Category Archives: reserch

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.

 

 

 

 

Crowdfunding- The Good, The Bad & The (really) Ugly

By Shane Liddell is the CEO and chief Crowdfundologist at Smart Crowdfunding LLC,. Crowdfund Beat Guest post,

Part 3 –The (really) Ugly

Introduction

In Part 1 I covered all of the good things that we have seen as crowdfunding continuously gathers momentum across the world. The future looks bright indeed!

In Part 2 I wrote of changes within the industry, especially within rewards based crowdfunding – the competition which makes it so much harder for the small guys and the Indiegogo platform now giving preferential treatment to corporates, allowing them “…to pay for special placement on Indiegogo’s site, making them more discoverable than other campaigns”. I also explained that although campaign creators are often labelled as scammers when they fail to deliver on their promises, in many cases this is not true at all.

Here in Part 3, we delve into the dark world of extortion, blackmail and a whole host of other not so nice behavior. I’ll cover some real scams where the campaign creator’s intention from the very beginning was to steal people’s money, in some cases, with the crowdfunding platforms help too!

Part 3-The (REALLY) UGLY

Extortion and Blackmail

Ethan Hunt – Micro Phone

During our very early days of offering crowdfunding campaign marketing services, we were engaged by a Mr. Ethan Hunt who had just launched his Micro Phone campaign on the Indiegogo platform. Ethan and I shared a few phone calls as his campaign began to gather momentum and I specifically remember being on a call with him one day, while the money was rolling in, and each refresh of his campaign page showed more and more backers claiming the rewards on offer. Times were good and there was an element of excitement in his voice (and mine too). Who wouldn’t be excited to see such fantastic traction?

Around 4 weeks later, with almost $50,000 raised, Ethan reached out to me to say he’d been contacted by a guy named Michael Gabrill who claimed that he had some negative information about Ethan and that if he did not pay him $10,000 he would release this information to the public through various media channels. Ethan forwarded me the email communications so I could see for myself.

Low and behold, there it was in black and white.

My advice to Ethan at the time was to just ignore this guy, as I was sure that Gabrill was just a typical opportunist money grabber and was probably seeking attention too. Ethan wrote back to him, refusing to pay a single cent but what happened next surprised us both – Garbrill began contacting various media including Pando and even went so far as to create a webpage slandering Ethan and his Micro Phone project.

The story continued and in Ethan’s own words at the time:

“Did Michael Gabrill attempt to extort money from us? Yes, he did, this is fact he has admitted to doing it here and on one of the many webpages he has set up in an attempt to cover his actions and his motives, claiming it was a test to see if we would incriminate ourselves. Incriminate us for what? Running a successful and legitimate campaign? Or refusing to pay him money not to do what he has done, something he threaten(ed) to do if we did not pay him.

What did Michael Gabrill do exactly? Well, he approached me the day after our campaign reached 100% funding which means in laymans terms when our campaign had received enough contributions for our campaign to be successful and for us to receive payment of the funds at the end of the campaign.

It took more than 30 days to reach our goal and our campaign to be fully funded. During this time, Michael Gabrill sat back and waited until there was enough motivation for us as campaign owners to if he could build enough fear of loss by the thought of him getting our campaign closed down to pay him money for his silence.

Why if Michael Gabrill if he really believed the campaign was fraudulent did he not immediately report it? Simple up until the campaign is 100% there would be no motivation for campaign owners to pay him a penny. This was never about him believing there was an issue with the campaign it was about his motivation to gain financially from a successful campaign. Something, we are sure he has done many times before.

Why do we think he has done this before? He waited until we were 100% funded, he claimed he could shut us down, he claimed that we had no intention of delivering anything to contributors and were going to steal their money and he wanted his cut or he was going to have us arrested for fraud.

Michael Gabrill’s only motivation was money, he sent me a link to his first webpage and told me if we paid him it would not go up. That webpage included photos of myself, details Michael Gabrill had obtained from my eBay account (which could only have been accessed by an eBay employee) and he claimed I was a creep or in Australian terms a sex offender. When I refused to pay him and reported him, he had the webpage active in less than 10 minutes. Only an extortionist would have a pre built webpage ready to go to force his victims into paying him to remove it.

Is our campaign is legitimate? Yes it is, we have registered businesses in Hong Kong and Australia, neither Mike or I have ever been investigated for fraud and we have both been successfully running business in Australia, Hong Kong and China for more than 25 years.”

To end the story, Ethan initiated legal action and managed to have all the slandering webpages created by Gabrill removed and received a public apology from the man himself too. In turn, Indiegogo went on to ban Gabrill completely from their platform.

This turned into a very time consuming and costly endeavor for Ethan but unfortunately, there are many Gabrills lurking in the shadows and waiting to pounce.

 

Bob Rohner – RG Energy

Bob signed up with us a few months after Ethan but his story is a different one in that his crowdfunding campaign didn’t really do too well at all. We tried our best but the ‘crowd’ seemed to think that what Bob was attempting to do was nigh impossible.

