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Chinese Entrepreneurship Global Study Shows Staggering Increase in Shenzhen and Hong Kong Entrepreneur Activities Compared to 64 Competitive Countries Worldwide

16 Feb

Experts advocate the two cities join force in formation of complementary advantages to foster international competitiveness for entrepreneurship

By Robert Hoskins

Hong Kong, China – New research released by the professors of The Chinese University of Hong Kong (CUHK) Business School’s Center for Entrepreneurship (CfE) and Hong Kong Baptist University (HKBU)’s School of Business shows that entrepreneurship in Hong Kong and Shenzhen is on the rise.

A collaborative effort by CUHK CfE, HKBU School of Business, the University of Hong Kong’s Faculty of Business and Economics, Shenzhen Academy of Social Science and Savantas Policy Research Institute, the research titled “Global Entrepreneurship Monitor (GEM) Hong Kong and Shenzhen Report 2016-17” provides a detailed analysis of the current status of entrepreneurship in Hong Kong and Shenzhen.

The GEM Study Compares the Results with Past Indicators for Ecosystems and Provides an International Benchmark with 65 Economies Worldwide

The GEM Study Compares the Results with Past Indicators for Ecosystems and Provides an International Benchmark with 64 Other Economies Worldwide

The study compares the results with past indicators for both ecosystems and provides an international benchmark with 65 economies worldwide. It is part of the global initiative, 180-page Global Entrepreneurship Monitor (GEM) Research Report, the world’s foremost comparative entrepreneurship study and a trusted resource on entrepreneurship for key international organizations such as the United Nations, World Economic Forum, World Bank and more.

In the recent few years, Hong Kong and Shenzhen have experienced an explosive growth in the start-up support ecosystem. The GEM Hong Kong and Shenzhen Report 2016-17 shows that the start-up rates recorded a staggering increase in Hong Kong and Shenzhen from 2009 to 2016. In mid-2016, the early-stage entrepreneurial activity among the adult population was estimated at 9.44 percent (3.64 percent in 2009) in Hong Kong and 16.04 percent (4.8 percent in 2009) in Shenzhen.

The growth has been driven by a rapid increase in Shenzhen’s new (+284 percent) and Hong Kong’s growth in nascent businesses (+206 percent) in comparison with 2009 statistics. The prevalence rates of established businesses recorded an increase as well: +389 percent for Shenzhen and +109 percent for Hong Kong. It is worth noting that while entrepreneurship rates are on the rise in Hong Kong and Shenzhen, they are declining in other places in China. Both cities have developed a separate start-up culture and entrepreneurial ecosystem that operate independently from the rest of the Mainland.

The positive changes were not limited to early entrepreneurship rates only. The research team also observed a major shift in attitudes and entrepreneurial intentions. In particular, 56.8 percent of the adult population perceives start-up opportunities in Hong Kong. In Shenzhen, the same proportion of individuals who declared they possessed necessary skills and knowledge to start a new business (35.8 percent), also reported their intention to start a business in the next two years (36 percent).

Comparing to 2009, the population with entrepreneurial intentions in Hong Kong grew from 7.3 percent to 19.7 percent in 2016, representing an impressive increase of +170 percent. Similarly, in Shenzhen the intentions grew from 17.6 percent to 36 percent, an increase of +105 percent. According to the study, cultural conditioning and attitudes towards entrepreneurship, perception of own skills, and exposure to entrepreneurship practices all had a positive impact on intentions to start businesses. Successful entrepreneurs are also regaining their high status and are promoted by local media in Shenzhen and Hong Kong.

In terms of financial support, Hong Kong early-stage firms have lower capital requirements than that of their Shenzhen counterparts, which may be related to the lower technological intensity of Hong Kong firms. 92 percent of nascent entrepreneurs in the two cities declared that their principal source of financial support was their own savings. The role of the family in financing new ventures is still significant in Shenzhen, but not so much in Hong Kong.

Banks are also more supportive of startups in Shenzhen than in Hong Kong and so are venture capitalists, which could be explained by a higher prevalence of start-ups with profound market impact. In Hong Kong, on the other hand, crowdfunding is more prevalent as the source of capital for early-stage businesses, a sign of a more established product innovation.

Aligned with higher entrepreneurship rates, the research team also found a growing culture of informal investors developing in both cities. Shenzhen observed a much higher informal investment prevalence rate (20.5 percent) than Hong Kong (6.5 percent) of the adult population. In fact, Hong Kong and Shenzhen informal investors were two of the most generous among all economies in the study with a contribution of US$70,565 and US$76,112 respectively.

The study has also recorded a dramatic change in investment patterns for Shenzhen. While in 2009 individuals were rather investing in family members, in 2016, friends and neighbors had been the first choice which was aligned with that of Hong Kong.

