Jason Best and Sherwood Neiss of Crowdfund Capital Advisors share how they changed a law in 460 days and how it will benefit start-ups and small businesses everywhere: Crowdfund Investing
1. CROWDFUND
INVESTING
(a.k.a. How 3 Guys Changed Securities Laws in 460 Days)
2. WHO WE ARE
Jason, Zak & Woodie
โข3 entrepreneurs, co-founders of the Startup Exemption
โขCo-authors of the CrowdFund Investing Framework
โขInc. 500 awards โ among fastest growing private companies in US
โขTogether raised over $100M in VC/PE capital
โขIn contract for CrowdFund Investing book (Wiley)
โขCo-Founders and Board members of CfIRA and CfPA
โขCo-Founders Crowdfund Capital Advisors
3. DEFINITION
CROWDFUND INVESTING
A large number of unaccredited investors
making modest investments in a small
business in exchange for equity or debt
securities.
4. CROWDFUND INVESTING
CURRENT CURRENT
CROWDFUNDING BUSINESS NEED
DONATION-BASED EQUITY FUNDING
โข Small businesses &
GAP start-ups
โข Up to $1M
THIS IS WHERE
CROWDFUND INVESTING
COMES IN
5. Everyone we talked to said it would never happenโฆ
โThe House and Senate will never agreeโ
โDonโt waste your timeโ
โWhat can 3 regular guys
get done in Washington?โ
โWhoโs gonna pay for this?โ
โYouโre crazyโฆโ
6. WHAT WE DID
January 2011 Jason, Zak & Woodie have an idea to make it
easier for small businesses to raise capital
Summer 2011 Testify in front of House Committees
November 2011 House passes the first version of the law
November 2011 Rally in D.C.
February 2012 Participate in Senate Committee hearings
March 2012 Senate passes the final version of the law
April 2012 President Obama signs JOBS Act
460 DAYS
7. AGENDA
1/ What Crowdfund Investing is
2/ The JOBS Act โ Structure of the Law
3/ Rulemaking timeline for
CrowdFund Investing
4/ Best practices and issues
8. HOW IT WORKS
1/ THE BIG IDEA
Small business owner has a high-potential idea
2/ WEB 3.0
Leverages social media for community financing
3/ CROWDFUND INVESTING
CrowdFund Investing provides funds at a crucial growth point
4/ GO PRO
Success attracts professional investment
5/ THE CYCLE CONTINUES
More entrepreneurs follow, transforming Main Street
through โlocalvestingโ
9. THE U.S. OPPORTUNITY
New small businesses each year 500,000
% getting VC funding <1%
VC funded in 2011 3,673*
% with CrowdFund Investing 5%
CFI funded (SMB and startup) 25,000
Small businesses with funding 28,673
~8x 2011 level
*gigaom (http://gigaom.com/2012/01/19/2011-q4-moneytree-vc-funding-web-startup-figures)
11. LEGISLATIVE FRAMEWORK
SMALL BUSINESS
SEC
OWNERS
โข Raise up to $1M per year โข Regulate websites for all
with โall or nothingโ terms CrowdFund Investing
โข State registration pre-emption
CROWDFUND INVESTING FRAMEWORK
UNACCREDITED SELF-REGULATING
INVESTORS ORGANIZATION
Invest at 1 of 2 levels: โข CfIRA, CfPA Boards
โขLesser of $2K or 5% income (<$100K โข Engaged with FINRA
income) โข SEC negotiations
โขGreater of $100K or 10% income โข NASAA engagement
(>$100K income)
12. THE FUTURE OF CFI
April 2012
JOBS Act signed into law
July 5 2012
General solicitation begins for accredited investors
2012
2013
January 2013
270-day rulemaking process by SEC
Q1 2013
FINRA rulemaking begins
Q2 2013 (best guess)
CrowdFund Investing begins
13. BEST PRACTICES FOR CFI PLATFORMS
1/ Criminal and securities background checks
2/ Easy to understand T&C, investor
agreements and disclosures
3/ Robust investor education
4/ Social connectivity tools
5/ Investor communication
tools
14. QUESTIONS FROM MAIN STREET
1/ Why shouldnโt I just go โperks basedโ?
2/ How do I determine valuation?
3/ What are the 3 parts of a successful pitch?
4/ How quickly can I get my hands on capital?
5/ Where can I get more information on
this?
16. REGULATORY UPDATES
Startup Exemption Framework:
www.startupexemption.com/exemption-framework#axzz1vANkx2lL
SEC JOBS Act Comments Page:
www.sec.gov/spotlight/jobsactcomments.shtml
SEC FAQ for Crowdfunding Platforms:
www.sec.gov/divisions/marketreg/tmjobsact-
crowdfundingintermediariesfaq.htm
Crowdfunding Professional Association (CfPA) Launch Release:
www.prnewswire.com/news-releases/crowdfunding-pioneers-launch-professional-
association-in-concert-with-regulatory-advocacy-group-150451405.html
17. WHAT WE LEARNED
1/ PUT A STAKE IN THE GROUND
2/ SHOW UP
3/ SELL WHAT PEOPLE ARE BUYING
4/ STAY ON POLICY & OUT OF POLITICS
5/ SUCCESS HAS MANY FATHERS