However, during the third week of his campaign. Bob received an email from someone claiming to be the owner of RG Energy, a company based in Ohio. Bob’s business was registered in Iowa. They emailed Bob stating that because they were using their RG Energy’s company name, he would have to pay $10,000 (yes, coincidently the same amount as Ethan was asked for) in license or royalty fees. What??

After a little research, it turned out that this goon had registered a company by the same name in Ohio AFTER Bob had launched his crowdfunding campaign thinking he could get money out of him by playing this little game. This led Bob to get his legal team involved and the problem swiftly went away.

 

The Scammers – Very few real ones but they are out there!
Intentional scams are very rare. During my time in the industry I have seen no more than 3 or 4 which were clearly scams from the very beginning.
Many labelled as scams today are situations whereby the people involved set out with good intentions, only to find out that what they are attempting to do is either impossible or far costlier than they expected. Crowdfunding campaign first, homework afterwards rarely works.
Julien (Courteville) Buschor – Launching Multiple campaigns helped him steal almost $400,000

During July 2015, a campaign on the Indiegogo platform called Smart Tracker 2 (ST2) caught my attention for the simple reason that it had raised over $20,000 within the first 24 hours. Normally, campaigns that gain this kind of traction so quickly have done their homework and are fully prepared with social media assets before launch. In most cases, they have a substantial number of social media followers. However, when I looked at the Smart Tracker accounts I saw that they barely had any followers at all. In fact, at the time, their Facebook page showed only 149 ‘likes’ and their Twitter account a measly 19 followers. Maybe they’d done a fantastic job of building a targeted email database before launch, was a thought at the time. My suspicions were aroused though which lead me to delve a little deeper.

I returned to the ST2 campaign page and began to scroll through their backer list. As I scrolled down to the very first backer, and began searching through the list of names, low and behold, I began to see some of the same names appear as backer’s multiple times and eventually realized that 7 or more user accounts had contributed to the campaign many times over – a clear sign of self-funding taking place. This raised alarm bells and prompted further investigation.

What I discovered was a first for me. A look at the user account profile that created this this ST2 campaign showed that this was the 4th campaign launched since the beginning of the year by the very same person – Julien Scherer (whose real name turned out to be Julien Buschor) and now it was only July? Ding..ding..ding. The alarm bells grew louder!

Upon further investigation I discovered that Mr Buschor first launched a campaign called Last Crime in January 2015 raising over $7,000 and claiming:

“Last Crime was made with cutting edge technology that can easily analyze data, provide facial recognition, perform phone and email scanning and much more”

A month later yet another campaign had launched by the name of Innovative Swiss Teeth Whitening Machine raising over $ 60,000 and with a tagline of “Swiss White Teeth, the most advanced swiss teeth whitening light with color screen and USB interface

A few short weeks later the Smart Tracker campaign launched and managed to raise just over $18,000. And finally, the ST2 campaign as initially mentioned above.

The answer to the question – How had the Smart Tracker 2 campaign managed to raise over $20,000 so quickly? –  was now fairly obvious as it was clear that Mr Buschor had rolled funds from his other campaigns into this new one.

Armed with this information, we reached out to Mr Buschor using a private email address and began a lengthy exchange of emails over the following few days. Initially he was panicked and changed user names on the campaigns listed above and sometimes became aggressive in his defense, but he did begin to accept that we knew his game. We threatened to report his campaign to Indiegogo and eventually, he did confirm that he had self-funded the ST2 campaign and his defense was made with a claim of “I’ve done nothing wrong as it’s legal so Indiegogo won’t cancel our campaign”

Mr Buschor self-funded his ST2 campaign to the tune of over $20,000, using money collected from previous campaigns to create a sense of popularity in the eyes of the public. No doubt in my mind that we were seeing a real con man in action!

As my marketing agency, Smart Crowdfunding is listed as a ‘Partner’ on Indiegogo itself, I reached out directly to their Trust and Safety division armed with all of the evidence needed to show that Mr Buschor had been scamming the public. I was certain they would listen, or at least reach out to me for more details. Nope. I received a canned email response saying very little except that they would investigate the matter. Did I hear back from them after this? Nope.

Of even more concern was that the ST2 campaign continued and on July 12th was promoted through the Indiegogo newsletter to a huge database of millions of people. Funding continued to ramp up and eventually the campaign raised more than $300,000.

Was it really a scam you may ask? Absolutely! The comments page on the ST2 campaign tells the whole shameful story!

As for Mr Buschor, he was resident in Switzerland and made local news for all of the wrong reasons as seen HERE

 

BioRing- The Amazing Ring That Made $460,000 Disappear

Now, this one had scam written all over it from the very beginning. However, even some notable Crowdfunding Marketing agencies were taken for a ride in the process too.

During mid-January 2016, we (Smart Crowdfunding) received an email inquiry from a Daniel Johnson asking about our services. After a few back and forth emails with our team, this lead to a Skype call booked for the 20th January. For some reason, they had to reschedule and we rebooked a time for 9am on 27th January, this time with a James Lee.

The call went ahead as planned, and James told me all about BioRing and that they were going to launch a crowdfunding campaign to raise the funds to manufacture the product and get it out there into the market. I explained our campaign development and marketing process, and the need to build an audience prior to launching. James asked if we would work on a percentage only basis to which I replied “No” and then went on to explain that without any validation testing we do not know if his product is a good fit for crowdfunding. Upon concluding the call I did say that I would email through our fee structure and the call ended.