In addition, the research team interviewed 39 Hong Kong and 37 Shenzhen experts in the field of entrepreneurship about their opinions on how the cooperation between Hong Kong and Shenzhen that would increase the cities’ international competitiveness. The most frequent recommendation was to leverage the natural industry compatibilities between Hong Kong and Shenzhen. Other recommendations include:

  • Joint development of industries such as Internet-of-Things, Smart City, Health Tech, Edu Tech, Fintech or E-commerce
  • Joint R&D initiatives aiming at cross-border innovation, sharing of talents and intensification of knowledge exchange
  • Introduction of joint or cross-border education to develop a shared cultural understanding of each other through opening more world-class academic institutions catering to students from both sides of the border
  • Coordinating government policies for entrepreneurship between the two economies, e.g. joint visas for entrepreneurs that would facilitate cross-border operations of many start-ups

“If Hong Kong and Shenzhen join forces in the formation of complementary advantages on entrepreneurship, it would strengthen the international and Mainland competitiveness for both,” said Prof. Kevin Au, Associate Director of CUHK CfE and Associate Professor of the Department of Management at CUHK Business School. “This can be the first step towards the development of the Hong Kong-Shenzhen megalopolis.”

“Hong Kong and Shenzhen are facing a fantastic opportunity: that of being in the perfect position to build a highly unique and internationally competitive start-up hub with an unparalleled ecosystem compatibility between the two cities and a supportive informal investment culture,” said Dr. Marta K. Dowejko, Research Assistant Professor in Entrepreneurship of the Department of Management at HKBU School of Business. “While Shenzhen’s start-ups are well geared to deliver innovative ideas with high growth potential, Hong Kong’s entrepreneurs possess the know-how in taking ideas to the next level and ensuring their long-term sustainability. The results from this year’s GEM report give testament to this unique setup that no other place in the world has.”

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Robert Hoskins, a seasoned Front Page PR veteran provides more than twenty-five years of external communications, media relations, digital social media and SEO skills to Front Page PR’s crowdfunding PR and media relations service portfolio.
Robert Hoskins
(512) 627-6622
@Crowdfunding_PR


Mr. Robert Hoskins is a seasoned marketing veteran with a proven track record of helping entrepreneurs, startups, small businesses as well as Fortune 500 corporations launch successful marketing communications campaigns to gain market traction for a wide variety of products and services.
On a regular basis, Mr. Hoskins consults with crowdfunding campaign managers as well as crowdfunding sites, portals and platforms to deliver successful crowdfunding marketing campaigns.
Google search “Robert Hoskins Crowdfunding” to see why Mr. Hoskins is considered one of the industry’s foremost crowdfunding experts that has amassed a huge social media following, which is dedicated to supporting donation-, rewards- and equity-based crowdfunding campaigns.

 

Crowdfunding PR Seeks Equity-based and Rewards-based Crowdfunding Sites to Add to Its Top 100 Crowdfunding List

29 Apr

Add Your Site to Our 2016 Top 100 List

Do you know of a new crowdfunding site that has been launched in the last 12 to 24 months? If so, we want to know the company name and what URL we should review for our Top 100 Crowdfunding Sites list.

Either follow us on Twitter @Crowdfunding_PR or connect with us on Linkedin at https://www.linkedin.com/in/roberthoskins and then share the information you’d like to add to any of our lists.

Is your crowdfunding site listed?

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The Narative Advantage: Why Women Are More Successful than Men at Crowdfunding Because of the Language They Use to Describe Their Projects

9 Feb

A leading crowdfunding research report from Andreea Gorbatai, UC Berkeley, and Laura Nelson, Northwestern University, details why women are better at crowdfunding because of the language they use in their crowdfunding campaigns

By Robert Hoskins

Austin, Texas – According to a new crowdfunding research report, it is not what you say, but the words you use to say it when communicating the features and benefits of a crowdfunding campaign. If you are researching how to launch a successful Kickstarter or Indieogogo crowdfunding campaign, we highly recommend that you read both “The Narrative Advantage: Gender and the Language of Crowdfunding” and “The Language that Gets People to Give for Successful Kickstarter Campaigns.”  These research reports will greatly enhance your ability to use the most effective and persuasive language possible to reach donors and investors and instill a desire to support your crowdfunding campaign.

Here is an introduction to what the crowdfunding research report covers:

“Economic and social arrangements in markets and organizations have been shown to systematically disadvantage women across a wide range of outcomes ranging from hiring, performance evaluations, rewards, and promotion in the labor market to financial support in the capital market. Research has identified several mechanisms through which this inequality is perpetuated, ranging from homophily, tokenism and structural constraints to negative stereotyping and women’s own beliefs about their skill level and worth in the labor market.

The Narrative Advantage Gender and the Language of Crowdfunding

The Narrative Advantage Gender and the Language of Crowdfunding

In particular, research on financing, small business, and entrepreneurship has shown that women are at a marked disadvantage compared against men with similar skill and experience levels. This difference has been largely attributed to choice homophily among predominantly male funders, and to the type of businesses that women start.

