-based crowdfunding is where
contributions are exchanged for current or future
of goods or services. In...
Equity crowdfunding is where the exchange is company equity, or
ownership, and not goods or services. The idea is very sim...
When a crowd lends money to an individual or company with the
understanding that the loan will be repaid with interest. Ca...
• Hedges risk
• Can be used as a great
marketing tool
• Provides market validation
• Showcase success
Non-Monetary Benefit...
JOBS Act Overview
Title II and III Crowdfunding—What’s the
Difference?
#JOBSAct
• An issuer may still choose to conduct a private offering in reliance on Rule 506(b)
without using general solicitation
•...
Conceptual Framework of Novel
Crowdfunding Law—Title III
• Any investor, including non-accredited, may invest online in an...
Title III (NOT YET LEGAL!)
• Imposes caps for non-accredited investors:
• $2,000 for those individuals making less than $4...
• On September 23, 2013, the SEC voted
unanimously to pass proposed rules for
Title II crowdfunding--lifting the 80-year-
...
U.S. Equity Crowdfunding Activity
Characteristics of Businesses Using Equity
Crowdfunding
#JOBSAct
Geographic Location
#JOBSAct
Capital Seeking
#JOBSAct
Previous Year Revenue
#JOBSAct
Projected Time Profitability
#JOBSAct
Industry Sectors
#JOBSAct
Navigating The Changing Landscape
The Impact of General Solicitation
#JOBSActSource: SEC.gov
General Solicitation
“General solicitation” is the act of publicly advertising or making public
statements regarding the s...
Title II – Accredited crowdfunding
• Has no restrictions on the type of general solicitations that may be
made or the medi...
No Bad Actors
“Bad actor” disqualification requirements prohibit issuers and others, such as underwriters, placement agent...
Reasonable Steps
• Underpinning the verification process, the SEC will
take a principles-based approach to the investor
ac...
Misrepresentations—Antifraud Rules Still Apply!
A through review of all information regarding the
offering should be done ...
Marketing Your Offering –New Rules Apply!
• All advertisements or promotional statements
made, for which compensation is r...
Be Careful with Social Media
• Maintain a clear communication policy regarding the promotion of
their crowdfunding offerin...
The Funding Ecosystem
#JOBSAct
Finding and Securing Investment
The Funding Ecosystem
Source: PricewaterhouseCoopers/National Venture
Capital Association MoneyTree™ Report, Data:
Thomson...
Who Gives?
“Most of my discoveries are made
through Twitter.”
- Matt Haugly
Backed 84 campaigns.
#JOBSAct
Bring Your Own Crowd
#JOBSAct
Building Your Crowd
#JOBSAct
How to Build a Crowd for Your Crowdfunding Campaign
Network Building
“Go out there and get connected.”
- Guy Kawasaki
#JOBSAct
Keys to Success
#JOBSAct
• Build your crowd
• Segment your database
• Prepare your network
• Build your digital profile
• ...
• A, B, and C investors
• Remember the 80 / 20
rule
• Spend 80% of your time
with the 20% most likely
to invest
Segment yo...
• Accomplishments
• Client list
• Associations
• Media coverage
• Following
• Speaking engagements
• Online profile
• Webs...
• Have a good idea
• Have reputable co-founders
• Be legally licensed
• Create an executive summary
• Have a business plan...
@douglasellenoff
@equitynet
@judyrobinett
@joyschoffler
Questions?
#JOBSAct
A Copy of the slides can be found at
www.crowdbuilder.co/blog
Thank You!