My thoughts at the time were that what they were trying to do was nearly impossible, so a few days later I emailed again stating that after careful consideration I could not help them as I felt their product was impossible to develop.

We did not hear from either Daniel or James again.

The BioRing campaign eventually launched in June 2016 and did rack up over $700,000 in funding.

Fortunately, at least some of the backers were refunded, as Indiegogo did not release any of the InDemand money to the campaign owners. The total amount ‘stolen’ is now showing at $424,664 as of today’s date.

Now, that’s a lot of money and has, in effect, added to a community of backers claiming to never back another Indiegogo campaign again as can be clearly seen on the comments section of the BioRing campaign page. There are many other campaigns with such negative comments.

These disgruntled backers have a right to be pissed and there are hundreds of thousands of them who have supported other campaigns that are disgusted with the treatment they receive from Indiegogo themselves.

You can read more about this scam in this excellent investigative article from Sara Morrison here

The ironic thing with BioRing is that the marketing agencies involved – Funded Today (FT), Herscu and Goldsilver (H&G) and Command Partners (CP) – were up in arms when they didn’t get paid after the campaign concluded, having raised over $700,000. It surprises me that none of them thought that this campaign was nothing but a scam from the very beginning, considering FT were taking a 25% cut of funds raised, H&G a 10% cut and I assume CP a minimum 10%….so, a minimum of 45% off the top! Add to this the 5% Indiegogo platform fee and payment processing fees of around 3.5% meaning that BioRing were giving away more than 50% of the backer’s money!

A screenshot of the BioRing campaign team captured prior to the campaign been flagged as fraudulent. Since then all associated team members removed themselves from the campaign, most likely out of embarrassment. 


2017 Real Estate Crowdfunding Sites

Alphabetically

CrowdFundBeat Media, Copyright © All Rights Reserved

Report: Real Estate Crowdfunding Set to Be $5.5 Billion Industry in 2017

Also:  CrowdFunding Lists, Data, Analytics, Research, Statistics, Reports, Infographic

Crowdfund Beat Media, “2020 Prospect Report”the leading research and advisory and firm specializing in  crowdfunding solutions for private, public and social enterprises, has announced the release of its comprehensive 2017 CF-RE Crowdfunding for Real Estate report, which will provide the first ever detailed look at the intersection of real estate and crowdfunding. The 120-page report features data on the exponential growth of real estate crowdfunding, the emergence of specialized real estate crowdfunding platforms and how this revolutionary new method of real estate finance and investment is disrupting this asset class.

Interesting to note that some platforms are purely providing additive capital to sponsored deals, earning a fee for intermedition, while some are a bit more compensatory, with the inclusion of management fees and a carried interest. As of now, all are focused on accredited investors, though one has included DPOs in their mix. Here is the lists:

2017 Real Estate Crowdfunding Sites. Alphabetically

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in the list? News@crowdfundbeat.com

CrowdFundBeat Media Copyright © All Rights Reserved

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.

The Search for Yield, Part 2: Refinancing Commercial Real Estate

By  Kyle EngelkenWealthForge Crowdfund  Beat Guestpost,

Ten years ago, you could not open your daily financial periodical without being bombarded with articles about the subprime loan crisis. However, quietly in the background, commercial mortgage backed securities (CMBS) were being issued at a record pace with loan to value ratios over 100 percent. In 2005, approximately $169 billion of CMBS loans were issued.

Two years later, this number reached $230 billion. Today, analysts are predicting just $50 billion in CMBS issuance for 2016—far less than the nearly $90 billion in loans due for refinancing this year and over $100 billion in 2017.1 Many of the commercial loans were issued at 10-year terms and the so-called “wall of maturities” has arrived. As a result, there are many opportunities for accredited investors to access private credit funds that seek to close the funding gap created by the supply and demand dislocation in commercial credit markets.

Traditional debt providers such as large banking institutions are limited in the capacity to refinance commercial debt due to regulations requiring lower LTV ratios and a continued aversion to the asset class from the Great Recession. Private Fund managers are stepping in to originate financing solutions for borrowers that are unable to secure funding. In many cases, high performing commercial properties with strong cash flow are unable to refinance with a traditional lender and private fund managers are able to get exposure to high yielding assets with reasonable risk exposure. In other instances, commercial borrowers that are currently “under water” on their loan have decided to forgo property enhancements and any other capital investment aimed at increasing rental income. Fund managers that step in to provide much needed recapitalization solutions to this subset of borrowers can turn around a non-performing asset at attractive terms.2 The supply of financing solutions in today’s market does not match the demand given the CMBS maturity wall. The imbalance continues to provide an opportunity for accredited investors to participate in funding opportunities that offer attractive current income on diversified commercial properties.