In the venture capital industry, male venture capitalists acts as gatekeepers; this results in less funding and mentorship for female entrepreneurs. In other entrepreneurial ventures, women gravitate towards small business ventures where they are often the sole employee instead of choosing scalable business projects.

In all these contexts, the long term outcomes – financing, and the terms of the financing deals – are the results of many difficult to quantify factors resulting from the interaction between the funder and the entrepreneur. It is thus difficult to isolate the effects that non-verbal behavior, paralinguistic cues, contextual factors, and interactions between the entrepreneur and the funder have on the final decision regarding funding. Some of these factors have been studied experimentally in the laboratory (Brownlow and Zebrowitz 1990; Carney, Cuddy and Yap 2010; Kramer 1977).

The majority of these studies rely on evaluating the effect of these factors on the audience, controlling for language content. But the language we use is intimately connected to how we think, and how others evaluate what we are saying. Moreover, language is connected with socio-demographic characteristics of the speaker or writer, such as gender, age or occupation.

In this study we aim to examine the effect of language on the success of crowdfunding campaigns, and the relationship between linguistic content and gender. Online, text-based campaigns are ideal for examining the effect of language content apart from characteristics of the delivery medium, message sender, and audio-visual information because the message is delivered to the potential donors via an information-poor, asynchronous text interface.

In turning our attention to the language used in crowdfunding campaigns, we examine four different dimensions of language content in campaign descriptions: positive (sentiment) language, vividness, inclusive language, and business language. We then suggest that three of these types of linguistic content (positive sentiment, vividness and inclusive language) are both more likely to be rewarded in crowdfunding campaigns, and more likely to be used by women, while the use of language related to money is more likely to be penalized in the crowdfunding context and more likely to be used by men. We then test and confirm our theory that language mediates the relationship between gender and fundraising outcomes using data from the online crowdfunding site Indiegogo.

Our findings indicate that gender-specific language partially mediates the success of women in fundraising money through crowdfunding. This study identifies an economic institution (crowdfunding) where female-specific linguistic patterns are preferred over male- specific patterns, leading to a reversal in gender inequality with respect to funding.

Additionally, this study contributes to economic sociology research on gender by quantifying the impact of linguistic choices on fundraising outcomes. Lastly, this research contributes to research in computational sociology by employing topic models to refine the product classification of crowdfunding campaigns and quantify crowdfunding campaign text along several content dimensions using the Linguistic Inquiry Word Count dictionary (Tausczik and Pennebaker 2010).”

An outline of the report:

Theory and Hypotheses:

Introduction

Money and Language

1a. Crowdfunding proposal success decreases with the use of money-related language.

1b. Crowdfunding proposal success increase with the use of vivid language.

1c. Crowdfunding proposals success increases with positive emotion.

1d. Crowdfunding proposal success increases with the use of inclusive (relational) language.

Gender and Language

2a. Women use more inclusive language than men do.

2c. Women use more vivid language than men do.

2d. Women use less language related to money than men do.

Language, Gender and Crowdfunding Success

3. Language mediates the relationship between gender and fund-raising success.

 Conclusion

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Robert Hoskins, a seasoned Front Page PR veteran provides more than twenty-five years of external communications, media relations, digital social media and SEO skills to Front Page PR’s crowdfunding PR and media relations service portfolio.
(512) 627-6622
@Crowdfunding_PR


Mr. Hoskins is a seasoned marketing veteran with a proven track record of helping entrepreneurs, startups, small businesses as well as Fortune 500 corporations launch successful marketing communications campaigns to gain market traction for a wide variety of products and services.
Hoskins is one of the crowdfunding industry’s foremost crowdfunding advocates and has amassed a huge social media following that is dedicated to supporting donation-, rewards- and equity-based crowdfunding campaigns. Due to the overwhelming demand from the general public for crowdfunding information, he empowers entrepreneurs with some of the internet’s most affordable ($20) online crowdfunding training classes, which provide insight to startups around the world on a 24 x 7 basis.
Hoskins adamantly believes that the crowdfunding industry will empower everyone in the United States to rediscover the possibility of living the American dream with a little hard work, a great business idea and the dedication to researching, planning and launching a well-thought-out crowdfunding campaign. He consults on a regular basis with crowdfunding campaign managers as well as crowdfunding sites, portals and platforms to deliver successful crowdfunding marketing campaigns.

University of Oxford’s Saïd Business School Announces 18-Month Crowdfunding Research Study that Will Explore How and Why Investors Decided to Invest in Successful Equity Crowdfunding Campaigns

21 Jun

 

Kauffman Foundation and Nesta Grants, Nir Vulkan, Associate Professor of Business Economics at Saïd Business School, funding explore the business of successful equity crowdfunding

By Robert Hoskins

Oxford, United Kingdom – The equity crowdfunding market is worth over £50 million a year in the UK, doubling in size last year as an increasing number of individuals look for an alternative place to invest their capital. Despite its size however, there is very little research into market dynamics, the success of campaigns to attract funding and the associated risks.

