the Role of Crowdfunding

Transcription

1 from Classroom to Garage to Main Street the Role of Crowdfunding for Job Creators & Investors A presentation created for by Scott E. McIntyre Director - Office of Student Entrepreneurship & Engagement THE UNIVERSITY OF TOLEDO

2 LATEST in CROWDFUNDING Background Hands up Q/A 1 JOBS ACT A systemic correction to stifling overregulation of capital formation process specifically with Crowdfunding, there was a misassumption that wealth = knowledge. Battle is increased capitalization vs. investor risk/protection 2 TITLE III - REG CF Introduces over 93% of Americans to securities investment, but with strict regulations governing transaction size and reporting requirements 3 BENEFITS / RISKS Reg CF Opens up endless stream of entrepreneurial and investment opportunities, but equally endless stream of novice business-builders and high expectations among investors

3 TITLE III BY THE #S

4 COMPARED TO TITLE IV 1. Issuers can raise up to $50,000,000 in a 12 month period for Tier 2 and $20,000,000 for Tier Anyone can invest: accredited investors, regular people including your friends and family, however there are limits: Tier II, individual investors can invest a maximum of the greater of 10% of their net worth or 10% of their net income in a Reg A+ offering. There are no investment limits under Tier Self-Certification of Income / Net Worth: Unlike Rule 506(c) under Title II of the JOBS Act, investors will be able to self-certify their income or net worth - no burdensome documentation required to prove income or net worth. 4. You can advertise your offering, but Offering Circular Approval is Required, and may receive the same level of scrutiny as a Form S-1 in an IPO. This is the biggest potential drawback of using Reg A+. 5. Audited Financials Required: For Tier 2, together with the Offering Circular, the issuer will be required to provide two years of audited financial statements. Tier 1 offerings require only reviewed financials (not audited). 6. Testing the Waters: An issuer can test the waters and see if there is interest in the offering prior to spending the time and money to create the Offering Circular. This is important so that companies don t have to gamble on their fundraise and can see if there is interest prior to investing in legal and accounting fees. 7. Ongoing Disclosure: For Tier 2, the issuer will be required to make an annual disclosure filing, a semi-annual report, and current reports. These reports will also require ongoing audited financials. There are no ongoing disclosure requirements for Tier Shareholder Limits: more investors, higher minimums 9. Unrestricted Securities: The securities issued in Reg A+ will be unrestricted and freely transferable, though many issuers may choose to impose contractual transfer restrictions. Many believe this will pave the way for a secondary market for these securities in the form of Venture Exchanges. 10.Investment companies ineligible (i.e. private equity funds, venture funds, hedge funds) may not use Reg A to raise capital. 11.Integration: You can use Reg A+ in conjunction with other CF offerings, but several safe harbors: No integration with any previously closed offerings No integration with a subsequent crowdfunding offering No integration where issuer complies with terms of both offerings independently can conduct simultaneous Reg D 506(c) offering.

5 COLLECTIVE PROBLEM 1 COMMUNICATION A wealth of underemployed, yet abundant resources: Facilities, staff, intellectual property support but stakeholders in the community still feel disconnected 2 TRAINING Stakeholders lack critical knowledge: Most claim little knowledge about Entrepreneurship, but instinctively grasp power of the Crowd, both students and small business owners 3 INVESTMENT Economic pressures AND outdated business models: Conventional investors rarely focus on small deals due to mindshare, transaction & management overhead costs Collectively, unlimited source of capital but limited trust

6 IDEAL SOLUTION Harness creativity, enthusiasm and (avail)ability of ideas 1 by Implementing broad entrepreneurship programs, curriculum, events = ecosystem Deliver critical knowledge and training where people expect it 2 by Training & Experimenting with Crowd sourcing and funding strategies, with social students Sustain stakeholders awareness and support 3 by Rewarding the individual and community for fruits of homegrown labor = new markets