Investors looking to allocate capital to real estate have many options. Private investments in core, value add, and opportunistic real estate funds continue to attract billions in capital commitments annually from high net worth family offices, endowments, and other institutional portfolios. Gaining access to quality offerings as an individual accredited investor is not as difficult as it used to be thanks to internet-based private investment platforms. Advisors are getting word of opportunities as they become available, and with minimums well below $1 million, investors can fulfill a commitment without over-allocating to the asset class. While investing in the equity side of a real estate transaction allows investors to participate in upside (and downside, for that matter) valuation potential, real estate debt can offer attractive risk-adjusted returns with current income. Fund managers participating in the refinancing of commercial real estate debt are touting target IRRs between 10% and 15% with quarterly cash distributions.3

The flow of “rescue” financing opportunities on commercial real estate debt should continue well into 2018 as the 10-year fixed rate debt issued during the “bubble” years comes due. High quality properties with outsized debt burdens are in the cross hairs of value-add and opportunistic fund managers. Public markets offer few options with meaningful yield potential in today’s low interest rate environment. Private funds, although illiquid and subject to a broader range of risks, are in a unique position to generate yield for accredited investors.

THE FINTECH REVOLUTION COMES TO REGIONAL AND COMMUNITY BANKS

Crowdfund Beat Fintech Center. 

download-20

 

Manatt Survey Reveals Collaboration, Not Competition, Between Banks and Fintech Is the Way Forward

LOS ANGELES – Oct. 24, 2016 – Thousands of regional and community banks are turning to fintech in order to meet the needs of customers who demand services on their computers, tablets and phones, according to a new report by Manatt, Phelps & Phillips, LLP. Conducted in conjunction with Mergermarket, the report, “Growing Together: Collaboration Between Regional and Community Banks and Fintech,”  is based on survey responses of senior executives from regional and community banks (50%), fintech companies (25%), and private equity firms, venture capital firms and investment banks (25%).

The survey reveals that executives are optimistic about future collaboration between the two industries, with 54% of bank respondents calling fintechs a potential partner and 89% believing that partnerships between the two will reign in the next decade. The benefits are clear to both sides. As banks seek to gain a competitive advantage, they see fintech as a way to offer online services to customers while decreasing technology costs and offering lower lending rates. Fintech firms also see the potential in working together (58%) as an advantage to gain access to the clients of midsized and smaller banks.

“Rather than compete or acquire one another, we’re seeing these institutions begin to form partnerships, and we predict that collaboration will be the primary way that they continue to interact,” said Brian Korn, chair of Manatt’s digital finance and marketplace lending practice. “In September, Radius Bank announced it would team up with online lender Prosper in an innovative deal to help make small business loans, a model that continues the collaboration theme demonstrated by other banks and lending platforms, such as JPMorgan Chase and OnDeck and Regions Bank and Avant. This is the beginning of a new trend that points specifically to an increasingly symbiotic environment.”

While the benefits of working together are unmistakable, adapting to the fintech revolution is not always smooth. Banks need to be prepared for the challenges of implementation, as well as possible security risks. As an executive of one Southeastern community bank put it, “We would have to restructure all our processes and push management and employees through training in order to get accustomed to the new technology. But we foresee a slowdown in our business if we do not find new solutions to implement. So currently I would say we are unprepared, but on the way to getting prepared, for the necessary changes.”

Banks are hyperaware of regulatory risks and therefore demand high standards from fintech companies when it comes to compliance—bank respondents who are not partnering with fintech (19%) cited cybersecurity among their biggest worries. The threat of data breaches is part of digital services, and both banks and fintech firms know how dangerous security risks can be to their businesses. As a result, the two sides must pay careful attention to the issue when preparing to collaborate.

“Despite the demand for mobile services, cybersecurity will be the chief concern as these institutions come together. Fintech opens numerous doors for traditional banks, but at the same time, it leaves the possibility of a cyber breach wide open,” said Craig Miller, co-chair of Manatt’s financial services practice. “Manatt is well equipped to help these institutions navigate compliance challenges that will arise during this exciting time in financial services, from counseling on cybersecurity preparedness and response plans to exploring the different types of partnership agreements that exist and ensuring those agreements are legally compliant. Building on Manatt’s traditional strength of working with depositary institutions and our leading digital finance and marketplace lending practice, we look forward to helping banks, fintech companies and investors develop strategies to overcome these challenges.”

Here are four key takeaways that are useful to everyone in the banking and fintech sectors when approaching the challenges that come with collaboration:

 

  • Banks are on board with fintech. At 81%, the overwhelming majority of regional and community banks are currently collaborating with fintechs. In addition, 86% of regional and community bank respondents said that working with fintechs is “absolutely essential” or “very important” for their institution’s success.

 

  • Lower costs + a better brand = a win-win. For regional and community banks, enhanced mobile capabilities and lower capital and operating costs were highlighted as the benefits of collaborating with fintechs. Fintechs named market credibility and access to customers in regional markets as the main benefits to partnering with banks.

 

  • Data security remains a challenge. Both banks and fintech companies are highly sensitive to the ways in which data is shared and secured. This means extra attention must be paid to cybersecurity when the two sides collaborate—especially given the cultural mismatch that can exist between them. Despite the optimism among banks for collaboration, preparedness is a large concern. Almost half of regional and community bank respondents said they are just “somewhat prepared” or even “somewhat unprepared” for this kind of partnership.

