JOBS Act - Economic Stimulus through Compassionate Capitalism
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The document discusses how compassionate capitalism and crowdfunding can be used to create wealth and stimulate the economy. It argues that crowdfunding democratizes access to capital and levels the playing field for entrepreneurs. When crowdfunding is used for equity investments rather than rewards, it becomes "crowd investing" and allows individuals to invest in startups and small businesses. This can reduce risk for traditional angel investors and create an entrepreneurship ecosystem that leads to wealth creation, jobs, and economic growth. The document provides an overview of different types of crowdfunding and considerations for individuals interested in becoming angel investors through these platforms.
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JOBS Act - Economic Stimulus through Compassionate Capitalism
- 1. Karen Rands Compassionate Capitalism Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 2. How to Create Wealth in an Entrepreneurial Eco-System Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 3. COMPASSIONATE CAPITALISM Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 5. Generational Wealth Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 6. JOBSJOBS > INCOME Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 7. Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 8. Greatest Stimulus for the Creation of JOBS since the “New Deal” Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 9. Economic Democratization of the Capital Markets Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 10. Crowdfunding Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 12. 1. Crowdfunding for Equity 2. Removal of Barriers 3. Wealth from Angel Investing Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 13. Crowd Funding becomes Crowd Investing A report published 2015 by Goldman Sachs went as far as to label crowdfunding as "potentially the most disruptive of all the new models of finance," with the Worl Bank predicting that crowdfunding investments will be a $96 billion a year market in developing countries alone by 2025. Forbes Magazine, March 15, 2016 Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 14. Hot Spots of Tech Startup Investment https://www.fundz.net/startup-database-funding-trends 2015 - 2017 Over Half a Billion Dollars $300,000,000 About a Half a Billion $30,000,000 $90,000,000 $24,000,000 $42,000,000
- 15. Crowd Funding becomes Crowd Investing • Geographic Limits on Access to Capital Removed • Levels the Playing Field • Significant Oversight on Intrastate, Reg CF and Reg A+ • “Stock Market Investors” & Real Estate investors Can Play • Effectively Reduces Risk for Traditional Angel Investors
- 16. So How to Think About It… • Reward CF is like SBIR grants, or University Grants • Get a product developed but not a business fully built • Equity Reg CF is like the F&F round, • contained, small dollar, but gets the company to a proven spot • Intrastate is really perfect for economic development • Investment from community • Local angel groups can consider it like a local syndication • Reg D 506c can be a replacement for a VC • less likely for a cram down • Reg A+ is like a Private Equity round • but you aren’t being bought out • for organically grown companies that could never raise capital from Angel groups or VCs. Compassionate Capitalist- All Rights Reserved - Karen Rands 2018
- 17. an Angel InvestorBecoming a Compassionate Capitalist
- 18. Compassionate Capitalist- All Rights Reserved - Karen Rands 2018 18
- 19. Ways to Invest • Bridge Financing – Be the BANK • Royalty/Revenue Financing • In an Angel Fund or With a Group • Convertible Note / SAFE Note • Straight Equity • Reg CF • Reg A+ • Reg D
- 20. Food for Thought • Don’t go it Alone • Fundamental profit model…. • Buy at Wholesale, Sell at Retail • Asset Class that out performs Real Estate, Stocks, Bonds….. • Remember WebVan? Pets.com? • Risk vs Reward • Compassionate Capitalism
Editor's Notes
- Good Evening, I am honored and excited to be the guest Key note speaker for the Annual Economic Conference and thank you to Bridge Angel Investors and the University of South Florida Sarasota Manatee.
- Not just because as an author, this type of an event is a golden goose for broadcasting a message to a preferred audience, but because it really is quite simply a topic that I am deeply passionate about. Sharing insights I have gained over more than 25 years of working with entrepreneurs and investors is near and dear to my heart. Wealth Creation by investing in the entrepreneur endeavors that bring innovation to market, is one aspect, but even more so is the ‘pay it forward’ effect to the prosperity that comes from the jobs that are created by those startup companies and the generational wealth that can come from the success of that business for the founders and the investors alike. I call that Compassionate Capitalism -----float in compassionate and capitalism.
