Miami Herald Builds a Case for Crowdfunding

Building a case for crowdfunding

 By Ina Paiva Cordle

Miami Herald – Sherwood Neiss is passionate about entrepreneurship. And he has helped lead the charge to change nearly 80-year-old federal securities laws about investing, so that entrepreneurs can gain access to capital.

Called crowdfunding, the changes will allow small investors to fund start-up businesses, hopefully creating jobs and boosting the economy in the process.

Earlier this month, while Neiss was in Dubai speaking at the Global Entrepreneurship Summit, we emailed him questions. Here are his edited responses.Q. Please tell me about your entrepreneurial background.

I’ve always been an entrepreneur at heart. I was the kid selling lollipops in elementary school, mowing lawns in high school and selling T-shirts to get through grad school. I learned early on that input drives output and nothing happens of its own accord.

I helped co-found a company, FLAVORx, based in Washington, D.C. FLAVORx solved the problem of getting kids to take yucky tasting medicine. By the time we sold the company in 2007, we’d gone from two to 50 employees and one to 40,000 pharmacies, including the nation’s biggest retail chains like CVS, Walgreens and Walmart.

Q. Please explain what crowdfunding is and how you became involved.

Crowdfunding is where a group of people pool money together to help fund someone with an idea. As a concept it isn’t new. Prior to 1900, Savings and Building Associations allowed communities to come together to finance home purchases. Charity events and political contributions are also forms of crowdfunding.

Kickstarter launched the current crowdfunding movement in the past five years. I became involved because, with the collapse of the financial markets in 2008 and the recession, everyone was talking about jobs.

My peers Jason Best, Zak Cassady-Dorion and I (all entrepreneurs) understood that the only way out of the recession was to create jobs. Jobs provide wages, and people use those wages to buy goods and services. Money flowing through the system will improve the economy.

However, in order to create jobs, businesses need access to capital. And with the financial meltdown this capital evaporated. We understood that we needed to get capital flowing to small businesses.

Frustration also helps. I won a startup weekend event here in Miami. A crowd of people thought I had a winning idea for a company – using smart phones for instant polling. I went out to raise money for it and couldn’t find it. Jason, Zak and I couldn’t understand why it was OK to ask people to give money to worthy causes but it was illegal to ask those same people to invest in a worthy business.

Read more….

Advertisement

Crowdfunding and 506 Private Placements

By Kristin Voinovich

I read an exceptional article back in November written by Daniel Gorfine and Ben Miller.  Daniel is Director of Special Projects & Legal Counsel for the esteemed Milken Institute and Ben is Co-Founder of Fundrise – a direct investment platform for local real estate and businesses.  Their article was pertaining to the possibility of the Jobs Act creating a Two Tiered System within the crowdfunding industry.

In brief, once the rules regarding the private placement portion of the  JOBS Act are finalized, those offerings will be allowed to advertise alongside their Crowdfunded brethren.  Private placements issued under Rule 506 are targeted towards Accredited Investors.  These are the sorts of individuals that are of high net worth and considered “sophisticated” by the SEC.   This follows along the same lines as individuals who invest in hedge funds.

This is a large pool of funds, to quote the aforementioned article;

”…even without the ability to solicit investments generally, approximately $895 Billion was raised in 2011 under Rule 506, more than five times the $169.9 Billion raised in global IPOs in the same year.  And the estimated $2.8 Billion that will be raised worldwide via crowdfunding this year is a comparative trickle.”

Until crowdfunding is actually legal, the $2.8 Billion is a guess at best but the numbers are expected to be significant.  Without any statutory limit on the amount a private placement may raise, the picture has the potential to change dramatically.

Read more…

ProHatch, IPO Village Executives Share Crowdfunding Tips & Tricks

by Charles Luzar, Crowfund Insider

For most, crowdfunding success isn’t as easy as posting an offering and sharing it on a favorite social network.  A successful offering takes careful planning and active management both during and after the campaign.  In this crowdfunding how to guide, I’ll outline the process and share tips and tricks according to the executives of IPO Village and ProHatch, two leading crowdfunding web sites.

Crowdfunding How To: Is This Right For Me?

Any self-respecting crowdfunding how to guide should admit that crowdfunding isn’t right for everyone.  Whether it is right for you is a hard question to answer and just depends on what you’re seeking funding for.  Consider the following when assessing your approach:

Elizabeth Smith Kulik, ProHatch: “Before social and business entrepreneurs consider crowdfunding as a means of sourcing capital, they must learn what crowdfunding means to the future of their enterprise, because along with the funding comes a large number of stakeholders. This is particularly important to explore when raising funds for your enterprise is not a one-time event and the consequences of crowdfunding will influence future financings.”