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  1. 1. The New Era of Investor Relations #JOBSAct
  2. 2. Doug Ellenoff is a partner at Ellenoff Grossman & Schole LLP. Mr. Ellenoff is a corporate and securities attorney with a specialty in business transactions and corporate financing. The firm is involved in various capital market initiatives, such as, crowdfunding (CrowdESQ.com), SPACs, PIPEs and Registered Direct offerings. He represents many venture capital investor groups and corporations involved in the capital formation process and provides counsel with regard to their respective ongoing regulatory compliance. With respect to crowdfunding, he is actively engaged with clients (funding portals, broker-dealers, technology solution providers, software developers, investors and entrepreneurs), and has visited both the SEC and FINRA numerous times to discuss the proposed rules, and presented at a National Press Club event in 2013. @douglasellenoff www.egsllp.com Douglas Ellenoff | Ellenoff, Grossman & Schole #JOBSAct
  3. 3. Joy Schoffler is the founder and principal of financial technology services public relations firm Leverage PR and is an active member within the crowdfunding industry. Joy sits on the board of the CF50, a global think tank for the emerging crowdfunding industry and the Crowdfunding Intermediary Regulatory Advocates (CFIRA) a national advocacy group for implementing JOBS Act policy. She is also a contributing author for the upcoming DealFlow Media, Wiley-published book, “Crowdfunding: The Definitive Guide to Raising Capital on the Internet” and regularly writes for a number of outlets. As principal of Leverage PR, Joy and her team regularly work with leaders within the crowdfunding, investment and fintech sectors. Having a passion for startups, she recently launched CrowdBuilder.co, a PR and influencer engagement platform that helps crowdfunders and startups connect with media and influencers. @joyschoffler @leverage_pr www.leverage-pr.com Joy Schoffler | Leverage PR #JOBSAct
  4. 4. Judd Hollas is a pioneer in the field of crowdfunding with multiple patents granted for web-based capital marketplace systems. As founder and CEO of EquityNet, he leads the company's efforts to create and introduce innovative new products and services and is responsible for its strategic direction and fiscal and professional integrity. Prior to founding EquityNet in 2005, Judd served as division manager for Beta-Rubicon, Inc., a consulting firm specializing in technology assessment and business due diligence services. Judd has more than 20 years of experience as an independent technology analyst and investment manager in the private and public domains. @equitynet www.equitynet.com Judd Hollas | EquityNet #JOBSAct
  5. 5. Judy Robinett served as the CEO and president of a publicly-traded biotech company for eight years. She now works with early-stage companies developing their business and funding strategies. Her experience ranges from management positions in large organizations, to serving Board of Directors, to authoring state legislation, and participating on the team defining performance criteria for the Malcolm Baldrige Award for Medical Excellence, for which she received an award from President Bill Clinton. With her powerful network of senior executives, funding sources, and content experts, she helps companies identify the things that are often causing them to stall and brings together the various resources needed to put them on the right track for success. Whether their needs are a workable funding strategy, a focused company strategy, or technology resources, Ms. Robinett either fills the needs herself or calls on her team of internationally renowned experts to get the job done. @judyrobinett www.judyrobinett.com Judy Robinett | Power Connecting and Startup Funding Expert #JOBSAct
  6. 6. Disclaimer of Liability • The information which is being shared with you today seeks and may answer some questions of yours related to Title II and the developments which are being observed within the online funding platform industry, but is not intended as a comprehensive analysis of the topic or situations directly impacting you and any of your existing operations. In addition, this information should not be relied upon as legal advice– these are only general observations of ours. You are encouraged to speak with your own securities counsel. Your counsel may analyze the same facts and rules differently and come to dramatically different conclusions and recommendations for you • Visit SEC.gov for more information #JOBSAct
  7. 7. What is Crowdfunding? Types of Crowdfunding #JOBSAct
