Category Archives: moon

Political Crowdfunding: Building a Community Instead of a Campaign

By Anum Yoon, Crowdfund Beat Media Guest Editor,

Throughout the past few years, crowdfunding has become a source of fundraising for charities, life-saving surgeries, new products, individual travel goals, research projects and more. With crowdfunding platforms and social media, it’s easier than ever to set up a page where friends and family can donate to whatever it is you’re passionate about or need money for. But does this new fundraising fad have a place in politics?

Election-Money

Politicians who are starting campaigns or building platforms need money, and it’s a fairly new possibility that this money could come from small individual donations from people on crowdfunding websites instead of the wealthy upper class. Here’s everything there is to know about crowdfunding in the political arena.

Traditional Political Fundraising

In the past and even currently, campaigns have been funded by the appropriate political party the candidate is running for. Additionally, wealthy donors throw large amounts of money into the politician’s bank account and, more often than not, cash in the donation for a favor later on down the road.

With this system, the upper class and politicians are completely running the show. Campaigns are based on who got money from the top dogs, and elections are based on those campaigns. So, it’s not hard to see how the average person isn’t exactly included in the political process.

Changes Being Made

In 2008, Barack Obama, who would be elected president that year, changed the game of fundraising in politics. He was the first candidate who collected funds for his campaign from the average working class family.

Obama successfully built a campaign that got American families interested and invested in him – literally. He asked for donations on his website in order to fund his campaign and raised millions of dollars from small donors who simply donated what they could afford, even if that was only a dollar.

Obama’s strategy worked, obviously. Since then, politicians at the local and federal level have used similar campaign strategies. Bernie Sanders, who ran for the Democratic nomination in the 2016 presidential race, prided himself on not accepting money from billionaires. Instead, he wanted to be funded only by the average American. It was easy for his supporters to support him because donating was just a few clicks away thanks to the ease of electronic payments.

He would often send out emails to his supporters asking for just $3 before midnight to send a message to Washington that Americans are tired of billionaires buying elections. The average campaign donation was $27.

On the surface, it seems like Sanders’ strategy did not pay off, since he did not win the nomination. However, Bernie Sanders made quite a name for himself in just a few short months and was a serious contender for the nomination, running on only small donations through crowdfunding efforts. His effort is a look into what could be the future of political fundraising.

Building a Community

The idea behind crowdfunding is to build a community. Crowdfunding started with individual stories. People who wanted to travel and do philanthropic work. Somebody who needed a surgery their family couldn’t afford. An entrepreneur with a great business idea. A young girl who wanted to go to Disney World.

The stories behind each crowdfunding page are what drives people to donate money. People tell their story in the hopes of touching others and convincing them to donate to their cause.

For this reason, crowdfunding in the political arena could be a great thing. Imagine politicians building their campaign not around the nitty gritty of politics, but around a story that touches the American people — a story of hope and resilience. Campaigns and politics in general could become so much more personalized, and Americans could really play a part in the government.

Of course, there are always some things that could go wrong. Politicians could somehow corrupt this system. There will always be billionaires to buy out politicians in their own best interest. There are holes in every system, but it’s also possible to patch up those holes. Since crowdfunding is such a new idea, there is much to be said and discovered about how the system would actually work when utilized by many politicians.

So, crowdfunding in politics could be great, it could be terrible or it could be somewhere in the middle. Only time will tell how politicians will use crowdfunding for their campaigns and how people will react to this new way of fundraising.

 

 

 

 

2017 Real Estate Crowdfunding: Surveying the Landscape

125

 

 

 

 

“Copyright” By Jonathan B. Wilson CrowdFund Beat Sr. Guest Editor, Partner, Taylor English Duma LLP

The impact of crowdfunding on real estate finance and deal-making has been one of the hottest topics of the past year.[1]  With the advent of crowdfunding, real estate developers and investors have multiple pathways to finance their projects and even to plot their exits.  But in many ways the impact of crowdfunding has not yet arrived.  Crowdfunding for real estate is still in the early stages and may take several detours along the way to its final destination.

What is Crowdfunding?

The idea of “crowdfunding” has been in the news a great deal but investors have only just begun to realize its potential for the industry.  Crowdfunding is the idea that a large number of people, with no particular expertise, can accurately predict the likely success or failure of a venture by combining their own observations and communicating with each other.  James Surowiecki‎, in his book, The Wisdom of Crowds[2], recounts dozens of examples where a large group of people who were able to collect and share information were able to make more accurate guesses about the success of a project than the best guess of any individual expert in the topic.  The Internet, with its ability to collect a large number of people quickly and easily, makes it possible to collect a “crowd” to evaluate an idea better than was ever possible before.

Crowdfunding applies this idea to the process of evaluating investment opportunities, allowing members of the crowd to put money behind their predictions and preferences.  Proponents believe that by allowing a crowd of potential investors to share their opinions about the investment and the information they collect that crowd will be better able to predict the success of the investment than individual investment experts.  Sydney Armani, the publisher of CrowdFundBeat, says, “People get excited when they engage with a new product that arouses their passions.  Those passions take on even greater intensity when they can invest in that new product.” [3]

Crowdfunding can take several forms.  Popular crowdfunding sites like Kickstarter and Indiegogo let project sponsors describe their projects to the public and ask for donations.  In an “affinity” campaign, supports of a project pledge funds for a project because they like it and support it.  Their affinity for the project is their only reward.  In a “rewards-based” campaign, project sponsors offer rewards for cash contributions.  Rewards may range from recognition on a website or on a wall, to t-shirts, products samples and more.

Securities-Based Crowdfunding

Securities-based crowdfunding is possible through several recent changes in U.S. securities laws, most of which are derived from the 2012 Jumpstart Our Business Startups Act (or “JOBS Act”).  In particular, the JOBS Act created three types of crowdfunding: (a) crowdfunding to “accredited investors” under Rule 506(c), (b) crowdfunding for up to $50 million each year under new Regulation A+ and (c) crowdfunding to both accredited and non-accredited investors in small offerings under Title III.

Investing Under Rule 506(c)

First, a sponsor could offer debt or equity securities to “accredited investors” under Rule 506(c).  The JOBS Act changed some of the rules affecting private offerings under Rule 506 so that sponsors could publicly-advertise their offerings.  Before this change in the law, public solicitations of private offerings were strictly prohibited.  Under new Rule 506(c) however a promoter that wants to advertise publicly must take various steps to ensure that every investor who participates in the offering is “accredited”, which is defined as having a net worth of over $1 million (excluding the investor’s principal residence) or having an income of more than $200,000 for two consecutive years ($300,000 is the investor is married and files tax returns jointly with a spouse).

Crowdfunding under Rule 506(c) has been feasible for more than a year and several websites, have had some success hosting real estate crowdfunding campaigns that have included securities under Rule 506(c).  Most of the popular real estate crowdfunding sites included in our survey, however, require accredited investors to create a membership on the site before they can view any live offerings.  As a result, the offerings made available to members are intended as a private offering, and not a general solicitation.  Because there is no general solicitation, those websites take the position that their offerings are private offerings under Rule 506(b) rather than publicized general solicitations under Rule 506(c).

Investing Under Regulation A

Another legal change that came from the JOBS Act was a change to Regulation A, an SEC rule that allows a private company to qualify its securities (which may be equity or debt) through filing a formal prospectus with the SEC.  The SEC reviews the prospectus to ensure that it adequately describes all of the risks of the business and the risks to investors.  Once the issuer’s prospectus is approved by the SEC (at which point it is said to be “effective”) the sponsor may sell the securities to both accredited and non-accredited investors.