Seedrs makes it simple to buy into the businesses you believe in and share in their success

Seedrs makes it simple to buy into the businesses you believe in and share in their success

Nir Vulkan, Associate Professor of Business Economics at Saïd Business School, University of Oxford, has been granted funding from the Kauffman Foundation and Nesta to explore the business of equity crowdfunding. Working with Thomas Åstebro from HEC Paris, the 18 month project will explore the criteria for success for crowdfunders and how investors make decisions on what projects to back.

“We are looking to find out how investors react when presented with different information about an investment,” said Nir Vulkan. “Do they respond more strongly to information about the founding team, to company milestones, existing investors, or previous sales made? We will be able to understand what generates success and what leads to failure, and this will have important implications for companies looking for investment of money and community expertise. More broadly our findings will be of great importance for regulators and governments both in the UK and internationally looking at the benefits and risks associated with the crowdfunding sector.”

The study is being conducted on Seedrs, one of Europe’s leading equity crowdfunding platforms. Seedrs matches investors with businesses seeking capital, conduct due diligence on the businesses, executes the investment transactions and acts as nominee on behalf of investors to protect their rights.

Seedrs was founded by Oxford MBA alumni Jeff Lynn and Carlos Silva, who worked on the idea for the company as part of their Entrepreneurship Project at Oxford Saïd, mentored by Vulkan, before it was launched in July 2012. On average, over £2 million is invested through Seedrs per month, and in 2013 it became the first crowdfunding platform for equity investments to allow cross-border fundraising rounds across the EU. Seedrs has made over 2.5 years of historical data, on an anonymized basis, available to Vulkan and Åstebro for the project.

Jeff Lynn, CEO and co-founder of Seedrs, said, “It’s a great honor to work with my former Oxford tutor, Nir Vulkan, along with Thomas Åstebro on this project. Equity crowdfunding is only in its infancy, and I expect their research to prove highly valuable for practitioners and observers alike as the space continues to grow rapidly in coming years.”

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GenYrator Launches Equity Crowdfunding Site for USC Startups Combined with an Entrepreneur Business Accelerator and Mentorship Program

6 May

GenYrator is the One of the First Mission-Driven Equity Crowdfunding Platform that Combines Real Returns with Real Impact by Investing in the Next Generation of USC Entrepreneurs

 By Robert Hoskins

Los Angeles, California – GenYrator launched its private beta for an equity crowdfunding site concentrating initially on startups from USC, the alma mater of co-founder Sean Nasiri. The GenYrator platform looks for emerging generation-y founded businesses with revenue that are not quite ready for institutional investors, and encourages regular people to get involved to fill that gap.

GenYrator Equity Crowdfunding Site for USC Startups

GenYrator.com Equity Crowdfunding Site and Business Accelerator for USC Startups

The company is currently being advised by notable figures from both the startup and USC communities. Current advisors include famous venture capitalist and USC Trustee Mark Stevens, former Managing Partner at Sequoia Capital, as well as Alex Cappello, former President of the USC Alumni Association Board of Governors who also served as the only two-time international chairman of YPO. Other notable advisors include Rob Ukropina, former CEO of Overnite Express, who also served on USC Board of Governors, and Ryan Meyers, Managing Director of General Assembly LA and former CEO of AlumniFunder.

“The problem GenYrator is solving,” explains Nasiri, “is that too many good millennial founded startups end prematurely or stagnate because they lack the support they need to grow, and the only way to fix this is by getting everyone involved.” Millennials now have the largest presence in the workforce, but according to the Huffington Post, they are facing the worst job market in more than twenty years. “We are starting businesses out of necessity. There are just not enough opportunities out there for people our age, and we need the support of all generations to create more jobs and grow the economy,” Nasiri continues.

GenYrator has recently achieved proof of concept by helping two companies close their recent rounds. First is wearable technology startup, Loopd, with noteworthy lead investors Tim Draper and Marc Benioff, which closed out its $1M seed round. Second is triple bottom line Hawaiian water bottle company, Waiakea, which closed out its $1.6M dollar Series-A. GenYrator has since opened up its platform to all, but still requires a private beta access code to view deals. It is currently featuring a selection of promising USC-founded companies in “preview mode,” with more being added over the next couple of months.

While investing through equity crowdfunding is only accessible to accredited investors, GenYrator’s unique platform is also open to those who are interested in other ways of helping out, such as being a mentor, advisor, or service provider. The platform also plans to expand beyond just a university platform. “The long-term vision of GenYrator is to establish itself as the premier destination for the next generation of entrepreneurs and leaders,” says Nasiri, “and to show people from all different backgrounds that they can add value and impact the success of a young startup.”