Simon Erblich, IPO Village: 

• Decide on the type of crowdfunding you need to pursue… Donation, Debt or Equity crowdfunding.
• Determine if your own personal network is strong enough to serve as a foundation for your crowdfunding campaign
• Ensure that you can articulate your pitch and value proposition in a 2-3 minute video and a couple of concise paragraphs

Crowdfunding How To: Choosing a Platform

Here are some truisms about crowdfunding platforms:

• There are hundreds of crowdfunding platforms and the number is constantly growing
• Their practices, costs, approaches, etc. vary greatly

Kickstarter is an awesome platform with a well-established networks of willing contributors, but they may not be the right choice for your specific project.  Indiegogo has a “flexible funding” option that allows you to keep any funds you raise even if you don’t hit your goal.  Fundable offers one-on-one support.  MedStartr specializes in the medical industry.  ProHatch allows raising money in phases instead of one fell swoop.  IPO Village deals only with companies selling public stock.  Selfstarter can be installed on your own web server and has no royalty fees.  Others allow you to white-label their platform and design your own campaign web page without having to host it yourself.

Get the point?

The good news is you have options.  It helps to know your options and pick the one that makes the most sense for your campaign.  If you want extra guidance or need a niche investor to succeed, the big platforms may not be your best bet.

To get up to speed on these options quickly, I’d definitely suggest following the #crowdfunding hashtag on Twitter.  You can also visit our crowdfunding website directory which can help sift through these sites to find listings specific to a certain region or industry, or visit our crowdfunding website news category for the latest news.

Read more….

America’s #2 Technology Hub Hosts Crowdfund Texas Conference on Jan. 8th

The coming Crowdfund Texas conference (http://www.crowdfundtx.com/) in Austin, on January 8th, 2013 is another perfect example of how crowdfunding is rapidly becoming a mainstream investment strategy. Attracting some of the biggest names and companies in both old and new finance.

When the organizers asked me to attend and be interviewed for the documentary being filmed at the conference (Crowd of Angels), I knew I was very interested in attending. This is just the kind of boost crowdfunding needs. I couldn’t be more excited to be representing IPO Village at this prestigious event.

When I looked over the list of featured speakers, I knew I had to attend. While I have not met all the speakers, I am familiar with most of them. All have a solid foundation in investing and all are strong supporters of crowdfunding. These people would be at home in any big Wall Street financial giant, but they have chosen pursue direct-to-the-public investing.

A few of the speakers to pay close attention to are:

Rodney Sampson co-founded Multicast Media Networks (Streamingfaith.com) in 2000, Intellect in 2002, Intellect Inspire in 2006 and Legacy Opportunity Fund in 2007. Currently, Sampson is building Opportunity Fund, a US based “super” growth fund and crowd funding platform designed to provide underserved and underrepresented communities access to investment opportunities traditionally reserved for accredited and institutional investors. He also serves on the boards of a publishing company, a merchant investment bank, Community Development Corporation (CDC) and the Crowdfunding Professional Association.

One of four ladies on the speaker roster, Kim Wales is the founder of Wales Capital and a board member and founding member at Crowdfund Intermediary Regulatory Advocates and a governing board member and founding member at Crowdfunding Professionals Association. Kim’s work in these voluntary regulation agencies is vital. While crowdfunding rules under the Jumpstart Our Business Startups (JOBS) act will eventually come down from the SEC, voluntary regulation of the industry will keep federal hands off this investment.

Brian Meece is the founder of crowdfunding website RocketHub.com . He is going to bring direct experience in overseeing crowdfunding efforts to this conference. Businesses that enable crowdfunding investors to step up with their money is integral to the crowdfunding industry. I look forward to sharing notes with Meece.

Scott Purcell is a heavyweight for this conference. According to Wikipedia, “Purcell was the founder of Epoch Networks, which was the fourth commercial internet backbone ever, raised in excess of $100 million in venture capital and was at one time was the largest privately held internet service provider in the United States. He also served as a Board Member of the internet industry associations trade group, CIX the Commercial Internet eXchange. In the formative years of the industry he was appointed by CIX to serve as the government liaison, working with the Clinton administration and the FCC on a variety of internet and telecom related legislation and issues.” He’s also started a number of other companies and brings massive experience of raising money for various projects to the table.

Read more…

Insert Coin: Engadget Is Looking For Some Cool Gadget Crowdfunded Projects

New gadget crowdfunding contest PR opportunity

Our brothers and sisters over at Engadget are holding their first red hot, super exciting conference called Expand in SF in March. The event will feature all the boring old commercial hardware you could imagine, including the latest from all the hardware greats but, more important, they’re also reaching out to a contingent dear to my heart: crowdfunded gadgets.

Having a brilliant idea isn’t always enough. Bringing a product to market requires support, marketing and above all, funding. Lots and lots of funding – but don’t worry, we might be able to help you get there.Engadget is proud to announce the launch of Insert Coin: New Challengers, a new competition aimed at helping to make those dream gadgets a reality. If you’ve seen our long-running series about the most promising crowd funded hardware, you can imagine that concept taken to the stage for a live competition between the best of the best new inventions.

Remember: this is for unlaunched products only and, knowing the field, this will be pretty competitive, so those with solid sterling-silver iPad stands will have to take a seat. If you’re ready to run with the big dogs, pop over here and submit and let us know how it goes. You know I love the smell of fresh crowdfunded projects in the morning.

Read more…

Tweet us your byline #crowdfunding article suggestions: @Crowdfunding_PR