Crowdfunding
Using the power and reach of the Internet
to raise money for your startup
Presentation Overview

•
•
•
•
•

Introduction
Securities and Crowdfunding

Three ways to crowdfund your business
Wrap-up
...
Traditional Fundraising Models

•
•
•

“Bootstrapping”
Public Offerings

Private Offerings
Securities Law

What is a security?
Securities Law
Raising money under
the U.S. Securities
laws:
Offering must be either:
Registered; or
Meet an exemption

•
...
The JOBS Act

•
•

Passed April 5, 2012
Aimed at helping to
make fundraising
easier for startups
The JOBS Act

•

Title II
o

•

Title III
o

•
•

Removed ban on general
solicitation
Enabled crowdfunding
under the secur...
Crowdfunding

What is
“crowdfunding”?
Crowdfunding

Three Methods of
Crowdfunding
Contribution Crowdfunding

•

Kickstarter
o
o

5.2 million pledges

o

•

$746 million (successful)
51,000 projects funded...
Contribution Crowdfunding

Pros and Cons
Contribution Crowdfunding

What are the costs?
Contribution Crowdfunding

Who will this benefit?
506(c) Private Placements

What is a “Private
Placement”?
506(c) Private Placements

Pros and Cons
506(c) Private Placements

•

Requirements
o

Accredited Investors

o

“Reasonable Steps” to
verify
506(c) Private Placements

•

Accredited Investors
o

Individuals who have an
annual income of over
$200,000 (or $300,000
...
506(c) Private Placements

•

“Reasonable Steps”
o

Review of tax forms

o

Review of assets and
liabilities

o

Agent tak...
New Form D Proposals

•
•
•

•

One year
disqualification
Must file Form D in
advance
Must file a “closing
amendment” afte...
506(c) Private Placements

Who will this benefit?
Equity Crowdfunding

Pros and Cons
Equity Crowdfunding

•

Proposed
Requirements
o

Maximum of $1 million

o

Limits on investment by
each individual

o

Man...
Equity Crowdfunding

•

Form C Disclosures
o

Directors and Officers

o

20% equity holders

o

Planned use of proceeds

o...
Equity Crowdfunding

•

Potential Issues
o

Advertising restrictions

o

Restricted shares

o

Liquidity exit strategy

o
...
The Timeline Going Forward

•
•
•

•

Sept. 23, 2013
o

General solicitation ban lifted

Oct. 23, 2013
o

Crowdfunding rul...
Takeaways

•
•
•

Pros and cons of the different crowdfunding
methods - use what works for you
Use professionals - don’t g...
Questions?
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Crowdfunding: Use the Power and Reach of the Internet to fund your startup

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Powerpoint Presentation given at the Santa Clarita Startup Meetup Group on Nov. 18, 2013. Covers three crowdfunding methods, their pros and cons, and a look forward.

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Crowdfunding: Use the Power and Reach of the Internet to fund your startup

  1. 1. Crowdfunding Using the power and reach of the Internet to raise money for your startup
  2. 2. Presentation Overview • • • • • Introduction Securities and Crowdfunding Three ways to crowdfund your business Wrap-up Questions
  3. 3. Traditional Fundraising Models • • • “Bootstrapping” Public Offerings Private Offerings
  4. 4. Securities Law What is a security?
  5. 5. Securities Law Raising money under the U.S. Securities laws: Offering must be either: Registered; or Meet an exemption • •
  6. 6. The JOBS Act • • Passed April 5, 2012 Aimed at helping to make fundraising easier for startups
  7. 7. The JOBS Act • Title II o • Title III o • • Removed ban on general solicitation Enabled crowdfunding under the securities laws Emerging Growth Companies Higher Reg A Fundraising Limit
  8. 8. Crowdfunding What is “crowdfunding”?
  9. 9. Crowdfunding Three Methods of Crowdfunding
  10. 10. Contribution Crowdfunding • Kickstarter o o 5.2 million pledges o • $746 million (successful) 51,000 projects funded o 44% success rate IndieGoGo o about ⅙ of Kickstarter o 34% success rate
  11. 11. Contribution Crowdfunding Pros and Cons
  12. 12. Contribution Crowdfunding What are the costs?
  13. 13. Contribution Crowdfunding Who will this benefit?
  14. 14. 506(c) Private Placements What is a “Private Placement”?
  15. 15. 506(c) Private Placements Pros and Cons
  16. 16. 506(c) Private Placements • Requirements o Accredited Investors o “Reasonable Steps” to verify
  17. 17. 506(c) Private Placements • Accredited Investors o Individuals who have an annual income of over $200,000 (or $300,000 with spouse) o Individuals who have a net worth, excluding primary residence, of over $1,000,000 o Institutional Investors
  18. 18. 506(c) Private Placements • “Reasonable Steps” o Review of tax forms o Review of assets and liabilities o Agent takes reasonable steps to verify
  19. 19. New Form D Proposals • • • • One year disqualification Must file Form D in advance Must file a “closing amendment” after raise Must file all solicitation materials with SEC
  20. 20. 506(c) Private Placements Who will this benefit?
  21. 21. Equity Crowdfunding Pros and Cons
  22. 22. Equity Crowdfunding • Proposed Requirements o Maximum of $1 million o Limits on investment by each individual o Mandatory disclosures to the SEC o Use of specified crowdfunding platforms
  23. 23. Equity Crowdfunding • Form C Disclosures o Directors and Officers o 20% equity holders o Planned use of proceeds o Offering target o Business plan o Financial condition o Price of securities
  24. 24. Equity Crowdfunding • Potential Issues o Advertising restrictions o Restricted shares o Liquidity exit strategy o Lack of shareholder coordination o Lack of investor sophistication o Valuation volatility
  25. 25. The Timeline Going Forward • • • • Sept. 23, 2013 o General solicitation ban lifted Oct. 23, 2013 o Crowdfunding rules proposed Nov. 4, 2013 o Comments due for Form D changes Feb. 3, 2014 o Comments due for Crowdfunding proposal
  26. 26. Takeaways • • • Pros and cons of the different crowdfunding methods - use what works for you Use professionals - don’t go it alone Get involved - take advantage of the SEC commenting process
  27. 27. Questions?

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