Founded with the mission to generate a more prosperous future through supporting entrepreneurship, GenYrator is the online platform that brings the benefits of the Silicon Valley ecosystem to the mainstream. GenYrator’s online community enables all interested parties, provided they are accredited in accordance with current regulatory guidelines, to directly participate in promising millennial founded businesses. Beyond simply crowdfunding, members and other supporters can lend guidance and mentorship.

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Why Every University and College Should Develop a Rewards-based or Equity-Based Crowdfunding Ecosystem

18 Mar

Crowdfunding platforms can be used to support research & development, transfer technology, protect IP, build co-working spaces and finance incubators and accelerators to launch new startups

 By Robert Hoskins

 Austin, Texas – The purpose of this equity crowdfunding article is to encourage universities and colleges to begin thinking about how schools and students might benefit from:

The Need to Build a Crowdfunding Ecosystem

There is a new generation of “Millennials” that do not want to go to college due to the poor economy and because they do not want to start their life as young adults by incurring $50,000 or more in college loan debt. And there is a growing concern for many students that there may not be a job waiting for them when they finally graduate. 

Read more:  What is Crowdfunding?

But what if there was a way to attract more students by convincing them that they could work their way through college by researching, planning and then launching their own business while earning their college degree? This would allow some certainty about their career path and teach students how to put a lot more money in their pockets than working for a large corporation that will stick them in a cubicle for the rest of their life.

Entrepreneurship Centers

For this reason, “Entrepreneurship Centers” are becoming a huge draw for students who do not want to work for a living, but instead want to live for working. That means learning how to build new startups from the ground up.  Entrepreneurship Centers usually start with a co-working space, then adds a business incubator with mentors to guide students through the startup process and when budget permits, accelerators are created to help students raise money from angel investors, accredited investors and sometimes venture capitalists.

Co-Working Spaces for Startup Companies

The biggest challenge for incubators and accelerators are the costs associated with building a 25,000 sq. ft. co-working space, paying mentors salaries and finding experienced executives with great track records that are willing to share their wisdom and industry experience with students. There is also resistance from departing from the “old school” way of transferring technology from a university Research & Development laboratory, protecting the intellectual property and then utilizing a licensing or royalty revenue model to realize short-term deals to provide a revenue for the college or university. 

JOBS Act: Nationwide Equity Crowdfunding

Enter the 2012 JOBS Act, General Solicitation and a new Equity Crowdfunding alternative financing tool that can help startups raise seed investment capital to startup new businesses. While the SEC and NASAA seems hell bent on preventing the national guidelines from ever being released (they are three years past the official deadline mandated by President and the United States Congress), approximately 14 states such as Texas, Michigan, and Georgia have passed their own Intrastate Equity Crowdfunding Exemptions. Add to that another 15 states have a Crowdfunding Exemption in progress.

Map of U.S. States that approved Intrastate Equity Crowdfunding Exemptions

Map of United States that have approved Intrastate Equity Crowdfunding Exemptions

Source: CrowdfundingLegalHub.com

Intrastate Equity Crowdfunding Exemption

In states where intrastate equity crowdfunding is legal, any trade school, college or university can build an equity crowdfunding platform and use it to begin fundraising campaigns to raise money, not only from Angel Investors and Accredited Investors, but also from the general public who are non-accredited investors.

Read more: What is an Intrastate Equity Crowdfunding Exemption?

This means anyone can take a brilliant idea, create a business plan and investor deck to support the business case, build an online equity crowdfunding profile and then use marketing campaigns to advertise the deal to millions of potential investors. Like any e-commerce site, Investors can then visit the equity crowdfunding sites to shop for deals by minimum investment amount, by products or services or by vertical business segment to find deals they want to invest in.

This means that a college or university can build an equity crowdfunding site and use it to raise money for every one of its R&D programs and streamline the entire technology transfer process so that promising technology can be transformed into startups businesses. The school collects a certain percentage from each crowdfunding campaign called a platform commission fee. For a $1 million raise and 10% platform commission fee, a college could collect a $100,000 fee from each campaign. This money could be used to fund co-working spaces, incubators, accelerators and Entrepreneurship Centers.

Creating Equity Crowdfunding Investment Syndicates

By the SEC’s securities law, a crowdfunding platform’s management team or employees cannot invest in equity campaign hosted on its own site unless they are registered broker dealer with the SEC. But a popular trend that is growing is building a college or university equity crowdfunding investment syndicate. An investment syndicate is usually led by one or more Super Angel Investors, who are seasoned veterans that have been investing in startups for 20 to 30 years and completely understanding the process of vetting deals with due diligence and understand the real risks of investing in startup companies.