Before the JOBS Act, offerings under Regulation A were limited to not more than $5 million.  Under the new provisions of Regulation A (sometimes called “Regulation A+”) an issuer of securities may raise up to $50 million in any 12-month period.

One of the advantages of a Regulation A offering is that the company will be able to solicit investments from both accredited and non-accredited investors, thereby widening the scope of interest in the project.  The SEC’s rules, implementing these changes to Regulation A, however, have only been effective since October 2015.  As a result, there have been relatively few offerings that have completed the new process and it is harder to tell how these new offerings will be accepted by investors.

Regulation CF

The third possible route for crowdfunding is often called “Title III” because it arises under Title III of the JOBS Act.  Although the JOBS Act became law in 2012, the SEC only released its rules implementing this new law in October 2015 and those rules didn’t take effect until May 2016.  Under those roles, a promoter may issue securities, in an amount up to $1 million in any 12-month period, to both accredited and non-accredited investors.  But, soliciting for investors may only take place through licensed crowdfunding portals that have received a license from the Financial Institutions Regulation Authority (“FINRA”).

Under Regulation CF (the name used for the SEC’s Title III regulations), issuers do not file a prospectus with the SEC but do need to include certain disclosures about the company in their offering memorandum.  The funding portal will also be liable for making sure that all of the prospective investors receive certain notices about the process and for ensuring that each investor does not invest more than a certain maximum that is derived from the investor’s taxable income.  While a Regulation CF offering can “go national” by accepting investments from people across the country (whether they are accredited or not) the $1 million limit and the requirement that all solicitations take place online through the licensed portal make this approach a challenge for many new ventures.

Because of the $1 million annual cap on fundraising under Regulation CF, however, this approach is usually not a good fit for real estate projects that often require more than this maximum amount.

Surveying the Landscape

The following websites have used one or more of these regulatory pathways to create a marketplace for crowdfunding real estate projects.  By surveying some of the more popular websites I have tried to provide an overview for how industry players are using these now crowdfunding regulations to make deal flow and investment opportunities possible.  This list is not an endorsement of any of these sites and a site’s omission from this list is not intended as a criticism or a suggestion that the site is not worthwhile or valuable.

Peer Street

PeerStreet specializes mostly in residential debt investments (with a smattering of multifamily and commercial). PeerStreet utilizes Rule 506(b) to solicit accredited investors to participate in loans that are secured by real estate.[4]  They have one of the lowest minimums in the top 10 ($1K versus $10K average), and a healthy volume of new transactions.

Virtually every site in the industry claims that they have superior due diligence. PeerStreet, however, supports its claim with concrete proof.  PeerStreet allows investors to review the performance of every past investment. PeerStreet’s site claims that, since 2014, the site has offered more than 200  notes but without any foreclosures or unremedied defaults.

Unlike many other real estate crowdfunding sites, however, PeerStreet does not originate its loans.  Rather, project sponsors introduce opportunities to the site and then earn a fee based on successfully closing the investments.  As a consequence, investors that participate in deals on PeerStreet pay slightly higher total fees than some other sites.  Because of the relatively high performance that PeerStreet’s deals have produced,[5] however, these fees so far have not kept investors away.

Real Crowd

Real Crowd acts as a syndication platform for real estate development companies and real estate funds.  The development companies and funds pay a fee to Real Crowd to have their offerings listed on the site.  Viewing the offerings is possible only for accredited investors who have created a free membership account on the site.  Most of the opportunities on Real Crowd involve commercial real properties or multi-family properties.  Some of the investments are funds in which the fund manager will be investing in the proceeds in a targeted type of property while others are syndicating take-out financing for existing properties.

From the investor’s point of view, Real Crowd has successfully recruited a large number of property developers and fund managers, so there are many investment opportunities to consider.  Most investments, however, require a minimum investment of at least $25 to $50,000, so the platform is not friendly to small retail investors who want to dip their toes in the water.   In addition, most of the investment opportunities are equity securities, so there is a higher risk of principal loss than is generally the case with debt-oriented platforms.

Realty Mogul

Realty Mogul is one of the largest real estate crowdfunding sites and it uses several different approaches based upon the needs of the project sponsor and the class of investor involved.  Accredited investors may invest in either debt or equity securities.  Accredited equity investors invest in syndicated private placements of special purpose limited liability companies that exist to finance equity investments in particular properties.  The equity investment has the higher potential return associated with equity as well as the potential downside risk of loss.

Accredited investors may also invest in debt securities called “Platform Notes”.  Each Platform Note is a debt security issued by a Realty Mogul special purpose vehicle which uses the proceeds of the Platform Notes to make a loan to particular sponsored investment.  By issuing the note from its special purpose vehicle, Realty Mogul is able to take on the management function of managing the underlying loan (reviewing financials, monitoring loan covenants, working out any defaults, and so on) without involving the passive investors who have purchased the Platform Notes.

For non-accredited investors, Realty Mogul has sponsored its own non-traded real estate investment trust.  Although the REIT (called Mogul REIT I) is not traded on any stock exchanges, its shares were qualified with the SEC through a Regulation A prospectus.[6]  According to the prospectus (which went effective in August, 2016) the REIT plans to hold:

“(1) at least 55% of the total value of our assets in commercial mortgage-related instruments that are closely tied to one or more underlying commercial real estate projects, such as mortgage loans, subordinated mortgage loans, mezzanine debt and participations (also referred to as B-Notes) that meet certain criteria set by the staff of the SEC; and (2) at least 80% of the total value of our assets in the types of assets described above plus in “real estate-related assets” that are related to one or more underlying commercial real estate projects, these “real estate-related assets” may include assets such as equity or preferred equity interests in companies whose primary business is to own and operate one or more specified commercial real estate projects, debt securities whose payments are tied to a pool of commercial real estate projects (such as commercial mortgage-backed securities, or CMBS, and collateralized debt obligations, or CDOs), or interests in publicly traded REITs.  We intend to qualify as a real estate investment trust, or REIT, for U.S. federal income tax purposes beginning with our taxable year ending December 31, 2016.”

Because Realty Mogul facilitates both equity and debt investments for accredited investors as well as equity investments for non-accredited investors through MogulREIT I, Realty Mogul is ideally-situated to generate substantial deal flow and relatively rapid underwriting for projects that apply for funding.  As a platform for providing funding for sponsored-projects as well as a platform for creating investment opportunities, Realty Mogul has one of the best head starts of all the available real estate websites.

Those advantages, however, come at a cost.  Realty Mogul has a large staff operation (which is required for its extensive underwriting duties) and that cost is borne by investors through the 1-2% fees they pay to participate in investments on the site.  While the site has tremendous deal flow, however, a student of the industry might ask, “is this really crowdfunding?”  Because Realty Mogul takes such an active role in performing due diligence on its projects and in structuring the investment opportunities on its site, the overall experience is more structured than most crowdfunding sites and there is less opportunity for the collectively give-and-take than crowdfunding was originally thought to represent.

Realty Shares

Realty Shares facilitates both debt and equity investments into both commercial and residential real estate.  The site claims that it has funded over $300 million to 550 projects that have returned more than $59 million to the site’s more than 92,000 registered accredited investors.[7]   Project sponsors must submit to underwriting through Realty Shares and only projects that have exceeded the site’s standards can be offered to the site’s members.  Fees range from 1 to 2% of the investment amount, but investment minimums are as low as $5,000.

As with most of the other real estate crowdfunding sites, investments are made through private placements under rule 506(b).

