Powerpoint Presentation given at the Santa Clarita Startup Meetup Group on Nov. 18, 2013. Covers three crowdfunding methods, their pros and cons, and a look forward.

1. Crowdfunding
Using the power and reach of the Internet
to raise money for your startup

2. Presentation Overview
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Introduction
Securities and Crowdfunding
Three ways to crowdfund your business
Wrap-up
Questions

3. Traditional Fundraising Models
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“Bootstrapping”
Public Offerings
Private Offerings

4. Securities Law
What is a security?

5. Securities Law
Raising money under
the U.S. Securities
laws:
Offering must be either:
Registered; or
Meet an exemption
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6. The JOBS Act
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Passed April 5, 2012
Aimed at helping to
make fundraising
easier for startups

7. The JOBS Act
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Title II
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Title III
o
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Removed ban on general
solicitation
Enabled crowdfunding
under the securities laws
Emerging Growth
Companies
Higher Reg A
Fundraising Limit

8. Crowdfunding
What is
“crowdfunding”?

9. Crowdfunding
Three Methods of
Crowdfunding

10. Contribution Crowdfunding
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Kickstarter
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5.2 million pledges
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$746 million (successful)
51,000 projects funded
o
44% success rate
IndieGoGo
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about ⅙ of Kickstarter
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34% success rate

11. Contribution Crowdfunding
Pros and Cons

12. Contribution Crowdfunding
What are the costs?

13. Contribution Crowdfunding
Who will this benefit?

14. 506(c) Private Placements
What is a “Private
Placement”?

15. 506(c) Private Placements
Pros and Cons

16. 506(c) Private Placements
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Requirements
o
Accredited Investors
o
“Reasonable Steps” to
verify

17. 506(c) Private Placements
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Accredited Investors
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Individuals who have an
annual income of over
$200,000 (or $300,000
with spouse)
o
Individuals who have a
net worth, excluding
primary residence, of
over $1,000,000
o
Institutional Investors

18. 506(c) Private Placements
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“Reasonable Steps”
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Review of tax forms
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Review of assets and
liabilities
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Agent takes reasonable
steps to verify

19. New Form D Proposals
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One year
disqualification
Must file Form D in
advance
Must file a “closing
amendment” after raise
Must file all solicitation
materials with SEC

20. 506(c) Private Placements
Who will this benefit?

21. Equity Crowdfunding
Pros and Cons

22. Equity Crowdfunding
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Proposed
Requirements
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Maximum of $1 million
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Limits on investment by
each individual
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Mandatory disclosures to
the SEC
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Use of specified
crowdfunding platforms

23. Equity Crowdfunding
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Form C Disclosures
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Directors and Officers
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20% equity holders
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Planned use of proceeds
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Offering target
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Business plan
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Financial condition
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Price of securities

24. Equity Crowdfunding
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Potential Issues
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Advertising restrictions
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Restricted shares
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Liquidity exit strategy
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Lack of shareholder
coordination
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Lack of investor
sophistication
o
Valuation volatility

25. The Timeline Going Forward
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Sept. 23, 2013
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General solicitation ban lifted
Oct. 23, 2013
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Crowdfunding rules proposed
Nov. 4, 2013
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Comments due for Form D changes
Feb. 3, 2014
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Comments due for Crowdfunding proposal

26. Takeaways
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Pros and cons of the different crowdfunding
methods - use what works for you
Use professionals - don’t go it alone
Get involved - take advantage of the SEC
commenting process

27. Questions?