  8. 8. Donation or rewards-based crowdfunding is where contributions are exchanged for current or future of goods or services. Individuals or companies who launch campaigns may compensate contributors with the product they are developing or something like a t-shirt, a copy of whatever they’re building or even just a thank you. Kickstarter and Indiegogo are the most popular donations-based crowdfunding platforms. Source: Crowdfund Insider The Ultimate Crowdfunding Guide Donation/Reward Based Crowdfunding #JOBSAct
  9. 9. Equity crowdfunding is where the exchange is company equity, or ownership, and not goods or services. The idea is very similar to how common stock is bought and sold on the stock market. Equity crowdfunding cannot take place in the U.S. at scale right now. That isn’t to say it can’t take place at all. It can and does in the form of “Title II” crowdfunding. There are complex rules in current law that allow a company to sell stock to accredited investors under “Regulation D.” Source: Crowdfund Insider The Ultimate Crowdfunding Guide Equity Crowdfunding #JOBSAct
  10. 10. When a crowd lends money to an individual or company with the understanding that the loan will be repaid with interest. Can also be called “peer-to-peer lending.” Companies also use debt crowdfunding to acquire capital from the crowd. As the individual or company pays back the debt accrued, subsequent rounds generally come at lower interest rates. Over time those seeking funding can acquire capital at rates much lower than traditional credit cards or other types of high- interest debt. Source: Crowdfund Insider The Ultimate Crowdfunding Guide Debt Crowdfunding #JOBSAct
  11. 11. • Hedges risk • Can be used as a great marketing tool • Provides market validation • Showcase success Non-Monetary Benefits of Crowdfunding #JOBSAct
  12. 12. JOBS Act Overview Title II and III Crowdfunding—What’s the Difference? #JOBSAct
  13. 13. • An issuer may still choose to conduct a private offering in reliance on Rule 506(b) without using general solicitation • The issuer must take reasonable steps to verify that the purchasers of the securities are accredited investors if it elects to generally solicit • What is general solicitation and how it’s a departure from 506(b) • All purchasers of securities must be accredited investors, either because they come within one of the enumerated categories of persons that qualify as accredited investors or the issuer reasonably believes that they qualify as accredited investors, at the time of the sale of the securities • The anti-fraud rules continue to apply • Title II--Generally Solicited Private Placements #JOBSAct
  14. 14. Conceptual Framework of Novel Crowdfunding Law—Title III • Any investor, including non-accredited, may invest online in any available crowdfunding investment opportunity, so long as it is proportionate to how much they make or are worth • The concept of limiting investor’s risk exposure, based upon income and net worth, isn’t typically found in private placement or public offering statutes– by convention broker-dealers impose such standards to reduce investor risk and their own liability exposure based upon “suitability standards” only. Title III is unique in this regard #JOBSAct
  15. 15. Title III (NOT YET LEGAL!) • Imposes caps for non-accredited investors: • $2,000 for those individuals making less than $40,000 per annum • 5% of income from $40,000 up to $100,000 • 10% of income above $100,000 • $100,000 per twelve month rolling period cap on individuals • Issuers limited to $1,000,000 per twelve month rolling period • Non-accredited investors broader access investing in exempt offerings of private placements so long as appropriate and equally novel investor protection mechanisms are implemented #JOBSAct
  16. 16. • On September 23, 2013, the SEC voted unanimously to pass proposed rules for Title II crowdfunding--lifting the 80-year- old ban on general solicitation. • October 23rd, 2013 the SEC released proposed rules for Title III crowdfunding—aka unaccredited investor crowdfunding • Comment period for Title III proposed rules ended February 3rd Regulatory Update #JOBSAct
  17. 17. U.S. Equity Crowdfunding Activity Characteristics of Businesses Using Equity Crowdfunding #JOBSAct
  18. 18. Geographic Location #JOBSAct
  19. 19. Capital Seeking #JOBSAct
  20. 20. Previous Year Revenue #JOBSAct
  21. 21. Projected Time Profitability #JOBSAct
  22. 22. Industry Sectors #JOBSAct
  23. 23. Navigating The Changing Landscape The Impact of General Solicitation #JOBSActSource: SEC.gov
  24. 24. General Solicitation “General solicitation” is the act of publicly advertising or making public statements regarding the sale of a securities offering. Examples include but are not limited to: • Advertisements published in newspapers, magazines, TV, and other public websites • Communications during seminars or other events • The use of an unrestricted, and therefore publicly available, website • Social media posts and email blasts #JOBSActSource: SEC.gov