- The Concept of compassionate capitalism has been a hot button for me since 2009. As the recession settled in, I noticed how many of the investors in the investor group I managed at the time, the Network of Business Angels & Investors, had the responsibility of running their own company or were an executive in a company with the responsibility of attracting and retaining customers, had to survive the recession, so their level of activity in investing in entrepreneurs had waned. Other investors, from fear of the collapse of the capital financial markets, had parked their money on the sidelines. As an economist, I knew full well that the way to grow an economy was to fuel job creation and innovation through the growth in new business, and the strengthening of existing businesses. But how does one convince others that if they stepped away from their fear, if they put their money to work by enabling good valid businesses to grow, and thereby grow the jobs they offered, they could have a greater impact on the economy, with sustainable growth, than any thing the government could do by extending unemployment benefits, or helping them refinance their homes…. My first step was to change the name of my podcast to the Compassionate Capitalist Radio Show….and hence the movement --- the Compassionate Capitalist Movement was born. I interview entrepreneurs, industry experts, investors, all types about best practices for starting and growing a business and insights about investing in entrepreneurs. You can find it on itunes, stitcher, tunein, google, beyond pod… pretty much every where. But first let me explain what a Compassionate Capitalist is…. A person that invests knowledge, resources, time, and money into entrepreneur endeavors to bring innovation to market, create jobs and create wealth for founders and investors. You see, we are a capitalist society. Capitalism is the natural order of free economy to buy and sell things that people have the freedom to decide if they want that, and at what price. But to go beyond the traditional strappings of capitalism….the investment mantra of buy low and sell high that is the foundation for real estate investing or stock market investing or gold boullion investing… whatever your favored investment asset is….. To the decision that you are going to be proactive in how you choose to expand your investment portfolio to include an asset class that has potential to change the world as we know it and improve the economy of our community like no other way. To take the greater risk of becoming an angel investor, a compassionate capitalist, because the potential reward is far greater, financially and emotionally, than any other type of investment.
- Wealth can come from any one of these elements…. Income from job or company, Income from real estate and annuities and stocks. But the really wealthy ad the 4th part of the circle for sustainable wealth from multiple streams of income.--- private equity. Quite simply, that is owning a portion of many private companies, owning the stocks of a private company before it is big enough and successful enough to be attractive to an acquirer or the general stock market investor. It is the ultimate capitalist play of buying low to sell high.
- When it comes to creating generational wealth, if only by the fact that these names are practically household names, I venture to say that the greatest source of wealth is to be a successful entrepreneur…. Businesses such as those started and led by these entrepreneurs contributed to our world in profound ways. The innovation they brought to the market in products, services, and even ideas and concepts that changed how we live, work, play, and even think, wouldn’t have been possible if it weren’t for their ‘silent partners’… the forward thinking men and women that decided to take the leap of faith and invest in their companies, to invest in their ideas, to invest in the potential they had to bring innovation to the market, to create jobs, to create wealth for themselves and their founders. And for the 13 names I have shown here, there are thousands, if not millions, of lesser known companies that have created generational wealth for their founders and their investors. Do you have a company in your midst that could be the next Home Depot, or Microsoft, or Amazon, or Spanx? Probably. The USF Technology and Transfer office is actively cultivating innovative ideas and providing resources to entrepreneurs to get them to the point that they have potential to thrive and be worthy of angel investment. There are similar such technology and transfer offices around the state at practically every university. We’ll be hearing more from Valery McDevitt the AVP for that program during our panel discussion later. There are a number of incubators and accelerators that both publically funded such as what you find at USF, UCF, UF… the Hight Tech Corridor, or privately operated for profit in south florida Such as Venture Hive in Miami and Tampa has their First Wave accelerator You have the Florida Angel Nexus merger with Florida Funders that have been showcasing the companies that are most appealing to the angel groups around Florida, and are believed to be the next big thing… perhaps as big as one of these companies. Unfortunately, with all these great programs and collaborative effort going on in Florida, it has been a very long time since the state or any university has taken a statewide look at the economic impact --- High Tech Corridor did a study in 2016 estimated they had contributed to over 230,000 jobs from 20000 companies---about 11 per company… that is impressive. AND we as business people can make some logical assumptions….of the 67 companies that Florida Angel Nexus has tracked investments in in just the last few years they were formed. Those company could rapidly go from the average 2-3 employees in a startup to the 10, 20, 50 employees an early stage company would have. An economy grows when there are JOBS.
