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Breakthrough VP - Skillsapien Crowdfunding Post-GS Seminar_2013-08-28

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Breakthrough Ventures presentation at Skillsapien seminar on Valuations and Crowd-funding Post-General Solicitation. …

Breakthrough Ventures presentation at Skillsapien seminar on Valuations and Crowd-funding Post-General Solicitation.

Date: 2013-08-28
Venue: NestGSV

Presented by Bernard Slede

Published in: Economy & Finance, Business

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  • 1. Crowdfunding Game Changer: What It Means For You Bernard Slede, Managing Partner Disclaimer: Informational summary for discussion purposes only, not advice - legal or otherwise
  • 2. Quick Background Entrepreneur in several industries Corporate VC Professional advisor to CEOs of tech/media co’s Specialize in growing revenues and financing #1 Startup America Champion in California © 2013 Bernard Slede, Breakthrough Venture Partners
  • 3. Photo credit: Wikimedia Creative Commons © 2013 Bernard Slede, Breakthrough Venture Partners Crowdfunding Liberty?
  • 4. What’s Crowdfunding?  To be accredited (US):  Have earned $200k the last 2 years ($300k for couples) OR  Have a net worth >$1M (home excluded) © 2013 Bernard Slede, Breakthrough Venture Partners
  • 5. Different Types, Different Purposes 700+ sites, 3 types: Main Purpose Example 1. Donations/Rewards Product launch/validation 2. Equity Fund-raising 3. Lending (30+) Borrowing © 2013 Bernard Slede, Breakthrough Venture Partners
  • 6. Crowdfunding is getting BIG 0 1 2 3 4 5 6 2011 2012 2013 $5-6B (e) © 2013 Bernard Slede, Breakthrough Venture Partners
  • 7. A Global Phenomenon Platforms – US: CircleUp, SeedInvest… – Australia: ASSOB – UK: Seedups, CrowdCube – … Securities Crowdfunding – US: “JOBS” Act – Italy: Decreto Crescita – … © 2013 Bernard Slede, Breakthrough Venture Partners Industry Associations – US – Canada (52) – Europe:
  • 8. How much can you actually raise? • Often ~$20-100k • Consumer plays • Not equity • Success rate ~20% © 2013 Bernard Slede, Breakthrough Venture Partners
  • 9. But not suited for every business need For instance, : >$738M from 4.6M people for >46,000 projects but currently prohibits: • e-commerce, business, and social networking • medical, health, safety, and personal care products • Equity or loans © 2013 Bernard Slede, Breakthrough Venture Partners
  • 10. So… What does that mean for Startups and Venture Capital?
  • 11. A Disruptive Shift For The “Asset Class”? $6B globally in 2013* But really maybe $150M equity? *:Estimate,DavidDrake,ForbesDec.27,2012 © 2013 Bernard Slede, Breakthrough Venture Partners
  • 12. Benefits of Crowdfunding for Startups 1) Might reduce geographical constraints 2) More efficient; low cost: $ or time 3) Better suited for: consumer and retail models 4) Crowdsourcing of intelligence 5) Market validation/social proof “Crowdfunding has now emerged as a viable, scalable alternative to public and private finance” Carl Esposti, Author of annual Crowdfunding Industry Report © 2013 Bernard Slede, Breakthrough Venture Partners
  • 13. WINTER 2011 Y Combinator: - Canadian entrepreneur - Generates revenues - $375k Angel round - Unable to raise VC APRIL 2012: Kickstarter campaign: $10M from 69,000 people MAY 2013: VC Round $15M The Pebble Story © 2013 Bernard Slede, Breakthrough Venture Partners “The early crowd acts as a signal mechanism (prediction market ) for the professional types, and the professional types act as a signal mechanism for the later crowd” - Kevin Lawton, author, “the Crowdfunding Revolution”
  • 14. Benefits of Crowdfunding for Investors 1) More transparency and efficiency 2) Increases deal flow 3) Market validation/social proof 4) Better investment decisions? “Having companies that have been proven out using crowdfunding will only create better pickings for the venture capital industry to come in and scale those startups.” Manu Kumar, K9 Ventures © 2013 Bernard Slede, Breakthrough Venture Partners
  • 15. Beware of SEC proposed complications! The SEC has proposed filing requirements such as: . If you publicly discuss raising money: notify the SEC 15 days before . each time you publicly discuss funding: include legal boilerplate . and if you don’t toe the line, you’d get a 1 year fundraising ban … Comments on SEC proposals close in a few days: https://angel.co/sec “[As a result of the extra filing burden], some commentators have questioned whether issuers will be more reluctant to pursue Rule 506 offerings.” - Dan McNamee, Esq. © 2013 Bernard Slede, Breakthrough Venture Partners
  • 16. Higher Bar: Show Business Appeal • Compelling idea and business model • Team that can execute • Sizeable market • Advisers © 2013 Bernard Slede, Breakthrough Venture Partners “Now we often see the kind of traction that we used to expect from Series B companies in Series A companies, and from Series A companies in seed companies. A number of our recent Series A investments built multi-M$ revenue run rates on their seed round.” Jeff Jordan, A16Z
  • 17. What impact on valuations? Seed Angel VC Growth • An irrelevant question? • Valuations will be driven by … supply and demand • Market will mature • Retirement funds • Flight to quality © 2013 Bernard Slede, Breakthrough Venture Partners ?
  • 18. What to do for September 23rd ? • Before: – Comply with SEC – Hire advisors to help tune your story, model, processes – Provide public comments on SEC site – Prepare crowdfunding application and campaign • After – Proceed with caution, hedge your bets – Strictly observe do’s and don’t’s – Launch crowdfunding campaign ©2013BernardSlede,BreakthroughVenturePartners Disclaimer: Informational summary for discussion purposes only, not advice - legal or otherwise
  • 19. Next Steps Stay up-to-date on the trends Work with a securities lawyer and an adviser! To reach me:  LinkedIn: www.linkedin.com/in/bernardslede  Twitter: @BernardSlede  SkillSapien: check out my availability © 2013 Bernard Slede, Breakthrough Venture Partners
  • 20. “Monetizing Innovation”