Residential Real Property Sites

There are several websites that focus primarily on residential real estate.  Because of the similarity of their focus and approach, they can be surveyed as a group:

LendingHome

Lending Home describes itself as the “largest hard money lender” [providing] “fix and flip loans up to 90% LTC and 80% LTV.”[8]  Unlike many of the other sites that aim their value proposition at investors, Lending Home addresses itself primarily to homeowners how are looking for loans and are willing to pay “hard money” rates of interest to get cash.  Accredited investors can participate in Lending Home in increments as low as $5,000.[9]

Roofstock

Roofstock’s tagline is “Property Investing Like the Pros.”[10]  Like Lending Home, Roofstock focuses only on single family residential properties.  Differently, however, Roofstock allows accredited investors to invest directly through loan participations as well as through small funds that focus on particular regions or particular rates of return.  Roofstock also emphasizes, through its underwriting and its messaging, the underlying quality of the properties and their surrounding communities, school systems and the like.  Browsing through loan opportunities on Roofstock feels more like browsing through listings on Zillow than looking for investments.

Patch of Land

Patch of Land is one of the largest and most heavily-trafficked real estate crowdfunding sites.  The site claims to have originated more than 400 loans for over $245 million in loans, returning over $61 million to investors.[11]  Although Patch of Land has made investments in multi-family and commercial real estate, more than 70% by value of its investments have been made in single family real estate.

Fund That Flip

Fund that Flip is a site that proudly advertises its role in financing single family residential rehab and resale projects.[12]  The site claims that the sponsors underwrite individual deals, requiring borrowers to put at least ten percent in the property’s value in equity.[13]  The site also tries to entice investors, claiming average returns between 10 and 14%.

The Future of Real Estate Crowdfunding

Real estate crowdfunding has definitely arrived.  Through the dozens of existing sites claiming to offer some kind of real estate crowdfunding, investors have invested more than a billion dollars through thousands of investments in just a few short years.  While this method of investing is still very small (in contrast to retail investments in mutual funds and the stock market) it fills a market need that shows no sign of disappearing.

For real estate crowdfunding to achieve a wider degree of acceptance, platform owners will need to continue to facilitate high quality investment opportunities while improving transparency.  Wider acceptance will require a level of information sharing that does not yet exist in the industry.  Even the most popular sites today have varying levels of information available to potential investors.  These inconsistent levels of disclosure can undermine the trust that is necessary to grow crowdfunding as a method of investing.  Real estate crowdfunding sites that facilitate exempt transactions under Rule 506(b) are not regulated, and that is probably a good thing.  But the lack of regulation also permits a wide diversity in style and approach that can make comparing the platforms difficult.

If the leading crowdfunding platforms could collaborate on a standardized “scorecard” that pulled together standard metrics on transactions, investment amounts and rates of return, the result would make it possible for both investors and project sponsors to compare platforms on a level playing field.  The investor confidence that might come from such a development would encourage new investors to come into the market.  Platforms that did not adopt the scorecard at first would experience market pressure to begin reporting results in the scorecard format.  Adopting a standardized scorecard for recording would, in a sense, demonstrate the power that crowdfunding was supposed to represent, by making it possible for the market to adjust itself to the information needs of the investing community.

[1]           http://www.jdsupra.com/legalnews/the-evolution-of-real-estate-15259/

 

[2]           Surowiecki, James, The Wisdom of Crowds, Anchor Books (2005).

 

[3]           Wilson, Jonathan B., Follow the Crowd: What the Future of Crowdfunding Holds for Startup Restaurant Owners, Restaurant Owner Startup & Growth Magazine, 18 (Feb. 2016).

 

[4]           www.peerstreet.com.

 

[5]           PeerStreet claims that its loans have generally yielded between 6 and 12%.  See PeerStreet FAQs, available at https://info.peerstreet.com/faqs/how-do-peerstreet-returns-compare-to-other-debt-investments/ (last visited January 29, 2017).

 

[6]           MogulREIT I, LLC SEC File, available at https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001669664&owner=exclude&count=40&hidefilings=0 (last visited January 29, 2017).

 

[7]           Realty Shares website available at https://www.realtyshares.com/  (last visited January 29, 2017)

 

[8]           Lending Home website available at www.lendinghome.com (last visited January 29, 2017).

 

[9]           https://www.lendinghome.com/how-it-works/#individual-investors.

 

[10]          Roofstock website available at www.roofstock.com (last visited January 29, 2017).

 

[11]          Path of Land website available at https://patchofland.com/statistics/ (last visited January 29, 2017).

 

[12]          Fund that Flip website available at www.fundthatflip.com (last visited January 29, 2017).

 

[13]          Fund that Flip website available at https://www.fundthatflip.com/lender (last visited January 29, 2017).

 

SEC Metrics on Reg A+

On 12/31 the SEC published a report on Reg A activity as of Q3 that has some eye-opening bullets. Here are a few of the key metrics, along with my observations and musings.

  • 147 offering statements filed, of which 81 were qualified (as of the date of the stats)
  • Of the 81 qualified, 49 were Tier 2, 32 were Tier 1
  • 121 days avg time from filing to qualification (Tier 2)
  • 17% used broker-dealers (Tier 2)
  • $18M avg max-raise
  • 20% used “test the waters”
  • 87% equity/13% debt or other offerings
  • $50,000 avg legal costs to file & get qualified
  • $15,000 avg accounting audit costs
  • 50%+ of all issuers are incorporated in either Delaware or Nevada and located in California, Texas, Florida or DC-area
  • Typical issuer had no assets, no revenue, no net income (in other words, they are start-ups)
  • Real estate was dominant, accompanied by financial services

Thoughts on:

Time to qualification, 121 days (Tier 2 avg):
This puts an exclamation mark on the fact that this isn’t a Reg D, which can be launched overnight. If you want to allow non-accredited investors to participate in a large or continuous private offering, and if you want the securities to be free of various restrictions (e.g. Rule 144 on Reg D), then you are going to need to allow for the time it takes to get audited, prepare the offering statement, and go through a 121 day avg SEC qualification process (though I know of several that have been much shorter, it seems to depends upon the experience of the lead attorney).

Broker-Dealer Activity, 17%: This is the most disturbing metric to me. You’d think that every broker-dealer in the country with “private placements” as an approved business line would be jumping on the bandwagon as Reg A is a fantastic Reg D alternative. But they’re not. The reasons, from my experience, are…

  1. Brokers think Reg A’s are IPO’s. As such they expect the issuers to be mature companies that are ready to trade on OTC or NASDAQ. This is completely misguided, of course, as Reg A is simply an “unrestricted (private) security” and should not be confused with an S-1 filing IPO. The fact that it “can” trade on OTC or NASDAQ doesn’t mean it should. Brokers need to view this as a private placement, not an IPO.
  2. FINRA treats Reg A’s like IPO’s. As such they are limiting broker compensation to the same caps as an S-1 of a less risky mature company backed by far more detailed disclosures and easy settlement mechanisms. We hear from many brokers that FINRA’s comp-caps make it impossible for them to justify the risk or work involved in handling a Reg A, so they pass on these; which leaves issuers (and investors) to fend for themselves.
  3. Compliance Education. The internal compliance depts at broker-dealers are not yet up to speed on this type of offering and so are quick to say “no” to deals their investment bankers bring to the table.
  4. Technology. Conducting an online offering is easy in concept, and challenging in execution. The transaction engine, the compliance requirements, the supervisory issues, and the fact that escrow has to manage potentially tens of thousands of individual investors are daunting issues. (of course this is FundAmerica’s primary business, our software makes all this very easy for brokers and escrow agents)

=> Unintended Consequence: this is a situation where issuers could really use the guidance of a regulated broker-dealer, and the market and investors would be better for it. But regulators and compliance issues have caused issuers to say “no thanks, too much hassle, I’ll do this on my own.” In an age of General Solicitation, brokers are an optional expense/luxury as far as many companies are concerned, and with unclear or oppressive regulations they often (83% of the time) just skip it altogether.