- Because with JOBS, comes a paycheck and that means income. JOBS > INCOME Even Washington – then in 2012 with the Jumpstart our Business Startups ACT and even today with the monthly focus on the growth in jobs in the market and the reduction in unemployment. We know that availability of good jobs, comes a growth in the economy. With income, people buy things, it is the ultimate trickle down that creates revenue for those businesses so they can hire more and spend more. And the jobs that come from startup are typically better than the jobs you get from traditional tourist and hospitality sectors that are very strong in Florida. Often it takes two, even 3 in some cases, hospitality jobs to make the income of a tech job or a job that is created by an innovative company, bringing a better mousetrap to market or creating a whole new market sector for something I didn’t even know I needed before it was invented.
- The American JOBS Act – Jumpstart Our Business Startup Community sought to trigger JOB Stimulus from the bottom up. In fact, it was born of necessity if you think about what our financial market were like, the massive unemployment…at every level there was a collapse, and that included investments and retirement accounts. It really quite historic in it’s bipartisan support and its embrace of ideas and insights from the business and investor community developed the JOBS Act, passed in 2012 but took another 3 years to fully implement. The JOBS Act has been called
- GREATEST STIMULUS FOR JOBS SINCE THE NEW DEAL And if you correlate the investment capital going into startup and emerging growth companies with the growth in JOBS you can see that the good deal of the trends in job growth we are seeing now is the ripple effect of the freeing up of access to capital and the confidence the investor market had to take that money off the sidelines and to put it into startup businesses. Not only does A successful startup go from 2 guys in a garage to 25, 50, even 100 employees in a few years, there is the ripple effect of 100 more jobs they support through out source contracting of services and products from companies with their own employees, they need to grow. Your speaker last year shared that information from a study conducted by the University of Maryland, that companies that are under a year old, represent 3% of all the companies, and 20% of the gross job creation. Emerging growth companies with 10-500 employees represent 21% of the companies, with 50% of the job growth. Instead of trying to get existing companies to hire more people by providing tax incentives, or to create a bunch of government jobs, our government removed much of the barrier between entrepreneurs and investors, so startups could get access to more capital, AND between investors and entrepreneurs.
- This is a two way street: >>>THE JOBS Act has been said to have been a trigger for economic democratization of the Capital Markets….. What I mean by that is that yes…..the JOBS Act removed much of the barrier between entrepreneurs and the potential investors they seek to attract that may be outside of traditional angel groups, but it also provided an opportunity for any one, literally anyone that has discretionary income or cash on hand can now invest in a startup. Even larger established companies that might have a new line of products to launch but lack the extra capital to do so, for example, a $4M profitable company that has been in business 7 or 10 years and has figured out with a $5M infusion of capital, they could launch their new line, expand their marketplace and become a $20 or $30M company in 2 or 3 years….where do they get that kind of cash? They can’t go to a bank for that because it is more than their cashflow, with that revenue their value is too high for traditional angel groups, to having taking that long to reach that revenue disqualifies them for most traditional Venture capital groups, and their revenues and ebitda will be too small for Private Equity funds. The GOOD NEWS IS that with the new methods of raising capital established with the JOBS Act, Those companies can now let their customers, let the community at large– ultra high net worth or not, invest in their success and share in their success. Because at the onset of the recession, when the values of real estate and the stock market were tumbling, so many americans lost a great deal of what they were depending on for retirement. The drop of the stock market in 2008, took 4 years to get back to their basis points… The real estate I had prior to the recession in Florida, has not fully regained even now. Is it worth more than when I bought it sure, but not as much as what it was believed to be worth then.
