Alameda County SBDC...2017/03/07  · Equity Crowdfunding Emerged in 2011 with “Regulation D”...

Crowdfunding

Berkeley Public Library

March 7, 2017

Alameda County SBDC

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Equity Funding

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Lee Lambert

Director, Alameda County SBDC – affiliated

since 2008

Founder/CEO, Simple Buyout Plans and

Hollywood Partners

Founder, Cambridge/Samsung Partners

(venture fund)

Samsung Electronics, Van Kasper & Co.,

Deloitte, Ernst & Young

Harvard Business School, UC Berkeley

Crowdfunding

Crowdfunding is forecasted to pass venture capital as a

source of business funding in the near future

2014: $16.2 billion worldwide

2015: $34.4 billion worldwide

2020 forecast: $90.0 billion (World Bank)

2015 Venture capital: $124 billion

2015 Crowdfunding - $34.4 billion, up from $16.2 billion

Crowdfunding Segments

Source: Massolution

Platforms

Platforms

What is Crowdfunding?

3 Basic Models

Donation/ Reward

Lending

Equity

History of Global Crowdfunding

Recent History

2003:Artistshare – website for artists to raise funds to

make recordings

Example: Maria Schnieder (Jazz) raised $130,000

Premiums: $9.95 – first right to download

$250 – name listed on notes

$10,000 – listed as Executive Producer

Won a grammy in 2005!

Rewards Based Sites

Rewards Based Sites take Off!

2008: Indiegogo

2009: Kickstarter

Rewards Based sites – encompassed arts, social causes,

entrepreneurs and small businesses

Kickstarter

Through March 6, 2017

342,000 campaigns “All or Nothing” launched

121,000 successful

$2.9 Billion from 12.5 million backers

31% over $10,000

2.8% over $100,000

Famous Kickstarter Campaigns

https://www.kickstarter.com/projects/ryangrepper/coolest-

cooler-21st-century-cooler-thats-actually

https://www.kickstarter.com/projects/getpebble/pebble-e-

paper-watch-for-iphone-and-android

Indiegogohttps://go.indiegogo.com/wp-content/uploads/2015/12/Indiegogo-Statistics-Infographic-2015.jpg

Indiegogo Notable Campaigns

https://www.indiegogo.com/projects/flow-hive-honey-on-

tap-directly-from-your-beehive-environment--5#/

https://www.indiegogo.com/projects/super-troopers-2#/

Most Popular Reward Platforms

Kickstarter

Need US Bank

Account

Must reach your

goal

5% fee

3% bank fees

Must be approved

to start

Indiegogo

Accepts Paypal

5% fee to goal

or 9% if partial

3% bank fees

No approval

process

Donation Based Crowdfunding

2010: GoFundMe platform launches

Charitable giving

Medical bills, Disaster Relief, Little League Teams

Over $3 billion raised

About 8% fee all-in

https://www.gofundme.com/success

Charitable fundraising often done on Kickstarter and

Indiegogo, + many other sites

Peer to Peer Lending

Peer to Peer Lending

Dominant sites: Lending Club & Prosper

Kiva – 0% Loans from your network and extended parties

Peer to Peer Lending

Other than Kiva, lending sites can be very expensive for

businesses, especially start-ups.

Community lenders and Kiva are generally your lower cost

alternatives.

Peer to Peer Costs

Lending Club Rates

Equity Crowdfunding

Emerged in 2011 with “Regulation D” Platforms

Microventures – Tech companies

CircleUp – Branded consumer products and retail

Reg D allows only “sophisticated” investors

Generally, $1 million net worth other than home

Or, income of $200,000 last 2 years ($300,000 if

married) and expectation to continue at same level

JOBS Act of 2012

Allowed advertising for many types of crowdfunding

offers

Opened up market to solicit “unsophisticated investors”

when regulations published by the SEC in May, 2016.