Tier 1 Offerings, 40%. Stunning really, considering people filing under Tier 1 almost always have to get audited financials (as some states require them, e.g. CA), they have to pay filing fees that they could avoid with Tier 2, and they subject themselves to what can be extraordinarily painful “merit review” by some states.

Equity/Debt, 97% to 13%. This is a misleading metric and doesn’t really explain what’s happening or what investors are buying (in successful offerings). For instance, the equity sold in the Reg A’s for Realty Mogul* and American Homeowners Preservation* pay investors a defined income stream and have articulated exit mechanisms; Brewdog* investors feel they are buying into a culture; Elio Motor’s* fans (oh, I mean “investors”) were passionate about the concept and the mission; Fig* investors are excited about the games and projects. So the vast majority of successful Reg A’s have some sort of defined returns and/or benefits for investors that make them more than just equity securities being bought based upon technical merits and potential market gains. It’s critical that issuers, brokers and others in this market grasp this essential point, as we’ve seen several Reg A’s fail that did not do a good job with this.
* note that all of these companies are customers of FundAmerica, I cite them here only to illustrate a general point and am NOT making a recommendation or providing advice as regards their securities.

Test The Waters, 20%. This isn’t surprising, as the current method of testing the waters is clearly broken. This will be fixed with technology and the number will increase.

In summary, it’s apparent that 2016 was a fantastic first year for Reg A+. At FundAmerica our technology was used in over $300M worth of online investment transactions, including tens of thousands of investments and millions of dollars from Reg A buyers. With continued education, with more issuers successfully raising funds, and with the new Reg CF now taking care of the smallest, least-prepared issuers, it seems clear that the use of Reg A will grow exponentially in the coming years.

Best Regards,

 Scott Purcell
CEO
FundAmerica, LLC

 

About the Author: Scott Purcell is the CEO of FundAmerica, a fintech services provider to the emerging equity and debt crowdfunding industry. His firm provides escrow, payment processing, and compliance technology for numerous broker-dealers, investment advisers, portals and others who make a business of online capital formation pursuant to rules now in effect thanks to the  JOBS Act. FASTransfer is the only tech-driven SEC registered transfer agent focused on the crowd-industry. He is a founding Board member of the Crowdfunding Intermediary Regulatory Association (CFIRA) and the author of the book “The Definitive Guide to Equity and Debt Crowdfunding” as well as the “Industry Best Practices for Funding Portals”.

Legal Disclaimer:
These materials are my personal opinions and for informational purposes only and not for the purpose of providing legal or tax advice. I am not advocating, advising or recommending anyone purchase any specific or general investment of any type, ever. The issues discussed include complicated areas of law and legal advice should only be obtained and relied upon from a securities attorney about your specific circumstances.

Targeted IRRs in Crowdfunding

By Mark Roderick CrowdFunding Beat  Sr. contributing editor and crowdfunding attorney with Flaster/Greenberg PC.

 

Closeup sad young man with worried stressed face expression and brain melting into lines question marks. Obsessive compulsive, adhd, anxiety disorders
Closeup sad young man with worried stressed face expression and brain melting into lines question marks. Obsessive compulsive, adhd, anxiety disorders

Targeted internal rate of return, or IRR, is used widely to advertise deals on Crowdfunding sites, real estate and otherwise. While target IRR means something to sophisticated sponsors and investors, its widespread and uncritical use makes me a little uneasy, for the following reasons:

  • If pressed, many people don’t know what IRR really means. Investors assume that a higher IRR is better than a lower IRR, but many couldn’t explain exactly why or how.
  • IRR can be misleading. For example, a bond purchased for $100 that pays interest of $10 at the end of each of the first four years and $110 at the end of the fifth year has an IRR of 10%. A bond purchased for $68.30 that pays nothing for four years and $110 at the end of the fifth year also has an IRR of 10%. But those two investments are very different. The IRR calculation assumes that the $10 interest payments on the first bond can be reinvested at 10%, which is probably not true.
  • The IRR of a real estate deal (or any deal) increases when the asset is refinanced and the proceeds distributed to investors. But refinancing the asset doesn’t necessarily make for a better investment.
  • There being no such thing as a free lunch in capitalism, a higher IRR generally coincides with higher risk. For example, I can usually increase my IRR by borrowing more money. That relationship is not typically highlighted.
  • For a typical startup outside the real estate industry, IRR has no meaning. Or to put it differently, a 28% target IRR for a startup plus $2.75 gets you on the New York subway.
  • The term “target IRR” tends to mask what’s really important:  the factual assumptions concerning sales and asset appreciation. To say “We expect a target IRR of 18%” is somehow easier to sell than “We expect the property to appreciate at 6% per year.”
  • Under FINRA Rule 2210, offerings conducted through a broker-dealer may not advertise target IRRs. FINRA also prohibits Title III Funding Portals from advertising target IRRs, and the SEC prohibits new issuers from advertising a target IRR in Regulation A offerings, even for sponsors with extensive track records. Hence, target IRR cannot be used to compare offerings across all platforms and all deal types.

What can we do better as an industry? Here are a few ideas:

  • We can explain internal rate of return better, maybe with examples and a standardized presentation and graphics.
  • We can develop other apples-to-apples metrics for comparing deals.
  • We can make clear that higher IRRs generally come with higher risks.
  • In Regulation A offerings, and even in Rule 506(b) offerings where non-accredited investors are involved, the issuer is required to provide extensive information about the sponsor’s track record. Some version of that concept, applied consistently and allowing for side-by-side comparison, might be the most valuable information for investors.

Mark Roderick is one of the leading Crowdfunding lawyers in the United States. He represents platforms, portals, issuers, and others throughout the industry. For more information on Crowdfunding, including news, updates and links to important information pertaining to the JOBS Act and how Crowdfunding may affect your business, follow Mark’s blog, or his twitter handle: @CrowdfundAttny. He can also be reached at 856.661.2265 or mark.roderick@flastergreenberg.com.

2017 Crowdfunding Persons of the Year

 

unnamed-7
Sherwood Neiss, Jason Best. Principals Crowdfund Capital Advisors, LLC

Each year, Crowdfund Beat Media Group assesses the landscape of the crowdfunding industry to identify thought leaders and individuals significantly impacting the evolution of digital finance.   To culminate this search, the Group selects a Crowdfunding Person of the Year, whom it believes has made an indelible mark to advance adoption and growth of the crowdfunding effort.  With Title III of the JOBS ACT, effectively Regulation CF, went live past May, we have identified two individuals that have been working tirelessly and successfully in making crowdfunding a reality, and feel honored to recognize them as 2017 Crowdfunding Persons of the Year.

Jason Best and Sherwood “Woodie” Neiss are Principals at Crowdfund Capital Advisors, where they have advised government agencies, NGOs and global leaders on the merits of crowdfunding and its impact on entrepreneurial activity.   Prior to the expanse of their travels and relationships, including with the World Bank and InterAmerican Development Bank, they initiated Startup Exemption, with Zak Cassady-Dorion, which laid the foundation of the legislative framework that evolved into Title III.