- There was a phenomenon that we had been experiencing from the likes of KickStarter and Indiegogo…. That people… wealthy to average joes would commit to buying a product before it was built. They would give money to a company, an entrepreneur, an inventor, in the hopes, no guarantee, but the hope that they could have one when it was ready. Decades ago…Crowdfunding… getting funding from strangers…. Was born. It was where 3d Printers got their start, smart watches that could read your heart rate or answer your phone got their first capital, it was where drones first got started. 3 D printer Glowforge raised over $20M from individuals wanting to get the newest innovation…and went on to sell $46M, Drones - Squadrone’s Hexo > $1.3 M, Pebble smart watch raise $10M in 2012….. None of that capital those companies received to start their companies and bring those innovative products to market was for equity. Sure they get equity later, after the greatest risk had already passed. But those thousands of people that have invested hundreds if not thousands into those companies as fans of a product to come would no share in the success of those companies.
- The architects of the JOBS act were also acutely aware that there were pockets of great wealth…. But what about the rest of America. This is from the 2013 census, so based on 2012 data of the income by county… Green representing the most wealthy areas, and lighter, paler yellow…. Where there isn’t a lot of wealth. Granted much of the green is in the biggest cities compared to rural area, but if you can’t get a large company… and amazon to move their HQ2 to your neck of the woods to create jobs, how else can you create jobs or even just create wealth in those areas. We had antiquated securities regulations for private companies that were decades old. The notion of asking for money for your company from strangers had been set forth in 1933 with only minor changes since then…. If we removed that barrier called ‘general solicitation’ from the structure of how entrepreneurs raise capital, and allow people other than the most wealthy to invest in company before they went public, when they had their greatest potential increase in value, what would that do for job creation and the accumulation of wealth by more americans.
- Could CrowdFunding Change this? JOBS Act’s 3 Goals Update securities regs for the new data world we live in Make it easier to find investors … remove barriers Give the non wealthy that were already playing in crowd funding a chance at the proverbial next bigthing
- A report published 2015 by Goldman Sachs went as far as to label crowdfunding as "potentially the most disruptive of all the new models of finance," with the World Bank predicting that crowdfunding investments will be a $96 billion a year market in developing countries alone by 2025. My talk today is not about JOBS Act or raising capital through crowdfunding and how all that works… I actually have a whole section in the addendum of my book on regulation that I address this and I talk about how it relates to regular angel investing, we are here to talk about wealth creation through angel investing… in the building of thriving entrepreneur ecosystems. But let me give you an example of how this raising money from the masses can benefit both sides of the table. Chicken Soup for the Soul…. I would expect that all of you have heard of Mark Victor Hansen and the series of feel good books that tell uplifting stores. Well the company and their intellectual property was bought a fellow, Bill Rouhana in 2008. he had tried to expand beyond the feel good books into consumer products… by 2016 they were an $8M revenue company. They had substantial market brand awareness, 70,000 web email subscribers, millions of facebook likes… They raised $30M in a Reg A+ offering in under 6 months, with 2.5 M shares offered at $12 a piece to create a warchest to create feel good TV & Movies …. No fan of chicken soup for the soul who had received or given one of those books for Christmas or for ‘Chicken Soup for New Mothers” to that first time mom…whatever could ever have participated in a traditional IPO. But here for $12 a share they could spend $60 and buy 5 shares for every grandbaby…. Whatever… and every time a successful movie comes out, they get a dividend check… not to mention the value of that stock over time as a now public company. In fact the public company Chicken Soup bought Ashton Kutcher’s media company last year. It is the great economic democratization of the capital market.
