The *Real* Crowdfunding Investment
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You've heard about rewards based crowdfunding (the Kickstarters, and Indigogos) of the world, but do you know about equities crowd funding? With the anticipated Title III new regulations of the J.O.B.S (Jumpstart Our Business Startups) Act, which will allow for crowd funding on equities investments by accredited and unaccredited investors. Anticipated regulations will create a new asset class of investors with financial contributions making investments in businesses seeking new growth and ROI. What does this mean to the crowd funding market? How can issuers and investors get educated in this "new asset class" and on potential opportunities for investors and/or investments?
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The *Real* Crowdfunding Investment
- 1. The *Real* Crowdfunding Investment SXSW Interactive March 7, 2014 #JOBSinvest
- 2. HISTORY ABOUT THE PANEL • Chief Marketing Officer of OfferBoard • First member and founder of the Digitas social team • Award-winning chili cook • Brand work includes American Express, Nestle, Showtime, Gawker, GE, KitchenAid, Whirlpool, Old Navy, Kraft, and Diageo. @JessicaRandazza #JOBSinvest • Chief Executive Officer • Chairman of CFIRA, the lead lobbying group for the JOBS Act platforms • Offerboard CEO, Former Managing Director of Nehemiah Investments, Former Wall St. attorney • UT grad. Hook’em!@ChrisTyrrell
- 4. *REAL* CROWDFUNDING IS: Technology Relationships Equity Capital ‘EQUITY CROWDFUNDING’ is the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations by providing finance in the form of equity. #JOBSinvest
- 5. LAW-ENABLED INNOVATION. WHERE DID THIS COME FROM? #JOBSinvest
- 6. #JOBSinvest
- 7. MARKET ACTIVITY • $35B in Title II offerings since Sept. 23 • Within 4 months, “crowdfunded” private security offerings were nearly twice the amount of total angel spend last year on all investments • $5B more than total VC spend #JOBSinvest
- 8. EQUITY CROWDFUNDING BY TITLE #JOBSinvest
- 9. TITLE II For Businesses • You can now generally solicit and publicly advertise. • You still only have to file a Form D with the SEC *after* taking capital. • (This may change) Rules are pending that would require you to disclose details about the solicitation 15 days before you begin, and register ads. •Investors MUST BE accredited, and you must verify their accredited status. #JOBSinvest
- 10. TITLE II For Investors • Only accredited investors can invest in companies who generally solicit. • Qualifying as accredited means having $1MM in net worth, or making over $200,000 for the past 3 years • Investors will need to prove accredited investors status, which can be done by a Broker Dealer platform (like OfferBoard!) #JOBSinvest
- 11. TITLE III For Businesses • Comment period ended Feb. 3, 2014 • Limited to raising no more than $1MM per year • Depending on the amount offered (≥$500,000), audited financials are required • Mandatory disclosures: 1) info about officers & directors, as well as owners of 20% or more of the company, 2) use of proceeds 3) timing and pricing of the securities #JOBSinvest
- 12. #JOBSinvest
- 13. TITLE III For Investors • For income ≤ $100,000, invest a max of $2,000 or 5% of income or net worth • For income over $100,000, invest a max of 10% of income or net worth • Investments made in a Title III crowdfunding transactions can’t be resold to unaccredited investors for a period of one year TITLE III is NOT yet in affect. Anticipated to be implemented by second half of 2014. #JOBSinvest
- 14. TITLE IV #JOBSinvest • All investors, public advertising, no caps on individual investment, but a $50MM total cap • Will create earlier IPOs • Comment period still open until March 24
- 15. Companies relying on the Title III exemption to offer and sell securities would be required to file an annual report with the SEC and provide it to investors.HISTORY RECAPPING THE REGS • Title II helps accredited investors find deals more easily and company find investors • Title III allows 99% to participate in exciting private investments offerings • Title IV allows companies to access public markets (IPO) earlier than they could have before #JOBSinvest
- 16. While huge opportunity, there are some watch outs to consider… #JOBSinvest
- 17. RISKS For Companies •Loss of intellectual property •Deal getting “stale” •Public failure •Could scare off “smart money” •May not agree with “crowd” (or shareholders) ideas #JOBSinvest
- 18. RISKS For Investors •You could lose all of your money •No liquidity •Reputational risk •Could be pushed around by professional investors (Title III) #JOBSinvest
- 19. OPPORTUNITIES COMPANIES COULD HAVE… FASTER CHEAPER MORE COMMITED CAPITAL #JOBSinvest GLOBAL REACH
- 20. OPPORTUNITIES INVESTORS COULD HAVE… BETTER DEAL FLOW #JOBSinvest GLOBAL REACH HIGHER RETURNS
- 21. ADVANTAGES #JOBSinvest •Investors follow “smart money” •Leverage social to reach new audiences and investors and investors invest with others. •Investors learn about opportunities from their networks. •Trust makes investments happen more quickly – and that means companies improve their “speed to money.” Social channels and tools reduce barriers and take deeper dives in to personal networks.
- 22. LEVERAGING DATA #JOBSinvest • Investing is currently managed by folks who use “years of experience” and “intuition” • Fundraising is often hit-or-miss, with little information on why an investor did or did not invest • We can now demonstrate, with real data, what actions a company can take that will improve their likelihood of receiving investment.
- 23. Companies relying on the Title III exemption to offer and sell securities would be required to file an annual report with the SEC and provide it to investors.HISTORY • Title II is now • Title III is coming • Title IV will change small public markets • Data and networks create the power that will continue to revolutionize capital through crowdfunding #JOBSinvest
- 25. Jessica Randazza, CMO jessica@offerboard.com@j essicarandazza Chris Tyrrell, CEO chris@offerboard.com @christyrrell
- 26. How was the session? Feedback SXSW App Session Feedback 1. Express yourself 2. Help us get better 3.Earn rewards {Daily SXSW Posters + Grand Prizes} In 1 minute
Editor's Notes
- CHRIS TO TALK ABOUT JOBS ACT FROM A HIGH LEVEL: PURPOSE – JOBS Act provides an advocate for small businesses in the SEC. Small businesses are HUGE in the US and have been underserved for a long time. Just to give some numbers on how big the need, small businesses make up more than 99.7% of ALL employers in the United states. They create more than 50% of the non-farm private gross domestic product. Employ about 50% of ALL private sector workers AND make up for 97% of exporters and produce 29% of all export value. So. A group came together wanting to speak for this large and unrepresented group to the SEC in order to communicate their greatest needs – one of which of course is MONEY. So the group, Crowdfunding Intermediary Regulatory Advocates formed the lead lobbyist group for helping small businesses get easier access to capital through of course, CROWDFUNDING.
- As opposed to most innovation seen at SX or similar tech conferences, this is not an innovation that is driven by technology, this is driven by law.
- CHRIS TO TALK ABOUT JOBS ACT FROM A HIGH LEVEL: PURPOSE – JOBS Act provides an advocate for small businesses in the SEC. Small businesses are HUGE in the US and have been underserved for a long time. Just to give some numbers on how big the need, small businesses make up more than 99.7% of ALL employers in the United states. They create more than 50% of the non-farm private gross domestic product. Employ about 50% of ALL private sector workers AND make up for 97% of exporters and produce 29% of all export value. So. A group came together wanting to speak for this large and unrepresented group to the SEC in order to communicate their greatest needs – one of which of course is MONEY. So the group, Crowdfunding Intermediary Regulatory Advocates formed the lead lobbyist group for helping small businesses get easier access to capital through of course, CROWDFUNDING.