Midwest Crowdfunding Conference November 15, 2013
Latest Developments in the
World of Crowdfunding
Organizer, New York Investing Meetup (5000+ Members)
Author of 4 Investing Books and 700 Articles
Upcoming book on Crowdfunding, out early 2014
Copyright 2013, All Right Reserved
For educational purposes only. There is no intention to recommend the purchase or sale of any investment
or provide legal opinions or advice.
Financing a company, project, campaign or
1.From a large number of small investors or donors
2. During a specific period of time
3. Done through a general online solicitation
4. Involving a social media component –and5. Offering some immaterial, product/service or
Four/Five Types of Crowdfunding
• Donation – charity in all forms
• Reward – creative projects or inexpensive
• Debt (the Western view)
- Peer-to-Peer (P2P)
- Peer-to-Business (P2B)
• Equity - stock
• Revenue Sharing – split the profits
• First Platforms:
- Donation: JustGiving/FirstGiving,UK in 2001
- Rewards: ArtistShare, U.S. in 2003
- Debt: ZOPA, UK in 2005
- Equity: ASSOB*, Australia in 2006.
• Leading Countries:
- Donation: U.S. and UK
- Rewards: U.S.
- Debt: China, UK, U.S.
- Equity: UK, France
• Kickstarter (U.S in 2009) currently the largest,
has most of the mega campaigns.
• By end of 2012:
- 536 platforms
- $2.8 billion raised ($5.1 predicted 2013)
• Growth Rates between 2009-2011:
- Donation 43%
- Reward 524%
- Debt 78%
Key Events and Trends
• SEC implements rules for 2012 JOBS Act.
- General Solicitation ban lifted on Sept 23 rd
- Proposed Rules for non-accredited Oct 23 rd.
• First failure of equity funded company (in UK).
• The big campaigns are becoming bigger and
• Platforms becoming multinational.
• Big growth in P2P lending. Niche areas
real estate and medical.
• Revenue sharing emerging 5th category.
Old U.S. Rules for Equity Funding
• U.S: Securities Act of 1933 allows raising money
only from accredited investors (millionaires) with
whom you have a pre-existing, substantive
relationship. General solicitation banned.
• Some exceptions through Regulations A & D.
• States add another level of regulation. Standard
disclosure document accepted in only 45 states.
• Underlying assumption is the entrepreneur is a
swindler and the investor is a rube.
New Regulations in U.S.
• JOBS Act (passed April 2012)
SEC had to implement rules for it to function.
• Non-accredited investors allowed into system, but
only allowed to invest small amounts.
• Title II of JOBS Act – general solicitation
rule implemented on Sept 23rd (proposed July)
• Title III of JOBS Act – non-accredited investors
proposed rules on Oct 23rd.
- $2.5 mil combined on Fundly for Hurricane
Sandy relief in Nov 2012
• Reward (tech gadgets, games, and celebrity)
- Gadgets: Ubuntu Edge, $12.8 mil Aug 2013
Pebble Watch $10.3 mil May 2012
- Games: Star Citizen* $19 mil as of Sept 2013
Ouya Console $8.6 mill Aug 2012
- Celebrity: Veronica Mars $5.7 mil April 2013
Zach Braff $3.1 mil May2013
- BD Bacatá skyscaper, $171.8 mil, 2010-12
- Ribbon, $1.6 mil (convertible note), Nov 2012
- Preshafood, $A3.45 mil, ASSOB 2009/10
- Smarty Pants, $2.5 mil Circle Up Sept 2013
- Hab Housing, £1,9 mil Crowdcube Sept 2013
• ZOPA entered U.S market in Dec 2007 and left a
• Kickstarter entered UK market in fall 2012.
• Crowdcube in the UK has created a “franchise”
model and is trying to aggressively expand globally.
• WiSEED in France has announced global ambitions.
• Symbid raising money in New York.
• Take off for Equity crowdfunding in U.S., but
expect SEC to continue to try to restrain it
(equity has actually existed in U.S. since 2010).
• Look to Europe for ideas on how equity
crowdfunding will develop in U.S.
• Continued big growth in P2P lending.
• Increased globalization and platform
consolidation along with expansion.
Ultimately, the only limitations to using
crowdfunding is your imagination and