 

  • Regulatory concerns remain paramount. For banks and fintech firms, structuring relationships that are regulatory compliant, including, if required, prior regulatory approval, is critical to ensuring success and the opportunity to change the way financial services are ultimately delivered.

The full report is available for download on Manatt’s  website. 

 

 

Fintech Fundings: 26 Companies Raise $270 Million

The fintech sector attracted $266 million in new capital the second week of August. Half went to Finovate/FinDEVr alums including:

The number of deals totaled 26, slightly below the YTD average of 28 deals per week. The YTD total now stands at 895, about 400 more than last year’s 484. Total dollars raised YTD is $19.9 billion, nearly double the $10.2 billion raised during the same period a year ago.

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Fintech deals by size from 6 Aug to 12 August 2016:

Interactions
Virtual customer service
Latest round: $56 million
Total raised: $167 million
HQ: Franklin, Massachusetts
Tags: Institutioins, customer service
Source: Finovate

Finova Financial
Alt-title loans
Latest round: $52.5 million Private Equity
Total raised: $52.5 million
HQ: Palm Beach Gardens, Florida
Tags: Consumer, credit, loans, underwriting, auto lending, vehicles, Finovate alum
Source: Finovate

Yunnex
POS solutions provider
Latest round: $45.1 million Series B
Total raised: $60.9 million
HQ: Guangzhou, China
Tags: SMB, merchants, payments, credit/debit card processing, acquiring, point of sale
Source: Crunchbase

BPS Technology
Digtial currency management for small businesses
Latest round: $21.2 million
Total raised: $21.2 million
HQ: Southport, Australia
Tags: SMB, payments, accounting, bitcoin, blockchain, cryptocurrency
Source: FT Partners

Upguard
Cybersecurity
Latest round: $17 million Series B
Total raised: $27 million
HQ: San Francisco, California
Tags: Institutions, SMB, consumer, security, FinDEVr alum
Source: FinDevR

Touzhijia
Wealth management
Latest round: $12 million Series A
Total raised: $16.5 million
HQ: Shenzen, China
Tags: Consumer, advisors, trading, investing
Source: Crunchbase

ComparaOnline
Financial services price comparison portal
Latest round: $6 million
Total raised: $20 million
HQ: Santiago, Chile
Tags: Consumer, credit, loans, deposits, price comparison, lead gen, discovery
Source: FT Partners

Pindrop Security
Phone-based fraud solutions
Latest round: $5.8 million addition to previously announced $75 million Series C
Total raised: $122.8 million
HQ: Atlanta, Georgia
Tags: SMB, institutions, security, anti-fraud, biometrics, call center, Finovate alum
Source: Crunchbase, Finovate

CUneXus
Consumer lending platform
Latest round: $5 million Series A
Total raised: $6.65 million
HQ: Santa Rosa, California
Tags: Consumer, credit, loans, underwriting, mobile, account opening, Finovate alum
Source: Finovate

DailyPay
Payment provider to employees & contractors
Latest round: $5 million Series A
Total raised: $6.5 million
HQ: New York City
Tags: SMB, payments, payroll, HR, benefits
Source: Crunchbase

Bigstone Capital
SMB lending marketplace
Latest round: $3 million Seed
Total raised: $3 million
HQ: New South Wales, Australia
Tags: SMB, credit, loans, underwriting, commerical loans, crowdfunding, P2P, investing
Source: Crunchbase

Verifly
Drone insurance
Latest round: $2.7 million Seed
Total raised: $4.86 million
HQ: New York City
Tags: Consumer, SMB, insurance
Source: Crunchbase

AlphaFlow
P2P real estate investment management
Latest round: $2.16 million Seed
Total raised: $2.28 million
HQ: San Francisco, California
Tags: Investors, advisors, P2P lending, investing
Source: Crunchbase

HashRabbit
Cloud hashing for blockchains
Latest round: $1.65 million Seed
Total raised: $2.34 million
HQ: San Francisco, California
Tags: SMB, institutions, blockchain, security, bitcoing, payments, crypto-currency
Source: Crunchbase

ET Index
Investor tools to manage carbon risk
Latest round: $1.5 million Seed
Total raised: $3.1 million
HQ: London, England, UK
Tags: Investors, traders, advisors, investing
Source: Crunchbase

Faircent
P2P lending platform
Latest round: $1.5 million Series B
Total raised: $5.75 million
HQ: Haryana, India
Tags: Consumer, credit, loans, underwriting, peer to peer, investing
Source: Crunchbase

Finexio
B2B payments network
Latest round: $1 million Seed
Total raised: $1 million
HQ: San Mateo, California
Tags: SMB, payments, B2B, billing, invoicing, accounts receivables management
Source: Crunchbase

PledgeMe
Equity & loan crowdfunding platform
Latest round: $860,000 Equity Crowdfunding
Total raised: $960,000
HQ: Wellington, New Zealand
Tags: Consumer, SMB, non-profits, credit, loans, underwriting, P2P, peer to peer, investing
Source: Crunchbase

First Access
Alt-credit score & risk management for financial institutions in emerging markets
Latest round: $750,000 Debt
Total raised: Unknown
HQ: New York City
Tags: Consumer, credit, loans, underwriting, solar energy, home equity
Source: Crunchbase