  25. 25. Title II – Accredited crowdfunding • Has no restrictions on the type of general solicitations that may be made or the media that may be employed to made such solicitations. This means that a company raising funds via accredited crowdfunding (an “issuer”) is free to use facebook, twitter, linkedin, youtube and any other medium to advertise, describe and generate buzz about the offering. • However, there are certain considerations that an issuer must be aware of and precautions that it must take. #JOBSActSource: SEC.gov
  26. 26. No Bad Actors “Bad actor” disqualification requirements prohibit issuers and others, such as underwriters, placement agents, directors, officers, and shareholders of the issuer, from participating in exempt securities offerings, if they have been convicted of, or are subject to court or administrative sanctions for, securities fraud or other violations of specified laws The rule includes the following categories of disqualifying events • Criminal convictions; Court injunctions and restraining orders • Final orders of certain state regulators (such as securities, banking, and insurance) and federal regulators • Commission disciplinary orders relating to brokers, dealers, municipal securities dealers, investment advisers, and investment companies and their associated persons • Certain Commission cease-and-desist orders • Suspension or expulsion from membership in, or suspension or barring from association with a member of, a securities self-regulatory organization (“SRO”) • Commission stop orders and orders suspending a Regulation A exemption • U.S. Postal Service false representation orders #JOBSAct
  27. 27. Reasonable Steps • Underpinning the verification process, the SEC will take a principles-based approach to the investor accreditation process • The SEC has indicated that reasonable efforts to verify investor status may differ depending on the facts and circumstances • The nature of the purchaser • The nature and amount of information about the purchaser • The nature of the offering #JOBSAct
  28. 28. Misrepresentations—Antifraud Rules Still Apply! A through review of all information regarding the offering should be done to ensure it is accurate and not misleading. Be extra careful with sales and marketing efforts before and during a raise! #JOBSAct The issuer will be liable for any material misstatements it makes in connection with the offering!
  29. 29. Marketing Your Offering –New Rules Apply! • All advertisements or promotional statements made, for which compensation is received, must include disclosure of such compensation, the type and amount of • This includes social media likes, retweets, etc. – major implications for 3rd party marketers • Compensation could take the form of cash, debt or equity interests (including options) in the issuer and other non-cash compensation #JOBSActSource: SEC.gov
  30. 30. Be Careful with Social Media • Maintain a clear communication policy regarding the promotion of their crowdfunding offering • Actively manage social media campaigns • Have legal review all social media posts and strategies before campaign • Monitor social media daily • Be careful of misstatements and omissions on social • Report compensation of promoters in advertising/ marketing #JOBSActSource: SEC.gov
  31. 31. The Funding Ecosystem #JOBSAct Finding and Securing Investment
  32. 32. The Funding Ecosystem Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters, Center for Venture Research #JOBSAct
  33. 33. Who Gives? “Most of my discoveries are made through Twitter.” - Matt Haugly Backed 84 campaigns. #JOBSAct
  34. 34. Bring Your Own Crowd #JOBSAct
  35. 35. Building Your Crowd #JOBSAct How to Build a Crowd for Your Crowdfunding Campaign
  36. 36. Network Building “Go out there and get connected.” - Guy Kawasaki #JOBSAct
  37. 37. Keys to Success #JOBSAct • Build your crowd • Segment your database • Prepare your network • Build your digital profile • Make sure your team is ready
  38. 38. • A, B, and C investors • Remember the 80 / 20 rule • Spend 80% of your time with the 20% most likely to invest Segment your database #JOBSAct
  39. 39. • Accomplishments • Client list • Associations • Media coverage • Following • Speaking engagements • Online profile • Website or blog • Social media profiles • Quality of search results Own Your Industry—Build Thought Leadership #JOBSAct
  40. 40. • Have a good idea • Have reputable co-founders • Be legally licensed • Create an executive summary • Have a business plan • Have realistic financial projections • Create an offering document • Have a reasonable valuation Crowdfunding is Pitching Investors #JOBSAct
  41. 41. @douglasellenoff @equitynet @judyrobinett @joyschoffler Questions? #JOBSAct
  42. 42. A Copy of the slides can be found at www.crowdbuilder.co/blog Thank You!
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