This document provides information on alternative funding strategies for startups and small businesses, including crowdfunding, angel investors, and other options. It discusses the different stages of businesses and funding needs, and outlines sources of funding through revenue, debt, grants, and equity. Specific options covered include crowdfunding platforms, various types of loans, angel investors, venture capital, and new Washington state laws allowing non-accredited investor funding. The overall message is that businesses should understand their funding needs and consider multiple options at different stages of growth.

1. Crowdfunding,
Angel Investors
and Other New
Funding Strategies
to Grow Your Business
John Sechrest
@sechrest

2. Building the NW Startup Ecosystem
● Networking -> connect investors and
startups
o Open Coffee
o geeks on a trail
● Lean Startup Seattle -> Stronger startups
● Seattle Angel Conference -> More Angels
● Impact Hub Kirkland -> Place to make
impact

3. Definitions
● Startup
● Small Business
● ( Startup is not the same as Small business)
● Federal Definition of Big is > 500 employees
● Not all small businesses are the same
● Small businesses are not small versions of
big businesses

4. What stage are you at?
● Thinking about new business
● Have customers (Revenue)
● Have 1 employee
● Have 10 or less employees - Stage 1
● Have 10 to 100 employees - Stage 2
● Have 100 to 500 employees - Stage 3
● Have 500+ employees - Stage 4

5. General Startup Advice
Start Small
Test with small experiments
Don’t gamble more than you can afford
Customer Development preceeds Product Dev
Content Strategy preceeds Customer Dev
Build the food cart before the restaurant

6. Four things I expect from Startups
● Understand Lean Canvas
Problem -> Customer
Solution -> Unique Value Proposition
Unfair Advantage
Key Metrics
Channels, Revenue , Expenses
● Cashflow projections
● Sale Funnel Visualization (AARRR)
● Content Strategy

7. Need Money for Business
● Capital Expense - (CAPEX)
o fund equipment
o set up company
o Change productivity of company
● Operational Expenses (OPEX)
o staff salaries
o supplies
o consumables

8. Sources of new money
● Revenue -> Sell Something
● Debt
● Grant
● Equity

9. Choices have consequences
● Interest (cost/expense)
● Equity/Control
● Overhead (reporting, admin, data)
● Liquidity
● Resources
● Duration
● Collateral
● Duration

10. Revenue
Start where you are
Use what you have
Do what you can
Solve a problem for a customer and get them to
pay you….. Today…..
Perhaps not the thing you imagine.

11. The cheapest place to find funding
is from
your customers

12. Crowd Sourcing
Selling product, perks, swag, sparkle to raise
funds
● Indiegogo
● Kickstarter
Use Crowdsourcing to Validate market demand
It works best if you have existing momentum

13. Debt
● Visa
● Bank Loans
● SBA backed loans
o 504 -> building financing for owner occupied
● Micro Loan programs
● Revolving loan programs

14. New ways into Debt
● PayPal
● Kabbage
● Lendio
● Ondeck
● Peer Lending
o Prosper
o Lending Club

15. Grants
● Thousands of granting agencies
● Lots of competition
● Lots of hoops and restrictions
● Takes a lot of time and effort (low return)
● Perhaps
o Local agencies for small projects (odd fellows)
o SBIR.gov
o Grants.gov

16. Equity
Sell Stock in your company
● Subject to SEC Rules
● Registered stock (NASDQ) (very expensive)
● Except
o Reg A
o Reg D 506
o DPO -> (Direct Public Offering) (Reg D 504)
o Intrastate

17. Reg D 506
Must be Accredited investors
506(b) - Private Placement
506(c) - General Solicitation (JOBS ACT)
● Raise unlimited funds
● Easy paperwork
● Low liquidity
● Low overhead

18. What is Accredited?
SEC Rules for accredited investors
● Have $1M+ networth (not counting home)
OR
● Have regular income more than $200K
OR
● Have regular income with spouse over
$300K
About 9% in Washington have this status

19. Angel Investors vs Venture
Investors
● Angel Investors
o Invest their own money direction
o Tend to be smaller amounts ($5k - $500K)
o Tend to be local (92% invest within 100 miles)
● Venture investors
o Invest other peoples money
o Tend to be larger amounts ($1M-100M)
Both invest about $18B each year in the US.
Many more Angel Deals

20. Eleven Angel Groups in Seattle area
● Alliance of Angels
● Keiretsu (2)
● Element 8
● Wings
● TAGS
● Seraph Capital
● Puget Sound Venture Group
● Tacoma Angels
● Bellingham Angels
● Seattle Angel Conference

21. Take Funds for appropriate stage
Angel Investors and Venture investors look for
● high growth companies
● in Markets that are trending
● That have 10X or more returns
● This is less than 2% of all companies
● Angels invest in gas for the engine, not
building the engine

22. HB2023
● New WA law in effect as of November 1st
● Raise up to $1M
● Do it inside washington state only
● take funds from anyone in the state (non-accredited)
● Has reporting and accounting issues
http://www.dfi.wa.gov/sd/rulemaking.htm#crowdfunding

23. SCOR
● Raise Up to $1M
● In the Washington Only
● Market directly to the public (non-accredited)
● Merit based evaluation
● Some restrictions on stock
● lighter reporting and accounting
requirements
http://www.dfi.wa.gov/sd/scor.htm

24. KANBAN
Questions