- So to my earlier point with the map of income in the US…. Not surprising those areas with the most green, have also been the locations with the most active angel investor community. According to FUNDz, these are the amount of money invested in tech companies by angel groups during the period of 2015 to 2017. Not surprising that NW California… Silicon Valle and the surrounding areas have invested $1B, Half a billion down in Southern Cal. Northeast in Boston you have about a half a billion, Atlanta gets into the game with about $30M, ups to about $35M when you go broader into outlying areas…. But I have to tell you, the ecosystem that you are creating here in Florida is shaping up nice. I sence that Florida almost collaborates across the whole state as angel groups are formed, and are nurtured by other angel groups. Bridge Angels are a new group, that is getting support from the community and the other angel groups like the Florida Nexus consortium and even the long standing New World Angels out of South Florida. Look at this… 90M in the SE of Florida, $24M in NE FL and $42 M in central and west coast FL. That is over $150M has been invested by angels in Florida in tech startups in the last 2 years! You are on your way from shifting from an agricultural, tourism, and hospitality dominate economy as a foundation, but potential strong growth from tech startups if this level of investment and collaboration continues. And if you will learn how to integrate intrastate crowdfunding, REG CF, and the growth capital programs of REg 506c and RegA+ to help spur the microcap companies to becoming bigger stronger companies, and to foster angel investing at all the levels, the future is very bright for Florida’s economy.
- Crowdfunding becomes crowd investing when Geographic Limits on Access to Capital Removed --- companies located anywhere can theoretically raise capital from anywhere Levels the Playing field for Women and Minority Owned Businesses, and non-tech companies that traditionally have struggled to raise capital from traditional angel groups. Potential to Join Real Estate & Stock as Portfolio Asset and Wealth Creation Strategy for Anyone with Disposable Income Significant Oversight on the Intrastate – Floridas’ was passed in 2015 and operates much like the national crowdfunding porgram Reg CF because those are the ones that a Mandates a minimum amount must be raised before the company can get their funds. A big risk in startups is that they can’t raise all the money they need. These programs tried to minimize that risk. and RegA+ companies have the oversight of the SEC like a company going public, but without all the expense. They shift their expense to the creating market awareness that not only grows their revenue but also identifies the investors and creates an after market for their stock once it is public. “Stock Market Investors” & real estate investors can Can Play the game … get their Sea legs for example with small crowd funding level investments or with these companies that are beyond the most risky stage to a growth stage, even if they don’t have the time to participate in a traditional angel group OR aren’t located near an angel group… such as in the panhandle or in central Florida. They can become angel investors Independent of time and geography constraints And it Effectively Reduces Risk for Traditional Angel Investors by either having a company get further along with reward based crowedfunding, or as a means to extend the investment an angel group has made and that company, for whatever reasond, hasn’t been fortunate to raise their next round from the VC market. They now have options to get capital and continue to grow their business, in effect protecting your investment as an angel group.
- So one way to think about all the option for Crowd Finance: Reward CF is like SBIR grants, or University Grants Get a product developed but not a business fully built Equity Reg CF is like the F&F round, contained, small dollar, but gets the company to a proven spot Intrastate is really perfect for economic development Investment from community Local angel groups can consider it like a local syndication Reg D 506c can be a replacement for a VC less likely for a cram down Reg A+ is like a Private Equity round but you aren’t being bought out for organically grown companies that could never raise capital from Angel groups or VCs.