Complicated restrictions (see chart next page)

Equity Crowdfunding Options

Equity Crowdfunding Sites

Crowdfunding vs. Venture Capital

Potential Advantages:

Easier to access

Valuation may be higher

Investment terms may be better

Publicity

Broader stakeholder base

Needs to be structured to allow VC investment – VC’s

don’t like to be “side by side” with unsophisticated

investors

Regulation CF

Intended to help small companies raise up to $1 million

per year

Many requirements before offering securities and

ongoing reporting requirements.

- Up front attorney/accountant fees to make an offering

- Ongoing financial reports

The new administration has stated it will seek ways to

lower the costs/red tape for this process to make it

easier to raise funds

Reg CF - JOBS Act

Reg CF Deals to September 2016

Another Way to Use Reg CF

Use Reg CF to obtain a loan

Example: Red Bay Coffee

Raised $160,000 on Wefunder

Terms: Repay with 5% of net revenues until investor is

returned 150% of investment (early investors received

200%). Forecast return in 3-5 years

https://wefunder.com/red.bay.coffee

Strategy

Telling Your Story

“Kickstarter as a phenomenon is made much

more comprehensible once you realize that it’s

not following the logic of the free market; it’s

following the logic of the gift.”

-Rob Trump

Storytelling

1. Have a character (can be family, neighborhood, etc.)

2. Share a problem/opportunity that character encounters

3. Make your donor a “guide” in your story

4. Give them a plan

5. Call them to action

Examples

https://www.indiegogo.com/projects/books-on-b-new-hayward-bookstore-independent-

community--2#/

https://www.kickstarter.com/projects/480091182/temescal-brewing-a-new-oakland-

brewery-and-beer-ga

https://www.indiegogo.com/projects/mr-dewies-cashew-milk-ice-cream#/

https://www.kickstarter.com/projects/1764790454/core-kitchen-the-worlds-most-

nourishing-restaurant

https://www.indiegogo.com/projects/the-core-wireless-speaker-system#/

https://www.indiegogo.com/projects/who-gives-a-crap-toilet-paper-that-builds-toilets#/

Steps to Launch

Build Your Team

Team Leader

Social Media Killer

Networker Extraordinaire

Funder Liaison

Content Developer

PR Maven

Name Your Idea

Set Your Funding Goal

Set Campaign Length

Starting Your Campaign

Create Your Media Database

Set Rewards

Digital > Tangible

Set reward tiers & themes

$25 & $100 most popular tiers

What can you give away that is meaningful?

Doesn’t need to be expensive

Build Your Fan Base

Create Your Story

Create Facebook/Twitter Accounts

Create Newsletter signup

What can you give away that is meaningful?

Build a Campaign Calendar

The Kickoff Personal email to

friends/family

Have them donate

right away

After 15-20% in

then blast to crowd

Spread the Word

Update your email signature

Send out a newsletter

Facebook/Twitter

Tap existing networks

Mainstream media

What to Share

Quotes from funders

Behind the scenes

pics/videos

Endorsements

Specific perks/rewards

Media coverage received

Facebook

Facebook once a day

Ask questions

Ask for shares/likes

Include photo

Always include a call to action

Twitter

Tweet all the time

Ask for retweets (RTs)

Thank RTs

Use popular #hashtags

Seek influencers

Always include call to action

Platform Updates

1-2 times per week

Be personal

Include them in the story

Ask for continual help

Extras

Add perks half way through campaign

Find more partners to cross-promote

Continue reaching out to

blogs/mags/newspapers

Release more short videos

Homestretch

Final week create a sense of urgency

Campaigns that reach 50% of their goal are 95% likely to

succeed

On Indiegogo over 90% of successful campaigns have

repeat contributors

Lastly

Collect the Money

Fulfill the Rewards

Don’t Forget Your

Funders

Key Statistics

Per Indiegogo statistical study:

30-39 Day campaigns work best

Keep updating the campaign page – makes a difference

Start strong, finish strong – 42% of funds 1st and last 3 days

Add new perks after launch – successful campaigns add 12 more

after launch

Work with a team – team approach raises 3x more

Include a pitch video – raises 4x more

https://go.indiegogo.com/blog/2015/10/crowdfunding-statistics-trends-infographic.html

Thank You!

Questions?