2017-personoftheyear1

 

It is due to these past and ongoing contributions that Crowdfund Beat Media feels compelled and honored to award Woody and Jason 2017 Crowdfunding Persons of the Year.

By Jorge Sanchez, Crowdfund Beat Guest Editor,

Innovation and entrepreneurial activity is driven by entrepreneurs, their ideas, actions, and the relationships formed in the marketplace. While this has been the case for economic growth, the primary funding mechanism we have had in place is not a natural extension of these business processes. We have had a large proportion of the entrepreneurial class being underserved by the capital needed to fund or grow their ventures. This was because the current legal landscape prohibited it.  However, today if a tech startup or business needs capital they have modern technology at their disposal that enables them to leverage their social networks in order to fund their startup or grow their businesses.

As a result of the Great Depression, regulatory actions were taken that imposed limits on where entrepreneurs can seek funding. Fueled by fear and desperation, the risks and power of investing in our nation’s business opportunities were removed from the public and placed in the hands of banks and wealthy investors. Because most people did not have access to these investors, small business, and startup financing became a function of bankers and collateral, not innovation and market demands.

Fortunately, this flaw in our funding landscape has been mended. Through the actions of a few ambitious and determined men, decades-old financial regulation have been amended to reflect modern capabilities and economic reality. Today, markets don’t just function to determine which businesses survive, but also which businesses are born.

img_1681
Niess, Zak Cassady, Best

Sherwood “Woodie” Neiss, Jason Best, and Zak Cassady-Dorion are not politicians, they are not lobbyist, nor are they D.C. insiders. The men behind, perhaps the most important policy change of our lifetimes, are entrepreneurs. The three Thunderbirds are businessmen with experiences that awarded them with intimate knowledge about the needs of startups and the pains of raising capital. They did not just embark on a political journey, they instead created The Startup Exemption and to tackled head on the problem, making regulatory change. Their historic campaign lasted just 460 days, culminating in the framework that was adopted and signed into law by president Obama in April 2012.

The journey began with a problem that had been widely acknowledged, but was never addressed. The impact the group has and will continue to have is the direct result of their development of a solution with the collaboration of stakeholders and early thought-leaders like Kevin Lawton, Danae Ringelmann, and Steve Cinelli in the form of a framework that would later go on to become a part of the JOBS Act

In the halls of congress, the trio of entrepreneurs were an anomaly and there was doubt and pessimism that the group could accomplish their task at all, especially not with the absence of a large war chest and an army of lawyers. But perhaps that is exactly why the political neophytes were able to accomplish their lofty goal in a year and a half, instead of the five to ten policy experts predicted.

Those on The Hill turned out to be people that understood technology and how to leverage it, not the technological laggards that policy makers are commonly portrayed as. The group also discovered that they had tapped into a problem with universal support. During a time with an alarming unemployment rate, flat GDP growth, and a slowdown in the flow of cash from banks to small businesses, D.C. lawmakers were happy to be met with a solution for the biggest problem facing the nation.

img_3344
Sherwood Neiss, Karen Kerrigan , Jason Best, Douglas Ellenoff on May 16th, 2016 Capitol Hill in DC

In May 2016, Regulation Crowdfunding of the JOBS Act went live and the startup exemption become law. Over half a year later, we have seen a steady and methodical adaptation of the innovation. Jason and Sherwood are now principals at Crowdfund Capital Advisors (CCA), where they advise governmental leaders and stakeholders, like the SEC and the World Bank, on how to draft and implement crowdfunding in order to ignite job creation from the grassroots level.

When asked about the adoption of the regulation so far, the pair expressed optimism and satisfaction. They see success by how it is being embraced by the industry, thoughtfully and with care to ensure the integrity of the law is upheld and the balance of investor’s and entrepreneur’s needs and concerns are maintained. The crowdfunding community looks to amend the laws to further strengthen the fit between the needs of the entrepreneur and the laws regulating them.

Amendments to the original rules are coming to a boiling point. The Fix Crowdfunding act, proselytized by many within the crowdfunding world, aims to make the exemption more friendly and appealing to issuers by raising the limits on funds that can be raised, enabling the use of special purpose vehicles, and removing liabilities away from portals for the issuers who use their services. While any changes to the regulation are being carefully scrutinized to ensure adequate investor protection, Sherwood believes the regulatory bodies are motivated to support job growth by empowering entrepreneurs with access to capital. They will do so with the data and case studies that have been collected since the first iteration of the law went live in May 2016.

Jason and Sherwood’s outlook crowdfunding is bright, they see a thriving asset class which creates a new path to capital for underserved entrepreneurs who collectively make up the largest non government source of employment.

It is for these efforts and their continued commitment to the progression of Crowdfunding, that Sherwood Neiss and Jason Best are being honored as the 2017 Crowdfunding Person of the Year.

 

photo

 

 

 

 

Crowdfunding Beat Media Announces 2017 Conference & Expo USA Tour

 

You are invited to attend:

Crowdfunding Beat Media, Conference & Expo Tour 2017

New York – Silicon Valley – Washington DC.-  Denver

By Sydney Armani, Founder / CEO / Publisher / Speaker, 

Happy Holidays 

Crowdfunding Beat Media, Conference & Expo – Tour 2017 will explore new methods of finance, as well as review existing and developing legal considerations and international initiatives.

We will bring together investment community and the new generation of social entrepreneurs – crowdfunders. The event offers you unique opportunity to promote your business in the center of private investments and innovations. We have several options available for those who will participate in the conference. Also, we offer packages of the virtual exhibitor and advertiser, for those who won’t be in the conference.

As you know, we have built CrowdFund Beat  into a leading media platform covering the crowdfunding and marketplace finance space.  Our viewership continues to grow daily as we are Internationally recognized as the definitive “Go-To” for all news & trends Crowd Fund Related. . .

Before we do our normal general Marketing, we are offering you first rights of participation to personally “touch” the eager CrowdFunding National Community and showcase YOU to this ever growing community by Inviting you to be a Conference Speaker and/or Sponsor of any of the following exciting 2017 Opportunities:

We are looking forward to your participation and much appreciate if you share these events with your social network.

Furthermore, we are now advancing our efforts into proprietary research on the space, and are pleased to introduce “2020 Vision”,  a  prognostication report on equity crowdfunding that will be released with much fanfare at our 5th Annual Silicon Valley Fintech Conference that will now have a new, and even larger home, at the Santa Clara Convention Center.  The Report will have general distribution to the International Crowdfunding Industry as well as being promoted at each and every 2017 CrowdFundBeat USA Tour Conferences. 

About:

CrowdFund Beat Media International ” Established  2012″ is an online source of news, information, events and resources for crowdfunding. We e-publish latest news and expert view related to the crowdfunding industry in the USA, Canada, UK, Italy, Germany, France, Holland and coming soon in Spain, Australia, Japan and China on a daily basis. With support of a group of crowdfunding professionals and experts, We are including an editorial column to our journal, in order to present a better perceptive on this new industry to our readers. At crowdfundbeat.com we think of our effort as an educational and informative service to the crowdfunding community, and appreciate your suggestions to make our work more helpful and efficient.

Crowdfunding Beat Media, Conference & Expo Tour 2017

cropped-crowdfundingusa2017tour-y

REGISTRATION – SIGN UP NOW!

Crowdfunded Cars To Exhibit At Crowd Invest Summit December 7th & 8th

Crowdfund Beat Newswire,

Regulation A+ Conference Proves to be Compelling Destination for Consumer Products Companies Looking to Extend their Brand Equity

LOS ANGELES, CA  / The Crowd Invest Summit, a new conference connecting everyday Americans with crowdfunded investment opportunities, is proud to announce the addition of three innovative companies that will exhibit their unique cars at the event, December 7-8 at the Los Angeles Convention Center in downtown Los Angeles.