Novice accredited investors with little investment experience join the investment syndicate so that they can follow or invest along side the Super Angel Investors. In addition, where it is legal, investment syndicates will pool a large pool of non-accredited investors together, who make small investments, into a single LLC and then invest the group’s money similar to how a venture capitalist invests money on the behalf of others.

Adopting an Equity Crowdfunding Ecosystem

For colleges and universities that adopt an equity crowdfunding business model might, it might completely change the way a school recruits, raises money, builds relationships with alumni and earns revenue by seeking long-term equity stakes in their students startups versus short-term licensing and royalty agreements.

Read More:  Top 100 Crowdfunding Sites in the United States

Launching an equity crowdfunding platform would not just increase a school’s earning potential, but they might dramatically change the manner in which that Millennials are taught. Instead of just course work, students would be taught at an early age to begin to engage with the world around them and plot a course for their own future destiny rather than relying on fate. Some Millennials might reject the idea of going to college, but the lure of becoming a successful entrepreneur and launching their own business while earning a college education has the potential to create one of the most vibrant and thriving economies the world has ever seen.

Even students that do not start up their own companies have an outstanding chance to benefit from the equity crowdfunding business model. All students seek a way to get some type of real world work experience usually by working as free or highly underpaid interns. Imagine the learning benefits that student would receive when applying their desired major’s education such as business administration, finance, legal or marketing to the intense equity crowdfunding process of launching a startup company.

Instead of adding a bullet point for working a menial job as a small cog in the corporate machine as an intern, students just might be fortunate enough to work on several successful crowdfunding campaigns that would highlight their professional expertise such as business planning, structuring equity finance deals marketing, PR, video production, and/or copy writing. And if the sweat equity pays off in equity crowdfunding shares, they might become extremely wealthy when that startup goes public a couple of years after they graduate. This is how many, many Silicon Valley millionaires got their start. They just did not have a term for the process, which is now branded as equity crowdfunding today.

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Understanding the Best Type of Crowdfunding Site to Support a College or University Campus

16 Mar

What’s the Best Type of Crowdfunding Platform to Serve a College or University Entrepreneurship Center, Co-Working Space, Incubator or Accelerator Program?

By Robert Hoskins

Understanding the Crowdfunding Funding Process

The first step in building a crowdfunding business model is to understand the various forms of crowdfunding and at what step of the business creation process each should be used.

This crowdfunding infographic is a good representation on each step of the business creation process from the business idea, generating revenue, validating marketplace demand, expanding operations and maturing into a fortune 500 company.  It also shows what type of crowdfunding is usually best to fund startups and each step of the business’ evolution.

The Crowdfunding Escalator by CrowdSuite  Shows the  Different Types of Crowdfunding

The Crowdfunding Escalator by Crowdfund Suite Shows the Different Types of Crowdfunding

Source: CrowdfundSuite.com


Donation-based Crowdfunding
– At kitchen tables, dinner parties, happy hours and dorm rooms around the world many brilliant ideas are born and discussed for the very first time. Once an idea has been pitched and vetted among friends and family and it begins to gain momentum toward the first step of crowdfunding, Donation-based Crowdfunding, which is used to scrape enough money together to begin building a business plan to figure out how much it will cost to bring a business idea to fruition and/or develop at one or more prototypes. Donation crowdfunding sites make it easy to collect money for new creative ideas as well as expand the crowdfunding campaign’s reach from just family and friends to a global audience of potential supporters.

Most donation-based crowdfunding sites are usually built to provide fundraising activities for campaigns that do not offer any rewards or perks.  They are also used to support non-profit causes.  Donations to 501(3)(c) are tax deductible and can be written off at the end of the year.  

Most universities will only build donation-based crowdfunding sites that can be used by students and faculty to collect money by students and faculty for a wide variety of projects including college educations, scholarships, research and development, campus improvements and all kinds of not-for-profit endeavors. Crowdfunding can be used for very small fundraising efforts to raising millions of dollars from alumni, foundations, institutional investors and corporate sponsors.

Donation-based crowdfunding sites will make it easy for anyone to search for, discover, research and fund their favorite pet projects on their alma mater’s campus.

Rewards-based Crowdfunding – Surprisingly enough 90% of people in the world still are not familiar with the term crowdfunding. Mention Kickstarter or IndieGoGo and most people do recognize the brand name and know its purpose and have heard of popular crowdfunding campaigns such as Oculus, Star Citizen, Coolest Cooler and the return of the Pebble Time SmartWatch.

Rewards-based campaigns are used to take ideas, concepts and prototypes to the next level. They are used in a similar fashion to how typical marketing campaigns are used to support product/service launches and rollouts with an added twist.