- Angels can come in all shapes and sizes now. First step in becoming an angel investor is to decide you want to learn Studies have shown that the internal rate of a return of angel portfolio is between 26 & 30% over a 10 year period of time, compared to residential real estate investing at about 7% and stock market at 12%. But as you may have experienced yourself. If you aren’t familiar with the language, the process, the paperwork, everything… you are reluctant to jump in and stroke that first $25K check. I saw this with my angel group when I was in the rebuild mode and I wrote the original version of my Book Inside Secrets to Angel Investing. Then it was called “How to be an angel investor”. I released my book last year with the sincere intention to provide a tool, a road map for anyone that wanted to learn how to become an angel investor would have a tool they could use at their own pace, with tips, and step by step how to, and a resource portal with thousands of dollars worth information and templates. So the first step in joing the Compassionate Capitalist Movement, where men and women of all ages, and income levels, will strive include investing in the entrepreneurs endeavers… whether through their liquid cash or through their self directed IRA, to including private equity as an asset in their wealth creation strategy, in their investment portfolio…… Become a Compassionate Capitalist. First step is to buy my book ---- available on amazon or signed in the back at the end of the program for the giant sum of $20 --- If you think you know what you need to know to be an angel investor, and you already are a compassionate capitalist… then buy it for someone that needs that information. Buy it for a mellinial that doen’t believe in the preparing for retirement system or that executive you know that it itching to leave his good paying job with all the benefits and luxury of time, to go start a business… You don’t have to be an entrepreneur if you can invest in an entrepreneur and share in the excitement of the innovation and the benefit of the wealth created. My shameless plug is done
- Because --- taking two quotes from my book…. David Rose says There is a way for private investors to take part in… investing supporting a company from its beginning…. Sounds like compassionate capitalism right? And Naval Ravkant of Angel.co declares… Innovation is the evolution of knowledge derived from the prior invention and understanding…. That is to say, if you do what experienced angels advise… and what I prescribe in the book…. Make a plan to invest in a minimum of 5 companies in 5 years, or even better 10 companies in 5 years…. Some of those will fail. Period. Fact of life. But the emotion side of the reward from being a compassionate capitalist is what Naval is talking about… think about it.. From space flight to electric cars to augmented reality to even the eveolution of the modern airplane…. There has been innovation that came before what we have today that failed but what was learned from that failure became the foundation for eveolutoin to something that worked.
- When you make the commitment to invest in multiple companies over time, you determine how much cash you have to invest and what your level of risk is. Bridge Financing – Be the BANK--- back that new customer order to be manufactured. Royalty/Revenue Financing ---- invest through a self directed IRA then those revenue payments will go into your retirement account tax free In an Angel Fund or With a Group like bridge angels and get the benefit of the group think and the years of industry experience and those that have experience as angel investors. Convertible Note / SAFE Note --- These will be your riskiest because if the company never raises their next round there is nothing to convert to Straight Equity and then you have straight equity that we have talked about Reg CF Reg A+ Reg D
- So as I start to wrap up let me leave you with this…. If investing in a startup, Don’t go it Alone – join a group or form a small group of trusted advisors. The Fundamental profit model…. Of capitalism applies here Buy at Wholesale, Sell at Retail Don’t buy based on emotion… the fundamentals have to be there for a solid business with potential to grow… how to do that is a whole other presentation Asset Class that out performs Real Estate, Stocks, Bonds….. Remember WebVan? Pets.com? ---- The angel investors were the ones that made money on those companies , not the people that jumped onto the IPO bandwagon. Risk vs Reward Compassionate Capitalism
- So as I set the stage for our panel… I want to bring up a point that Chris last hear made taken from Kauffman Foundations Entreprneurial ecosystem playbook. Entreprneurship is not just about building companies, it’s about giving individuals a means to take charge of their economic destinies We seek to empower the makers, the doers, the dreamers…. And we do that at scale by building entrepreneurial communities or ecosystems. Thank you. With that I’d like to welcome to the stage Tim ____ from Rewired solutions Valerie McDevitt from UCF technology transfer department and Allen Johnson from Bridge Angel Group. INTRODUCTIONS Questions…