The Crowd Invest Summit was developed with the vision that every American, through the Jumpstart Our Business Startups Act (also known as the JOBS Act), can now be a venture capitalist – or shark.

ronn-motor-group-prototype-600x450

Motors Leads the Pack

Elio Motors’ Regulation A+ crowdfunding campaign, launched in June, 2015 and completed this past February, did more than just allow individuals to participate in the company’s vision of disrupting auto transportation – it has been one of the most successful campaigns to date, raising $17 million from 6,500 everyday Americans. In February, Elio Motors became the first crowdfunded IPO in the United States when it listed its shares on the OTC Markets’ OTCQX (“ELIO”).

Although Elio Motors will not be exhibiting this year, the company has inspired other automotive innovators – including Campagna Motors, Ronn Motor Company, and HyGen Industries – to participate.

Campagna Motors

Campagna Motors is a forward-thinking car company that has been designing and producing three-wheel vehicles with a focus on performance since 1988. Located in Montreal, Canada, the company’s most popular models are the T-REX and V13R, both of which will be featured at the conference. The company plans to create a sister company in the United States to facilitate an upcoming Regulation A+ campaign.

CEO of Campagna Motors, André Morissette said, “Campagna is a vehicle manufacturer that wants to expand and grow to be a serious player in the emerging three-wheel vehicle market. We looked at all sorts of financing avenues and opportunities and we chose the Reg A+ route because it will provide us with the possibility of engaging our large fan base to become investors and partners in our business, and it allows us to raise the required capital in conditions that are interesting for us and our investors to realize our vision.”

Ronn Motor Company

Through its current Regulation A+ campaign, Ronn Motor Company has enlisted the support of its community and beyond, asking for one million partners to co-create technology that has “the face of a supercar.”

Ronn Ford, Chairman and CEO of Ronn Motor Company said, “This new investment approach through crowdfunding allows us to partner with many to take on the big automakers and give the small guys a way to bring their collective dreams to fruition by joining us as investors and partners. We celebrate this community approach of building cars by capitalizing community effort through crowdfunding.”

HyGen Industries

HyGen Industries, based in Los Angeles, California, produces fuel to power eco-friendly vehicles, distributing the fuel through partner locations throughout the state. HyGen’s hydrogen refueling pumps coexist with current gasoline dispensers without additional infrastructure. The company is currently running a Regulation A+ campaign to build hydrogen fuel stations.

HyGen’s technology will be on display at the conference; the company will feature a Toyota Mirai that runs on hydrogen fuel.

Paul Dillon, CFO of HyGen Industries said, “What really excites me about Reg. A+ is the ability to connect directly with impact investors. The transition from fossil fuel vehicles to zero-emission cars, buses, and trucks presents unlimited opportunities for innovation, jobs, and economic growth. HyGen is at the forefront of this sea change. We believe Reg A+ lets small investors put their money to work for a sustainable future by opening up access to promising startups.”

About The Crowd Invest Summit

The Crowd Invest Summit was founded by three pioneers in the equity crowdfunding sector: Josef Holm, Darren Marble, and Alon Goren. The conference was developed with the vision that every American – whether accredited or not – can now become equity investors. Visit us online at www.crowdinvestsummit.com.

OTC Markets Group and CrowdFund Beat to Host Regulation A+ Bootcamp in New York City

facebook_regabootcamp-1 NEW YORK, Oct. 26, 2016 /PRNewswire/ — OTC Markets Group Inc. (OTCQX: OTCM), operator of financial markets for 10,000 U.S. and global securities, and CrowdFund Beat, a news and information source for the crowdfunding market, today announced they will co-host a Regulation A+ Bootcamp on November 10 at OTC Markets Group’s headquarters in New York City.

 

The one-day workshop will provide startup companies and entrepreneurs with expert guidance on how to raise capital under Title IV of the Jumpstart Our Business Startups (JOBS) Act, also known as “Regulation A+,” which allows small companies to raise up to $50 million annually in crowdfunded offerings from accredited and unaccredited investors.  Speakers will include legal, accounting and other crowdfunding industry experts, including:

  • Kim Wales, Founder and CEO of Wales Capital, who will provide an overview of the state of the Reg A+ market
  • Doug Ellenoff, Partner at Ellenoff Grossman & Schole LLP, who will discuss legal considerations involved in a Reg A+ offering
  • Ron Miller, CEO of StartEngine Crowdfunding, Inc., and Darren Marble, CEO of CrowdfundX, who will discuss equity crowdfunding portals and marketing an offering
  • Craig Denlinger, Managing Partner of Artesian CPA and CrowdfundCPA.com, and attorney Mark Roderick of Flaster Greenberg PC who will provide an overview of the numbers, valuation and legal structure to be considered in a Reg A+ filing
  • Scott Purcell, Founder and CEO of FundAmerica, LLC, who will talk about the escrow process
  • Crowdfunding industry expert Dr. Richard Swart, Chief Strategy Officer of NextGen Crowdfunding, who will address how Reg A+ has evolved
  • Attorneys Seth Farbman and Yoel Goldfeder of VStock Transfer, LLC who will discuss selecting a transfer agent and depositing shares into brokerage accounts
  • Jason Paltrowitz, Executive Vice President of OTC Markets Group, who will discuss investor considerations and how and where a company’s Reg A+ securities can become publicly traded.

The event will conclude with a group discussion and question-and-answer session with Jonathan Frutkin of The Frutkin Law Group, Sam Guzik of Guzik & Associates, Brian Korn of Manatt, Phelps & Phillips, LLP, Blaine McLaughlin of VIA Folio™, a division of FOLIOfn Investments, Inc., and Jonathan Wilson of Taylor English Duma LLP.

Attendees will be able to ask questions and schedule one-on-one meetings with the speakers.

“It has been over a year since Reg A+ became effective, yet still there are questions about how it works and what is needed to make a Reg A+ offering successful,” said Jason Paltrowitz, Executive Vice President of Corporate Services at OTC Markets Group.  “Our boot camp is designed to answer some of those questions and provide small businesses and entrepreneurs with step-by-step instructions on how to conduct a Reg A+ offering and take their company public.  We are thrilled to partner with CrowdFund Beat on this initiative and look forward to an exciting event.”

“What’s most important is we have data over the past year on Reg A+ that will be shared by the conference’s panel who are the who’s who of the crowdfunding industry.  This boot camp is really about trends and where things are going forward,” said Sydney Armani, Publisher of CrowdFundbeat.com.

To register for the event or for more information, visit http://www.regapluslist.com/.

About OTC Markets Group Inc.
OTC Markets Group Inc. (OTCQX: OTCM) operates the OTCQX® Best Market, the OTCQB® Venture Market, and the Pink® Open Market for 10,000 U.S. and global securities.  Through OTC Link® ATS, we connect a diverse network of broker-dealers that provide liquidity and execution services.  We enable investors to easily trade through the broker of their choice and empower companies to improve the quality of information available for investors.

To learn more about how we create better informed and more efficient markets, visit www.otcmarkets.com.

OTC Link ATS is operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.

