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A very short overview on Crowdfunding, and Propel Arizona - specifically for local small businesses
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Crowdfunding
WYNTK * (what you need to know)
Hands-on For Entrepreneurs
CJ Cornell – Propel Arizona
10+ companies$250M Funding 4 Exits (great !)$3B Revenues 4 Failures (awful !)
Lots of lessons. Chaos, Pain and Joy.
‘Serial/Parallel Entrepreneur”
EIR, Venture PartnerAngel Investor
5 Companies 9 Boards3,000 Tylenol Caplets. Ego and Brain Atrophy.
Investor/Venture Capitalist
Professor of Digital Media & EntrepreneurshipArizona State University, SJSU, Stanford (Lecturer)New York Institute of Technology Knight Center for Digital Media EntrepreneurshipResearch in digital media, behavior, entrepreneurship
University Professor
Advisor/Mentor, Author etc.
ASU – Skysong, Venture Catalyst, RSS etcArizona Commerce Authority / Venture readyArizona Innovation ChallengeBook: Age of Metapreneurship. Blog/Articles
CJ Cornell
@cjcornell
The Funding Gap
Concept to Product to Growth
Concept to Product to Growth
$ $ $$
Concept to Product to Growth
$Entrepreneur IPO
Concept to Product to Growth
$Entrepreneur IPO
$Entrepreneur IPO
$
Venture Capital
Concept to Product to Growth
$Entrepreneur IPO
$Entrepreneur IPO
$
Venture Capital
$Entrepreneur IPO
$
Venture Capital
$
Angels,accel & incub
The Kauffman Index of Entrepreneurial Activity is a leading indicator of new
business creation in the United States.
In 2012 - The state with the HIGHEST level of Entrepreneurial Growth was …
Arizona.
# 1 in Entrepreneurial Growth
# 46th in Venture Capital $
The Series-A Crunch
The Series-A Crunch
Source: http://theyec.org/making-sense-of-the-jobs-act-and-crowdfunding-infographic/
Concept to Product to Growth
$Entrepreneur IPO
$
Venture Capital
$
Angels,accel & incub
Crowdfunding
$$
Concept to Product to Growth
$Entrepreneur IPO
$
Venture Capital
$
Angels,accel & incub
Crowdfunding
$$
Crowdfunding$
Concept to Product to Growth
$Entrepreneur IPO
$
Venture Capital
$
Angels,accel & incub
Crowdfunding
$$
Crowdfunding$
Crowdfunding$
Concept to Product to Growth
$Entrepreneur IPO
$
Venture Capital
$
Angels,accel & incub
Crowdfunding
$$
Crowdfunding$
Crowdfunding$
Crowdfunding$
Crowdfunding
Soliciting & Collecting relatively small amounts of money (“funding”) from a large number of people (“crowd”)
WYNTK(what you need to know)
http://blog.intuit.com/trends/crowd-power-what-is-crowdfunding-infographic
“Crowdfunding is a term used to describe individuals
coming together to support – and directly fund
projects by other individual and organizations.
“
• Source – http;//crowdfunder.com
• Source – http;//crowdfunder.com
Equity Crowdfunding(aka Investment)
5 APRIL, 2012 (AND … AUGUST 2012, DECEMBER 2012 …)
Jumpstart Our Business Startup ACT, Title III (JOBS Act).
Equity Crowdfunding - JOBS• Eliminates ban on general solicitation and general advertising in connection
with private offerings to accredited investors under Regulation D (Rule 506) and to qualified institutional buyers under Rule 144A.
• Exemption from Securities Act registration “crowdfunding” transactions (involving access to small amounts of capital through the internet).
• Exemption to allow issuance of up to $50 million of securities in any 12-month period, up from the current $5 million threshold
• An increase in the number of shareholders a company may have before being required to register its common stock with the SEC and become a public reporting company from 500 to 2,000 total shareholders (including up to 500 “unaccredited” shareholders)
• Amount each person may invest in offerings of this type, tiered by the person's net worth or yearly income.
http://www.pepperlaw.com
SAN FRANCISCO, Dec 6 (Reuters) - Netflix Inc said on Thursday securities regulators warned they may bring civil action against the company and its chief executive for violating public disclosure rules with a Facebook post …
• Equity Crowdfunding - not in the USA (yet)
• JOBS act (April 2012) technically enables CF – but has not yet been approved by SEC.
• No documented fraud in USA or other areas.
• Equity CF is for “high growth companies” seeking significant funding from experienced investors
• Will dramatically change in 3-5 years (CJ prediction)
www.propelarizona.com
WYNTK(what you need to know)
“THE KICKSTARTER MODEL”Rewards-based, Donation Crowdfunding:
ALL OR NOTHING
Perks &Rewards
Updates (and Blogging)
Updates (and Blogging)
Comments & Engagement
Kickstarter (2012)
2.2 million people pledged a total of
$319,786,629
(up 221% from 2011)
Backers pledged $606.76 per minute
People in 177 countries backed a project in 2012
(That's 90% of the countries in the world)
Source: http://KickstartersHQ.com
WHY …Do people Crowdfund?