Remitware Payments
Remittance provider, RemitR
Latest round: $590,000
Total raised: $590,000
HQ: Mumbai, India
Tags: Consumer, SMB, payments, funds transfer, FX, remittances
Source: Crunchbase

RateHub
Financial services comparison site
Latest round: $495,000
Total raised: $495,000
HQ: Toronto, Ontario
Tags: Consumer, credit, loans, mortgage, deposits, lead gen, price comparison, discovery
Source: Crunchbase

AppIDentify
Residential real estate valuation system
Latest round: Undisclosed
Total raised: Unknown
HQ: Atlanta, Georgia
Tags: Consumer, home buying, mortgage
Source: Crunchbase

Duocaitou
Real estaete crowdfunding platform
Latest round: Undisclosed
Total raised: Unknown
HQ: Bejing, China
Tags: Consumer, credit, loans, underwriting, P2P, investing, rental real estate
Source: Crunchbase

FintecSystems
Data provider to financial institutions
Latest round: Undisclosed Series A
Total raised: Unknown
HQ: Munich, Germany
Tags: Institutions, metrics, analytics, information, BI, underwriting, risk management
Source: Crunchbase

Red Dot Payment
Payment processor
Latest round: Undisclosed
Total raised: Unknown
HQ: Singapore
Tags: SMB, credit/debit cards, payments, acquring, merchants
Source: Crunchbase

Otly
Spending platform for families
Latest round: Undisclosed investment from Uber
Total raised: Unknown
HQ: Amsterdam, The Netherlands
Tags: Consumer, spending, budgeting, youth market, PFM, mobile
Source: FT Partners

“REG CF” An Analysis of the First 50 Crowdfunding Offerings

By Marc A. Leaf, Robert T. Esposito, and Abigail Luhn,

The Securities and Exchange Commission (SEC) is now accepting Form C filings from private companies seeking to sell securities through registered crowdfunding portals. We have been following the nascent crowdfunding space closely and will continue to monitor the adoption of crowdfunding as a new method of financing private companies.

In this alert, we will analyze offerings conducted through crowdfunding portals, offer tips for those thinking of entering the space, and provide a summary of the SEC’s final rules and forms for equity crowdfunding (“Regulation Crowdfunding”).

The Drinker Biddle Crowdfunding Report, an open data set providing information on the first 50 offerings conducted under the Regulation Crowdfunding exemption, is available for download. The report provides data on filing dates, issuers, type of security, investment amounts, funding portals and other information.

Analysis of the First 50 Offerings

In general. As of June 30, 2016, 50 companies have filed a Form C with the SEC to offer securities under the Regulation Crowdfunding exemption. Minimum target offering amounts range from $20,000 to $500,000 per offering, with a median of $55,000. All but one of these issuers, however, have disclosed that they will accept offers in excess of the target amount, including 27 issuers that say they will accept investments at or near the maximum permitted offering amount of $1,000,000.  In contrast, 18 of the first 50 issuers elected to cap their offering at just $100,000, with the remainder setting an offering cap of between $200,000 and $500,000.  In the aggregate, if this first wave of retail crowdfundings is successful, 50 small companies will raise an aggregate of $6 to $30 million in new capital to fund their businesses.

While announced offering durations range from 21 days to one year, the median period that issuers say they will keep their offerings open is just under six months, with about half electing an offering duration between 166 and 182 days.

Eighteen different jurisdictions of incorporation are represented among the first 50 issuers; however, nearly half of the initial filers (24) are Delaware entities. Early data shows that issuers tend to be early-stage startups, with a median issuer age of just 354 days. Nevertheless, nine of the issuers were more than five years old, and the oldest was incorporated in 2003.

Regulation Crowdfunding does not restrict the type of securities that may be offered under the new regime, and the first 50 issuers offer a broad array of securities to prospective investors. The two most commonly offered securities, which constitute three-fifths of the first 50 offerings, are common stock (16) and the so-called Simple Agreement for Future Equity or “SAFE” (14)—a financing instrument developed by startup accelerator Y Combinator that has been described as “convertible debt without the debt”[1].  Other securities being offered include debt securities (seven), preferred stock (six), LLC units (five), and convertible notes (two).

While a total of 12 funding portals have registered with FINRA to date, the early mover Wefunder portal hosts more than half (26) of the first 50 offerings. The StartEngine portal has secured eight offerings, with the remainder split among other portals, including SeedInvest, Next Seed, Flashfunders, and Venture.co.

Early Adopters.

Read More..

http://www.drinkerbiddle.com/insights/publications/2016/07/leading-the-crowd-first-50-crowdfunding-offerings?noredirect=trueDBR_stacked_logo_RESTRICTED_400x400

Five Ways that Brexit Will Complicate Cross-Border M&A

By Jonathan B. Wilson CrowdFundBeat Sr. Guest Editor, Partner, Taylor English Duma LLP 

Last week’s referendum in the UK and the decision for Great Britain to exit the European Union has caused turmoil in financial markets.  For M&A practitioners, however, the impact is only just beginning.  Here are five key ways in which Brexit will complicate cross-border M&A:

1. Deal Terms Will Need to Contemplate the Potential for Additional Exits

If you thought the UK exit was tumultuous, just imagine the complications that might result if the Netherlands, France or another EU stalwart held a referendum that allowed its voters to possibly leave the EU.  M&A deals with European targets should contain provisions that contemplate these complexities and either allow the acquiror an “out” if the situation in Europe changes or that provide a mechanism to make changes if another EU member state serious contemplates an exit.