People with ideas build a crowdfunding profile, shoot a crowdfunding pitch video and build a list of up to 20 perks or rewards that are pre-sold to raise enough money to develop a prototype or pay for the very first manufacturing production run.  Not only do rewards-based crowdfunding campaigns validate industry demand, but they allow businesses to test market various product versions, colors and price points to gauge public interest. More importantly, they help startups generate their first revenue by pre-selling their products and services in order to raise enough money to get the business started. Gaining this type of market traction is very important to angel investors because it shows that there is an audience of people who are willing to pay for the company’s products and services. 

The best way for universities and colleges to cut their teeth on the crowdfunding business model is to launch a rewards-based crowdfunding site, which usually collects a 5% commission on the crowdfunding campaign’s total amount raised. That may not sound like much but since 2009, Kickstarter alone has raised $1.6 billion, which at 5% means $80 million over 5 years in gross revenue or an average of $16 million per year that could be used to fund a wide variety of college/university projects.

Not only are crowdfunding platforms a good source of revenue, but with the right marketing resources crowdfunding campaigns have the potential to raise a huge amount of marketplace awareness for the university’s projects, business development goals, research and development labs and technology transfer programs. All at no cost to the university because the crowdfunding campaign managers are the ones that spend money to market their crowdfunding campaign to the world.

The other reason to consider launching a rewards-based crowdfunding program is that they are easy and do not fall under the jurisdiction of the SEC or state securities board regulators because no securities are being sold. For new startups it also means that raising money does not involve selling any equity shares or giving up any control of the company’s administration.

Rewards-based crowdfunding campaign commissions can also be used by colleges/universities to establish co-working spaces and to fund college incubator and accelerator programs. Co-working spaces with at least 25,000 sq. ft. can generate millions of dollars per year in additional revenue from rent and mentorship programs.

It is important to note that rewards-based commissions combined with co-working space revenue can provide millions of dollars in seed investment capital to begin funding the next step in the process, equity-based crowdfunding sites, where schools, students, faculty and alumni can become equity investors in new startups.

Equity-based Crowdfunding – Setting up equity-based crowdfunding websites will allow schools to play the role usually enjoyed by Angel Investors, Venture Capitalists and/or Broker-Dealers. They will allow students to raise money for startups by selling debt, such as convertible notes, or selling equity shares for a certain percentage of the company to raise enough seed investment capital to produce prototypes, fund early manufacturing runs, setup distribution agreements and hire manufacturer representatives. 

Other types of equity crowdfunding involve sharing 20% of the gross profits with investors or making royalty payments on a per item sold basis until the investors receive a 3x to 5x payback on their initial investment.

Investing in startups is a risky business, but with the right education and building a small group of experienced Super Angel investors to follow, a large group of novice accredited investors can invest smaller amounts of money along side seasoned experts with a proven 25-30 year track record.

In states like Texas, Michigan, Georgia and 11 others non-accredited investors can also pool their money together to purchase equity shares of stock. This is something that has been illegal for the past 80 years, but intrastate crowdfunding exemption laws are now allowing average people to begin investing in startups just like angel investors and venture capitalists.

The aggregation of novice accredited and non-accredited investors are known as Investment Syndicates, which is the process of following expert investors.  This allows students, faculty members and the general public to learn the equity investment business and enjoy the benefits of being an insider when a great business idea is transformed from a startup company to an Initial Public Offering (IPO).

For example, a $300 investment for a single share of stock and pair of Oculus virtual reality goggles would have paid investors a return on investment of $45,000 when Facebook bought the company for $2 billion dollars.

Equity-based crowdfunding is much more complicated than rewards-based crowdfunding due to the stringent requirements needed to meet the SEC and state securities board regulatory requirements.

Unlike rewards-based crowdfunding, equity crowdfunding provides a great opportunity for business administration, legal and finance students to get hands-on experience writing business plans, structuring deals, protecting intellectual property (IP) and planning real world product/service launches that are part of every single equity crowdfunding campaign.

Working alongside experienced angel investors and venture capitalists is also a great way for students and faculty to learn the finance industry from the inside out.

Learn more about crowdfunding:

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Equity Crowdfunding Provides Colleges and Universities with Easy Access to Early Stage, Seed Round Investment Capital

15 Mar

How Colleges / Universities Can Provide Easy Access to Seed Investment Capital with Equity Crowdfunding Platforms

By Robert Hoskins

Providing Easy Access to Investment Capital 

Providing easy access to seed investment capital is a great way to encourage the creative thinking of young innovators. When money is hard to get, there isn’t much point in trying to be creative. But when students realize that there is a better than average chance of putting together a good business plan and actually being able to raise money to fund their ingenious ideas, Equity crowdfunding will serve as the catalyst that stimulates economic development.

The payoff for students, faculty and universities can be tremendous. It only takes a couple of home run investments to generate a billion dollars in revenue when one of their startups is purchased or takes their company public.  

If you look at the current crop of Angel investors, the large majority got their start by working for a company that went public. Once entrepreneurs strike it rich, they want more.  They don’t cash out and retire.  They reinvest the $10 million they earned into a new pool of startups to help them achieve the same success.  This is what most people mean by mentors.

