CROWDFUNDING for Innovation, Job Creation, and Entrepreneurship. Robert Mitchell

Transcription

1 CROWDFUNDING for Innovation, Job Creation, and Entrepreneurship Robert Mitchell

2 Three Topics 1. The Problem Lack of capital for entrepreneurs 2. Solution What it is and our story 3. Its Potential - And what it means to you

3 Crowdfunding Defined Umbrella term meaning the practice of funding a project or venture by raising many small contributions of money from a large number of people.

4 Crowdfunding Donation/Perk Based Crowdfunding A large number of individuals donating for perks. For product based companies this can be used for pre-purchase of inventory. Crowdfund Investing A large number of unaccredited investors making modest investments in a small business in exchange for equity or debt securities.

5 Problem - Broken Financial System Although half of our jobs and output, and 65% of net NEW JOBS, come from startups and small businesses essentially all of our savings go into Fortune 500 companies U.S. Savings Allocation U.S. Jobs/GDP by Business Size 99% 1% 50% 50% Startups & SMBs Other Large Businesses Small Businesses

6 Crowdfund Investing CURRENT CROWDFUNDING DONATION-BASED CURRENT BUSINESS NEED EQUITY FUNDING GAP Small businesses & start-ups Up to $1M THIS IS WHERE CROWDFUND INVESTING COMES IN

7 Everyone we talked to said our solution would never happen The House and Senate will never agree Don t waste your time You are not being realistic? Who is going to pay for this? You re crazy!

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9 WHAT WE DID August 2010 January 2011 Summer 2011 November 2011 November 2011 February 2012 March 2012 April 2012 Jason, Rob, & Woodie have an idea to make it easier for small businesses to raise capital Zak, Jason, & Woodie Create the framework and begin lobbying Testify in front of House Committees House passes the first version of the law Rally in D.C. Participate in Senate Committee hearings Senate passes the final version of the law President Obama signs JOBS Act 460 DAYS

10 AND ON THE 460 TH DAY

11 LEGISLATIVE FRAMEWORK SMALL BUSINESS OWNERS Raise up to $1M per year with all or nothing terms SEC Regulate websites for all CrowdFund Investing CROWDFUND INVESTING FRAMEWORK UNACCREDITED INVESTORS Invest at 1 of 2 levels: Lesser of $2K or 5% income (<$100K income) Greater of $100K or 10% income (>$100K income) SELF-REGULATING ORGANIZATION CfIRA, CfPA Boards Engaged with FINRA SEC negotiations

12 HOW IT WORKS 1/ THE BIG IDEA Start up or small business owner has a high-potential idea 2/ WEB 3.0 Leverages social media for community financing 3/ CROWDFUND INVESTING CrowdFund Investing provides funds at a crucial growth point 4/ SUCCESS ATTRACTS PROFESSIONAL INVESTMENT Crowd validation + entrepreneur execution = positive signaling for follow-on capital 5/ THE CYCLE CONTINUES More entrepreneurs follow, transforming Main Street through localvesting

13 Crowdfunding s Potential

14 Keys to a Successful Crowdfunding Campaign 1. Can t crowdfund without a crowd Build out your social network before you start Remember the 80/20 rule 2. Raising money is always hard Even when it is from a crowd. Success is never easy. 3. Prepare for success Study other successful campaigns and figure out how they communicated to their possible investors/contributors. Create a campaign that resonates with your audience 4. No one like to the first on the dance floor Work with family and friend to build momentum to get to 30% 5. Stay engaged with your investors/contributors Build and maintain trust Communicate often even when the news is bad

15 What Can I do Now? 1. Donation/Perk based crowdfunding is a good fit for idea/inception and proof of concept prototyping. It allows the community to decide which ideas are worth funding. 2. Get involved in bringing enabling regulation and Crowdfund Investing to Latvia for Job Creation, Innovation, and Entrepreneurship

16 Thank You Questions? Robert Mitchell