2. Taxes Will Get Complicated

The terms of UK’s exit from the EU have not even begun to take shape.  At a minimum, though, the harmonized system of taxation that was developing under the EU will no longer apply to UK companies or companies with subsidiaries in the UK.  Counsel in M&A transactions will need to grapple with the complexities of multiple, competing tax regimes when target companies have significant assets in both the UK and the EU.

3. Data Protection Rules Will Get Complicated

In our ever-digital world, data is everything (or nearly so).  For the past decade, U.S. firms have become familiar with the EU Data Privacy Directive and its member-state implementing legislation.  U.S. firms with data flows out of the EU have had to deal with the EU/U.S. safe harbor rules, to ensure that such data flows do not offend the EU requirements.

Counsel in M&A transactions will need to account for the possibility of different treatments for data flows into the U.S. from the EU and the UK and the possibility of different (or multiple) safe harbor regimes in the future.  The EU safe harbor provisions will (in all likelihood) cease to apply to UK data outflows once the UK’s exit is completed, but we cannot predict what safe harbor regime (if any) will govern UK data in the future.

4. Multiple Sets of Regulatory Approvals

U.S. acquirors looking at targets with both UK and EU assets previously could look to a single set of EU regulators for deal approvals.  Post-exit, there will be at least two sets of regulators whose approval may be required for the acquisition of mixed UK/EU companies.

5. Multiple Sets of Local Counsel

U.S. acquirors doing deals in the UK before Brexit could often hire out European firm to provide pan-European local counsel services for the deal.  Most UK law firms had developed continental offices to facilitate deals across borders.

Post-Brexit it is more likely that U.S. acquirors will need to retain both UK and European counsel (or at least involve the continental partners of UK law firms).  While law firms with offices in both the UK and Europe will have an advantage in providing cross-border advice, the coming divergence in legal systems between the UK and the EU will require an increased level of effort from lawyers in both regimes in M&A deals that span the UK and the EU.

“The Fix Crowdfunding Act”

BY Lauren LeibowitzPrincipal at 1st BridgeHouse Securities, LLC, Crowdfund Beat Sr. contributing editor,

The Evolving Crowdfunding Regulations: Now Presenting “The Fix Crowdfunding Act”

On April 5, 2012 the JOBS Act was passed. On October 30, 2015 Title III: Equity Crowdfunding final rules were passed which marked all 7 Titles of the JOBS Act were approved. Recently, the ‘‘Fix Crowdfunding  Act’’ was  introduced to Congress to improve Regulation Crowdfunding.  FINRA and SEC has taken an approach of letting the crowdfunding industry cultivate the business model and the regulators will oversee and implement regulations on an as needed basis. The integration of technology within the private capital markets is monumental since in the 21st century the internet is incorporated in every aspect of your daily life and business.

 9 Funding Portals have been FINRA approved as of May 16. A handful of previously interested business and FINRA member Broker Dealers announced they would not join the crowdfunding marketplace because the current crowdfunding regulations are not conducive to operate in but hope that the ‘Fix Crowdfundung Act’ will be passed in order for them to reconsider joining the crowdfunding marketplace.  Jeff Lynn, CEO and co-founder of Seedrs-a leading UK based investment crowdfunding platform, intended to expand its operations across the pond but believes the current crowdfunding regulations to be “not workable in its current form”, especially burdensome compared to FCA’s crowdfunding regulations that has made the United Kingdom a workable model of successful crowdfunding.  His full statement is below:

“Title III of the JOBS Act, which comes into force today, should have been one of the most important pieces of legislation to impact US fintech in recent years. But although Title III nominally makes it possible for non-accredited (regular) investors to invest in startup businesses and private firms in the US, the legislation’s considerable limitations and poor drafting means we believe it is simply not workable in its current form. Among other things, Title III:

  • Makes it likely that only lower-quality investment opportunities will use equity crowdfunding in the U.S. Title III places such significant burdens on companies seeking to raise capital—making crowdfunding far more expensive, time-consuming and difficult than raising money through other channels (such as institutional or private angel investors)—that businesses will only to turn to crowdfunding as a last resort after more efficient capital-raising methods have failed. The result will be that ordinary retail investors will have access only to those businesses that cannot raise capital elsewhere, which is an adverse selection phenomenon that has not occurred in Europe.
    • Gives insufficient protection given to investors. While Title III and the related regulations place significant focus on limiting the losses that may be experienced by investors, loss of capital is not the only risk in this asset class. Also important is that investors be protected in the case of a business’s success: a successful business can see its valuation increase 100-fold or more, but if the investment has not been properly structured or monitored, investors may receive nothing. Where restrictions interfere with crowdfunding platforms’ ability to provide those protections—which is precisely what Title III does—investors will be significantly worse off in the long run.
    • Reduces the likelihood of businesses succeeding raising capital. One of the key lessons from the growth of equity crowdfunding in Europe is that raising capital in this way is a dynamic process that requires the business to build momentum behind its campaign. Successful crowdfunding campaigns tend to require active outreach, ongoing and multi-modal engagement with prospective investors, and the participation of one or more “anchor” angel or institutional investors, all before the crowd investors start to commit capital in a meaningful way. Title III’s significant marketing restrictions mean that companies will be very limited in their ability to create momentum, which in turn will make it exceptionally difficult for their campaigns to succeed.