Lessons from Ethan Mollick’s “The Dynamics of Crowdfunding: Determinants of Success and Failure”
3 Why’s: 1. They connect to the greater purpose of the campaign
2. They connect to a physical aspect of the campaign like the rewards
3. They connect to the creative display of the campaign’s presentation
three main reasons why people unconnected to a
project or business would support it:
What Is Crowdfunding And How Does It Benefit The Economy - Forbeshttp://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy
The Real(Crowdfunding)
Why’s
• Passion– For the technology– For the industry– For the cause– For the product
• Affinity– For the Entrepreneur– For the region, industry etc
• Connection
• Every reason BUT R.O.I. …
emotional ROI.Not financial ROI
WYNTK(what you need to know)
Crowdfunding is about …
(when crowdfunding …)
“its not what you do, but why you do it,”
WYNTK(what you need to know)
http://www.kickstarter.com/projects/1104350651/tiktok-lunatik-multi-touch-watch-kits
http://trendwatching.com/trends/infographics/presumers/
“Consumers who want products before they are developed”
Pre-ordersEarly adopters
Supporters
UH OH …The Kickstart Model..
1. Crowdfunding = New “1st Money” for ventures($10k - $50k average– but wild exceptions)
2. Equity Crowdfunding is Still Far away3. Rewards based Model IS Crowdfunding today4. All or Nothing Crowdfunding – Standard5. Perks and Rewards: Pre-order Crowdfunding6. Social Media & Content Intensive
www.propelarizona.com
WYNTK(what you need to know)
What does success look like?
• The iPhone-friendly Pebble watch earned $7.6 million more than its $100,000 goal.
• And the Galileo iPhone platform closed its Kickstarter campaign at $702,000, far surpassing its $100,000 goal.
• Ouya raised $2 million in one day for a new Android gaming console (it’s raised more than $5 million to date),
• the Nifty MiniDrive, external memory for Apple MacBooks. The tiny storage company is more than 2,000% above its $11,000 goal with 15 days left in the campaign.
Successful campaigns took an average 11 days preparing for their launch.
http://blog.indiegogo.com/2013/01/12-insights-for-2012.html
Campaigns ran an average 49 days in 2012, as opposed to 60 in 2011.
Successful campaigns fundraised for 39 days.
http://blog.indiegogo.com/2013/01/12-insights-for-2012.html
Crowdfunding Myths & Mistakes
• Myth #1: If You Build It, They Will Come• Myth #2: Cash is Free• Making it about you• Unrealistic Expectations• Lack of clarity• No call to action• Expecting to be found: (No Marketing)• Ignoring Small Donations/Donors
http://kickstartershq.com/articles/5-project-crushing-kickstarter-mistakes-how-to-avoid-themhttp://www.crowdsourcing.org/document/3-big-crowdfunding-myths-via-funderhut/23804
focus on “them” – not your company
WHO are they?What motivates them?Interests, Values … PEOPLE
the
1.The new 4 P’s of Crowdfunding ..
www.propelarizona.com
PITCHthe
2.You are pitching to “them”
TELL A STORY !!
WHY is more important than $$
VIDEO(s) & VISUAL(s)
Tell the story in small ‘chapters’
VIDEO(s) & VISUAL(s)
And even smaller “sound bites”
Give them a Story they can tell to others.
PERKSthe
3.$$ Value is a negative driver !
UNIQUE
It’s about THEM
EXCLUSIVE
And what is important to “Them”
FIRST
Make sure it is …
BUZZWORTHY
PROMOthe
4.It’s a daily/hourly effort …
SOCIAL MEDIA
It’s a conversation …
UPDATES, BLOGS, NEWS
Provide Value, and Talking PointsRE-POST, TWEETable
It’s about … for their network
VALIDATION & EVIDENCE
First: Who What Why When …
• The 3 Who’s:– Who are the donors? (affinity & passion)– Who is benefits? (the market)– Who are you?
• The 3 Why’s– Why would your donors care?– Why does the market care?– Why are you the right team to do it?
First: Who What Why When …
• What is your project & goal?– Understandable & Simple– Compelling & Intriguing– Repeatable & Memorable
• How and When– How will you achieve your goal? Realistic?– When, after funding? When will I get my perks?
Perks & Rewards
Directed by
Patrick Million
Executive Producer
CJ Cornell
a Patrick Million FILM
American Grandmaster
Rewards Crowdfunding
• Incentives & perks• Pre-Orders• Pre-Sumers
• Market Validation
Rewards don’t have to worth $$
• $25 perk is the single most claimed perk, representing nearly 25% of all perks that are selected.
• While the $25 dollar perk is only responsible for raising 11% of total funds.
• $100 perks raise more money than any other perk price and make up nearly 30% of total funds. A $100 perk combined with the next three perk price points: $50, $500, and $1000 makes up about 70% of total money raised by perks
some
Rules for Rewards
1. Make perks unique & exclusive
Avoid T-shirts, Mugs & Hugs
2. Target them
3. Give them a connection
“The Cocktail Party Effect”
“The Restaurant Effect”
“The Carey School Effect”
The less tangible the perk,
the more public (visible) & EXCLUSIVE it needs to be.
Crowdfunding Arizona
Can it jumpstart entrepreneurship?
1. Kickstarter “Fails”
Arizona does poorly …
2. Members =/ Supporters
% of supporters is the key ….
3. Entrepreneurship is Different
Products, Companies, Entrepreneurs …
4. The role of “Ecosystem”
Incubators, accelerators, mentors etc ..
5. The power of Community
Shared Goals, Passions, Outcomes …
Shared Goals, Passions, Outcomes …
Crowdfunding for Entrepreneurship & Economic Growth
People as Important as Projects …
Organizations & Affiliations …
Entrepreneurs success as much as funding …
$15k - $100k *(Average $50k) ….
Local Perks
Unique Opportunity for Arizona Small Businesses