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
•3 entrepreneurs, co-founders of the Startup Exemption
•Co-authors of the CrowdFund Investing Framework
•Inc. 500 awards – among fastest growing private companies in US
•Together raised over $100M in VC/PE capital
•In contract for CrowdFund Investing book (Wiley)
•Co-Founders and Board members of CfIRA and CfPA
•Co-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
• Small businesses &
GAP start-ups
• Up to $1M
THIS IS WHERE
CROWDFUND INVESTING
COMES IN
5. Everyone we talked to said it would never happen…
“The House and Senate will never agree”
“Don’t waste your time”
“What can 3 regular guys
get done in Washington?”
“Who’s gonna pay for this?”
“You’re crazy…”
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 – 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 ‘localvesting’
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
• Raise up to $1M per year • Regulate websites for all
with ‘all or nothing’ terms CrowdFund Investing
• State registration pre-emption
CROWDFUND INVESTING FRAMEWORK
UNACCREDITED SELF-REGULATING
INVESTORS ORGANIZATION
Invest at 1 of 2 levels: • CfIRA, CfPA Boards
•Lesser of $2K or 5% income (<$100K • Engaged with FINRA
income) • SEC negotiations
•Greater of $100K or 10% income • 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 shouldn’t I just go “perks based”?
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