Subscribe to the OTC Markets RSS Feed

About CrowdFund Beat

CrowdFund Beat is the Crowdfunding Industry’s go-to source of Smart Content for all news and trends Crowdfunding related.  With an extensive online video library, CrowdFund Beat is the Worldwide source of information.  The company also produces two marquee Industry Conferences: The Silicon Valley Fintech Conference in Silicon Valley and The Fourth Annual Conference and Workshop, held at the National Press Club in Washington.  This year CrowdFund Beat is commissioning a robust written and Video Report of where the Industry is heading called 2020 Outlook Crowdfunding Industry Report, to be Published in January, 2017.

Media Contacts:
OTC Markets Group Inc., +1 (212) 896-4428, media@otcmarkets.com
CrowdFund Beat, LLC, +1 (888) 580-6610, news@crowdfundbeat.com

Logo – http://photos.prnewswire.com/prnh/20110118/MM31963LOGO

SOURCE OTC Markets Group Inc.

Related Links

http://www.otcmarkets.com

NASAA and Members of Congress Come Together on the Need for the SEC to Expand Intrastate Crowdfunding Rules

By Samuel S. Guzik, CrowdFundBeat special guest editor,  Guzik & Associate

It is rare that I am able to find agreement with the publicly stated positions of the North American Securities Administrators Association (NASAA). Equally rare – members of Congress who are traditionally strong advocates for “smart” regulatory reform of capital formation by SME’s to find themselves on the same page as NASAA.  However, there appears to be a growing, even overwhelming, consensus that the SEC’s proposed rules to modify current federal restrictions on the intrastate sale of securities – are on the one hand a step in the right direction.  But on the other hand, the SEC’s rule, as proposed, does not go far enough, and places unnecessary restrictions on the ability of states to decide what is in the best interests of their constituents – free of interference from the SEC.

By way of background, on October 30, 2015, the same day that the Commission announced final investment crowdfunding rules in furtherance of Title III of the JOBS Act of 2012 to implement investment crowdfunding on a national level – it also issued for comment a proposed rule, primarily intended to facilitate investment crowdfunding at the state level – Rule 147A. Significantly, the proposed rule would allow companies to advertise their offering on the Internet, something which the SEC Staff has stated is prohibited under current Rule 147 – and much to the consternation of state regulators and securities lawyers  alike.  In doing so, the SEC proposed to limit the amount that a state could authorize under its laws to $5 million. And it also proposed to eliminate the existing rule, Rule 147, in its entirety.

On October 7, 2016, a bi-partisan group of 15 members of Congress, many members of the House Financial Services Committee, signed a letter addressed to the SEC, encouraging the Commission to finalize its rulemaking, but with some important modifications. In particular, as proposed by the Commission, the existing “safe harbor” rule, Rule 147, which would allow states to regulate offerings occurring entirely within their state, would be scrapped in its entirety, and replaced by a new rule, Rule 147A, under the Commission’s general rulemaking powers.  This approach, if adopted in the final rules, has at least two untoward effects, as regards the ability of states to fashion their own rules for intrastate offering, including intrastate investment crowdfunding.

First, of the 35 or so states which have enacted their own investment crowdfunding statutes, adoption of the Rule, as proposed, would in effect, terminate these exemptions in many of the states which enacted their exemptions based entirely upon the current rule – proposed to be eliminated – bringing intrastate crowdfunding to a halt.  Comment letters to date have almost universally requested the SEC to clarify and expand the existing Rule 147, but to retain the existing rule.  Though a technicality of sorts, failure to fix this glitch would require the large majority of states authorizing intrastate investment crowdfunding to go back to their state legislatures to incorporate any new rule which replaces the current Rule 147. And until then, intrastate crowdfunding would be shut down.

Second, though the SEC’s proposed rule makes necessary improvements, it comes with some conditions which many find unpalatable – and unnecessary. In particular, the SEC rule, as proposed, would limit the ceiling under this proposed exemption to $5 million.  Opposition to this condition has been strong, simply because this is a matter which ought to be determined by each state – on a state by state basis.

The latest missive by 15 members of the House Financial Services Committee includes Congressman and Deputy Whip Patrick McHenry, a leading proponent of the JOBS Act of 2012 and subsequent legislation, and Congressman John Carney, the original sponsor of a Bill which passed the House this year which if enacted would create a new, independent office at the SEC – Office of Small Business Advocate – and would report to the full Commission and to Congress.  Undoubtedly, their letter will signal to the SEC the need to approval final rules as expeditiously as possible nearly a year after originally proposed. So look for good things to come from the Commission in this area in the coming months.

For those who want to dig a little deeper, I am providing links to my Comment Letter to the SEC as well as the Comment Letter submitted by NASAA, both back in January 2016.

Samuel S. Guzik has more than 35 years of experience as a corporate and securities attorney and business advisor in private practice in New York and Los Angeles, including as an associate at Willkie Farr and Gallagher, a major New York based international law firm, a partner at the law firm of Ervin, Cohen and Jessup, in Los Angeles, and in the firm he founded in 1993, Guzik & Associates.

 

samuel guzik

Samuel S. Guzik has more than 35 years of experience as a corporate and securities attorney and business advisor in private practice in New York and Los Angeles, including as an associate at Willkie Farr and Gallagher, a major New York based international law firm, a partner at the law firm of Ervin, Cohen and Jessup, in Los Angeles, and in the firm he founded in 1993, Guzik & Associates.

Mr. Guzik has represented public and privately held companies and entrepreneurs on a broad range of business and financing transactions, both public and private. Mr. Guzik has also successfully represented clients in federal securities litigation and SEC enforcement proceedings. Guzik has represented businesses in a diverse range of industries, including digital media, apparel, health care and numerous high technology based businesses.
Guzik is a recognized authority and thought leader on matters relating to the JOBS Act of 2012 and the ongoing SEC rulemaking, including Regulation D Rule 506 private placements, Regulation A+, and investment crowdfunding. He has been consulted by Congressional members, state legislators and the U.S. Small Business Administration Office of Advocacy on matters relating to the JOBS Act and state securities matters.

Guzik & Associates

1875 Century Park East, Suite 700

Los Angeles, CA 90067

Telephone: 310-914-8600

www.guziklaw.com

www.corporatesecuritieslawyerblog.com

@SamuelGuzik1

REPORT: Equity Crowdfunding – Risks and liabilities as the industry matures

 

aaeaaqaaaaaaaakcaaaajgrlowi1ztayltizowmtndq1ms05otrilwzinjuxnwflzgeznw

BY Ronald Kleverlaan Crowdfunding strategy, CrowdfundingHub, advisor European Commission, co-founder European Crowdfunding Network

Within the rapidly-expanding alternative finance industry, equity crowdfunding is emerging as a popular method of growth finance. Equity crowdfunding is a mechanism by which a broad group of investors can fund start-up companies and small businesses in return for equity.

In collaboration with UK insurance company AIG, the researchers of CrowdfundingHub worked together with leading European experts from SyndicateRoom, Seedrs, AIG, CrowdCube, Invesdor, Twintangibles and Legal Alternative to create a state-of-the-art overview of the Equity Crowdfunding industry.

Summary of report

Introduction: The rise and rise of equity crowdfunding

Overview of the growth of the equity crowdfunding industry globally and in Europa.

Chapter 1: Latest developments in equity crowdfunding

Secondary markets, business angels and equity crowdfunding, growth in deal sizes, serial crowdfunding and DIY crowdfunding campaigns.

Chapter 2: Striking the right regulatory balance

Investor protection versus access to finance for companies. Do regulations help or hinder the growth of the equity crowdfunding industry? What will be the impact of Brexit on the equity crowdfunding industry.