Successful entrepreneurs love to share their success stories with the next generation. The most important step is to create the first wave of entrepreneurs even if it means a small town in nowhere Texas has to pay Angel Investors and Venture Capitalists from California and New York for their consulting services to get the ball rolling.  All it takes is a small college, smart professors, a few successful investors, a Rewards or Equity-based crowdfunding platform and a team of marketing experts that understand advertising, email marketing, PR and social media.

One company that creates a 1,000 millionaires has the capability to investment up to a billion dollars back into the next round of startups. This is precisely how Silicon Valley was built. For colleges/universities that decide to add an Equity-based Crowdfunding ecosystem, it has the potential to start a huge investment domino effect that will result in a wide-spread, long-term return-on-investment for universities, its faculty, their students and the community around them.

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Setting Up a New College – University Equity Investment Crowdfunding Site to Take Advantage of the Growing U.S. Investor Network Suffering from a Lack of Deal Flow

14 Mar

Schools that Launch Equity Crowdfunding Sites Now Will Learn How to Market Investment Opportunities to Accredited Investors and Get a Head Start on the Vast Amount of Money that Will Flood the U.S. when the SEC Finally Approves Title III Crowdfunding Guidelines

By Robert Hoskins

Investor Surplus, Deal Flow Shortage

Believe it or not, there is a growing surplus of angel investors, accredited investors and venture capitalists that have the money to invest in new startups, but cannot find enough good deals being circulated by entrepreneurs and startups that need investment startup capital.  

A recent member of the San Francisco Angel Group member recently said that there many startups in San Francisco currently receiving seed investment that really are not worthy of seed investment capital, but are getting lucky because there is a surplus of money and a shortage of good deals. 

The good news is that college and universities can now take advantage of a new rule passed as a part of the JOBS Act, which approved something known as General Solicitation. For the past 80 years it has been illegal to advertise or market private equity deals to the general public, but that ban has been lifted. 

In November 2014, a new SEC rule was passed that makes it possible to advertise private placement memorandums (PPMs) to approximately 8.7 million accredited investors throughout the United States and abroad.  This is great news because only about 3% of all accredited investors are active angel investors. This means that 97%  of this group has never been approached by startups seeking investment capital. 

This means that any school can setup an equity crowdfunding platform and start marketing their local community’s entrepreneur and startup business plans to a nationwide or global network of accredited investors.  Once a platform is setup, investors with the right credentials can search through the platform’s online equity investment opportunities on a 24x 7 basis.

And then, hopefully in October 2015, the SEC also will pass the final rules that open up Title III equity crowdfunding to every adult in the United States who is 18 years or older. When that happens, the same equity crowdfunding site will have the ability market deals to every adult in America or approximately 180 million new investors.  Take that with a grain of salt because the new Title III rules are three years overdue, but if they do make it to the Federal Registry there will be flood of money seeking great business plans and startups who need startup capital.

In order to leverage the growing pool of accredited investors now, colleges and universities should begin the process of setting up a streamlined equity crowdfunding ecosystem as soon as possible. It will open up schools to a nationwide and/or global network of angel investors now and help them get a head start on the vast amount of money that will flood the marketplace when the SEC finally approves the Title III crowdfunding guidelines.

Learn more about crowdfunding:

 

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Paid Mentorship Management Consulting Fees Can Help Fund College University Incubator and Accelerator Programs

14 Mar

Allowing Mentors to Earn Revenue while Colleges/Universities Collect a Commission for Facilitating the Knowledge Transfer is Great Way to Bring Leading Expertise to Remote Areas

By Robert Hoskins

Paid Mentor Management Consulting Fees

Another option for schools to generate funding is to create a management consulting practice in tandem with college and university incubators and accelerators. Many sources of mentorship can be attracted by allowing the subject matter experts to generate revenue by providing mentoring services for a consulting fee. 

Incubators/accelerators could take a 15% commission out of the consulting fee to add monthly recurring revenue to their incubator and accelerator programs. Payments for services can be paid in cash and/or might include an option to purchase equity shares in the first class of equity shares being offered during the seed fundraising round.

Using this strategy, schools with video conferencing capabilities can tap into talent on a worldwide basis. Using teleconferencing and distance learning applications schools can access the world’s leading entrepreneurs, venture capitalists, and private equity investors, even in remote locations.

A single community college might not able to afford a speaking engagement with Guy Kawasaki, Elon Musk or Richard Branson, but working with numerous community colleges in any given state they could launch a rewards-based crowdfunding campaign to solicit enough cash to pay for an event that could be broadcast to a network of participating schools.  These single session tutorials, mentoring sessions or consulting engagements could be setup in a very similar manner to the very popular TedX talks.

Other sources of revenue can be earned by hosting conferences, trade shows, pitching competitions and/or training classes.

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