7 1 COMMUNICATION Associations and Trade Groups are key to both communication and cooperation: Helping develop and validate education programs Promoting and hosting industry conferences Gathering and sharing best practices Guiding and influencing legislative support Crowdfunding Professional Association Partnering and publishing sponsored research The Crowdfunding Professional Association was formed by pioneers that helped write legislation in the U.S. The CfPA is run by volunteers helping entrepreneurs everywhere raise capital and build businesses aimed at sustainable economic growth. Universities are ideal community partners, stocked with creative natural communicators, and commonly expected to develop both technology and economic development strategies. Partnering with schools and NPOs offsets expenses, multiplies message, and orients students to benefits of networking and volunteerism.

8 2 TRAINING At The University of Toledo, I created the FEED and SEED programs ( Freshmen Experience Entrepreneurial Discipline ; Student Entrepreneurs Exhibit Discipline ) to mentor students through a process guiding them from concept to capital in only 8 weeks. Students earn real world experience, and the program is free of charge. Companies can create similar ecosystems of innovation. In Philadelphia, cophilly has been training students from multiple partner institutions on how to harness the Crowd to fund student projects, university IP, and area businesses.

9 3 INVESTMENT Startups require capital. Prior to Crowdfunding, Entrepreneurs were limited to Friends & Family, Banks, Angel Investors and Venture Capitalists, each with different requirements. Crowdfunding now puts supporting innovation, and the potential rewards, both financial and social, in almost anyone s hands. The dawn of Equity Crowdfunding brings even greater opportunities to the marketplace by filling the chasm where most businesses exist between where Friends & Family pledge thousands and where Institutional Investors place millions. Regulation Crowdfunding adds upwards of 90% of the population to the early stage equity investor class, and thankfully with more realistic expectations for sustainable businesses, not just VC-preferred high-flyers - gazelles & unicorns. New Financial Models is forging a new use for a recognized investment model designed to provide investors with liquidity freely tradable shares, delivering what most investors prefer

10 CURRENT REALITY Taking advantage of creativity delivers more than fulfilling careers Corporations are seeing Intrepreneurship" as much good business as good-will The moment of inspiration happens at any moment. Supporting it opens up doors Because of technology advancements, government support and the Open Source movement, learning, practicing, collaborating, and ultimately commercializing these moments can happen at any time Employees are eager to commit voluntarily 100% of employers prefer workers with Entrepreneurial experience MOOCs, LEAN development, rapid prototyping, 3D printing, and Crowdfunding are revolutionary advancements, and available to anyone

11 SUCCESS FORMULA Formalize integration of design and entrepreneurship advancements into workplace regimen + = ongoing peer & professional guidance toward commercialization Technology Mentoring Culture budding entrepreneurs self-replicating as Ambassadors for next crop of Job Creators + Connect entrepreneurs & resources (intuitively and at low cost) + Furnish collaborative physical environments (co-working spaces, incubators) + Offer practical Entrepreneurial and Crowdfunding training (clubs, workshops, ambassadors, mentors) + Provide access to capital (grants, Crowdfunding, competitions, Community Fund) = Practical, inspiring, real-world outcomes (projects, products, startups, companies, tax revenue, sustainability) These assets together accelerate time to market and result in a low-cost, selfsustaining culture of company-fueled innovation that puts commercialization into the hands of any worker with a good idea who is able to show initiative

12 CONTACT INFORMATION Scott E. McIntyre - Director, The University of Toledo Office of Student Entrepreneurship & Engagement THE UNIVERSITY OF TOLEDO Mr. McIntyre formerly managed the State of Ohio s Edison Technology Business Incubator where he designed and launched COspace, a co-working facility for early stage ventures. Scott is a founding member, and currently serves as President of Non-Profit trade organization The Crowdfunding Professional Association. for speaking requests or further information, Scott.McIntyre@UToledo.edu or call +1 (424)