Chapter 3: Tackling investor protection

Direct shareholder versus nominee structure, due diligence and cross-border considerations

Chapter 4: Mind the gap: Risks and liabilities associated with crowdfunding platforms

Risks and liabilities associated with crowdfunding platforms, insurance as mechanism for sustainable growth of platforms and fraud risk case studies.

Download free report:

The full report can be downloaded here: Equity Crowdfunding – Considering potential risks and liabilities as the industry grows and matures.

Dara Albright Media Announces New FinTech Video Channel and Broadcast of its Upcoming FinTech Revolution Symposium

Crowdfund Beat NewsWire,

FinTechREVOLUTION.tv will feature the leadership, ingenuity and technologies that are shaping the future of personal finance

ATLANTA, GA (PRWEBOCTOBER 11, 2016

Dara Albright Media, known for its trendsetting FinTech articles and acclaimed industry conferences that helped birth the crowdfinance movement, is pleased to unveil FinTechREVOLUTION.tv, a new FinTech video channel supported by BrightTALK technology. BrightTALK is a leading provider of financial webinars and videos and the producer of the highly praised Digital Banking Summit which continues to garner widespread views from financial industry professionals across the globe.

FinTechREVOLUTION.tv will stream both live as well as on-demand video programming aimed at helping investors of all sizes, businesses in all stages of growth, and financial services providers of all echelons stay on the forefront of the FinTech revolution.

“Especially as FinTech democratizes the financial landscape and gives rise to a new generation of alternative investment products for micro-investors, it is imperative that we create video content that is not only informative and useful, but programming that is as appreciated by investing novices as it is by financial experts. Our mission is to produce innovative and entertaining financial content that makes personal finance and retirement planning not only easy to comprehend, but alluring to the average consumer. Only by truly engaging the populous can we even begin to narrow the national wealth gap and thwart a looming retirement crisis,” stated Dara Albright, Founder of Dara Albright Media.

FinTechREVOLUTION.tv will officially launch on November 15, 2016 in conjunction with Dara Albright Media’s next FinTech Revolution cocktail event being held in New York City.

The November 15th program will include cutting-edge discussions such as: how non-exchange traded alternatives are becoming the mutual funds of yesteryear; what is driving retail’s demand for non-exchange traded alternatives; using micro-investing technology to diversify across and within online marketplaces; how legislation is being used to engineer a new breed of alternative products; how innovations in self-directed IRAs will create new retail distribution channels for the entire alternative product universe; how technology will ensure the scalability of online platforms and enable traditional financial services providers to increase AUM; how millennials will fuel the growth of FinTech and redefine financial services; how FinTech will replace the 401k and transform the way Americans save for retirement; and how modernizing the Self-directed IRA is the trillion dollar FinTech opportunity. Featured retail alternative products will include consumer debt, small business debt and a groundbreaking new equities Reg CF offering.

“I’m thrilled to expand our partnership with BrightTALK which began nearly 4 years ago when we broke new ground in the finance industry with the launch of the world’s first crowdfinance webinar channel. Through this new initiative, BrightTALK enables us to significantly augment the interactive experience of our online viewers. Now virtual participants across the globe will be afforded the same unprecedented opportunities as our physical event attendees to not only see some of the latest financial tools, technologies, investment products and apps that are coming down the pike, but to interact with FinTech experts through live Q&A during our conferences, seminars, roadshows and other “physical world” events,” concluded Albright.

Those interested in participating virtually can register at https://www.brighttalk.com/webcast/9407/228383.

Those joining us in person will, of course, get the added benefit of rubbing elbows with FinTech leaders in an informal setting over cocktails and hors d’oeuvres. Those wishing to join us in person in New York City on November 15th can register athttp://fintechrevolutionnyc.eventbrite.com using the special complimentary code obtained by joining the guest list athttp://www.daraalbright.com/events/ or by emailing guestlist@daraalbright.com. Although there is no attendance fee, admittance is available only on a first-come first-serve basis. The networking event will begin at 4pm EST.

Credentialed members of the media are also welcome to join us for a pre-event press conference that will give journalists a sneak peek into some of the latest micro-investing technologies, non-exchange traded retail alternative investment products and retail investing tools that will transform personal finance and retirement planning. For details on the press conference, please email press@daraalbright.com.

About Dara Albright Media 
Since 2011, Dara Albright has been helping set the direction of the financial services industry through trendsetting articles, white papers, acclaimed conferences, roadshows and influential webinars that introduce new digital financing techniques and modern alternative asset classes such as equity crowdfunding and p2p notes to the financial ecosystem. Over the years, Dara Albright Events have connected thousands of investors, issuers and financial services providers – while helping them capitalize on the incredible transformation in financial services resulting from regulatory overhaul and the progression of FinTech. Additional information can be found at http://www.daraalbrightmedia.com.

Crowdfunding Is Just Beginning

By Mark Roderick CrowdFunding Beat  Sr. contributing editor and crowdfunding attorney with Flaster/Greenberg PC.

For those of us who work in the Crowdfunding space, it can seem as if we’ve covered a lot of ground since April 5, 2012, the day President Obama signed the JOBS Act into law. At a conference in New York earlier this year, a panelist actually referred to Crowdfunding as a “mature” industry.

Nothing could be further from the truth. Crowdfunding is actually just beginning.

A couple weeks ago I received a promotional email from OurCrowd. Founded by Jon Medved, one of the most successful venture capitalists in the world, OurCrowd has developed into the most successful Crowdfunding portal in the world outside the real estate industry. Unlike most angel investors and venture capitalists, Jon understood that Crowdfunding is nothing more or less than the Internet disrupting the capital formation industry – his industry. Rather than resist the disruption, he built the most successful disrupter.

The email recites the impressive number of successful exits and IPOs of companies financed through OurCrowd (remember when Jon’s fellow VCs were claiming that a Crowdfunded company could never attract more financing?), and boasts that OurCrowd has signed up 15,000 investors. That’s a number many Crowdfunding portals would envy, for sure. On the other hand, it represents a market penetration of less than 0.2% among the roughly 8.5 million accredited investors in the United States, and a market penetration of less than 0.02% among the total population of U.S. investors, accredited and non-accredited. And that’s for the most successful non-real estate site in the market.

That’s not a mature industry, folks. By way of comparison to an industry that really is mature, I would say the Crowdfunding industry is about where the automotive industry was in 1912, when a few early adapters were driving these crazy machines with four wheels while their more respectable neighbors were driving proper horse-drawn carriages.

Today, everything about the automotive industry seems obvious, pre-ordained. But here are some of the things we didn’t know in 1912:

  • Whether consumers would use automobiles
  • How they would use them
  • How much they would pay for them
  • Who would make automobiles and their many parts
  • Who would distribute them
  • How automobiles would be regulated
  • Who would make money, and how
  • How automobiles would work
  • Whether the automobile market would segment
  • How it would segment
  • Who would build the automobile infrastructure
  • That a person with an orange wig would someday run for President

If you’re already in the Crowdfunding industry trying to make a living, realizing how little we know can feel disconcerting, even alarming. But try thinking of it this way: 98% of the innovation is yet come, almost all of the opportunities remain unexplored, the disruption of OurCrowd and others will be multiplied a thousand times.

One of the most influential essays of American history was Frederick Jackson Turner’s The Closing of the American Frontier, written in 1893, shortly after the Western frontier was declared closed by the U.S. census. Turner argued persuasively that the idea of a frontier had been central to the American national identify up until that time, and speculated how the national identify might change with the end of the idea.

261

Markley S. Roderick concentrates his practice on the representation of entrepreneurs and their businesses. He represents companies across a wide range of industries, including technology, real estate, and healthcare.