“What is particularly unfortunate in all this is that Europe, and the UK in particular, has shown how a regulatory system can facilitate a thriving equity crowdfunding environment, allowing the best companies to raise funds successfully and giving investors the protections they need. US lawmakers would have been well advised to look much more closely at the UK system when developing Title III.

“However, I am hopeful about the future of Title III, and under revised legislation (a version of which is already being considered by Congress), I would love for Seedrs to use it to facilitate investments in the US.

“In the interim, Seedrs will launch stateside under Title II of the JOBS Act, which is limited to accredited investors, and which will offer a specific demographic of investor access to many of the European businesses seeking capital on our platform. Whilst it means that entrepreneurs will only have access to a portion of the American crowd, the opportunity for those investors who are accredited is really exciting. We believe Europe has the fastest-growing ecosystem of early-stage businesses in the world, and the combination of reasonable valuations and fast growth that many companies see on this side of the pond should make them highly appealing investment opportunities for accredited American investors.”

WHAT IS PROPOSED IN THE “FIX CROWDFUNDING ACT”?

 

QUALIFICATION FOR CROWDFUNDING EXEMPTION
  1. Increase the Issuer offering limit to $5,000,000 from $1,000,000.
  2. Take the “Greater of Approach” rather than the “Lesser of Approach” regarding the Crowd’s annual investing limitations.

An investor will be limited to investing: (1) the greater of: $2,000 or 5 percent of the lesser GREATER of the investor’s annual income or net worth if either annual income or net worth is less than $100,000; or (2) 10 percent of the lesser GREATER of the investor’s annual income or net worth, not to exceed an amount sold of $100,000, if both annual income and net worth are $100,000 or more.

CLARIFICATION OF CERTAIN FUNDING PORTAL REQUIREMENTS AND EXCLUSIONS FOR REGULATION CROWDFUNDING.

EXCLUSION OF ISSUERS FROM FUNDING PORTALS

  1. CLARIFICATION OF CERTAIN EXCLUSION REQUIREMENTS FOR FUNDING PORTALS—Section 302 of the Jumpstart Our Business Startups Act

ADD (e) to “Under the rules issued pursuant to subsection (d), a funding portal shall have a reasonable basis for disqualifying an issuer from offering securities through such funding portal pursuant to section 4(a)(6) of the Securities Act of 1933 if the funding portal, through a background check of the issuer or other means, has found that such issuer, in connection with the offer, purchase, or sale of securities, has knowingly—

‘‘(1) made any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or

‘‘(2) engaged in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.’’.

  1. CLARIFICATION OF OTHER OBLIGATIONS TO REDUCE THE RISK OF FRAUD.

Securities Act Section 4A(a)(5) requires an intermediary to “take such measures to reduce the risk of fraud with respect to [transactions made in reliance on Section 4(a)(6)], as established by the Commission, by rule, including obtaining a background and securities enforcement regulatory history check on each officer, director, and person holding more than 20 percent of the outstanding equity of every issuer whose securities are offered by such person.”

Amend language to read as follows:

“(5) as a minimum to reduce the risk of fraud with respect to such transactions obtain a background and securities enforcement regulatory history check on each officer, director, and person holding more than 20 percent of the outstanding equity of every issuer whose securities are offered by such person;’’.

  1. CLARIFICATION OF LIABILITY OF FUNDING PORTALS FOR MATERIAL MISSTATEMENTS AND OMISSIONS

Securities Act Section 4A(c) provides that an issuer will be liable to a purchaser of its securities in a transaction exempted by Section 4(a)(6) if the issuer, in the offer or sale of the securities, makes an untrue statement of a material fact or omits to state a material fact required to be stated or necessary in order to make the statements, in light of the circumstances under which they were made, not misleading, provided that the purchaser did not know of the untruth or omission, and the issuer does not sustain the burden of proof that such issuer did not know, and in the exercise of reasonable care could not have known, of the untruth or omission. Section 4A(c)(3) defines, for purposes of the liability provisions of Section 4A, an issuer as including “any person who offers or sells the security in such offering.”

In describing the statutory liability provision in the Proposing Release, the Commission noted that it appears likely that intermediarieswould be considered issuers for purposes of the provision. Several commenters agreed that Section 4A(c) liability should apply to intermediaries noting that it “may serve as a meaningful backstop against fraud” and would create a “true financial incentive” for intermediaries to conduct checks on issuers and their key personnel.

However, a large number of other commenters disagreed that Section 4A(c) liability should apply to intermediaries. Some of these commenters stated their views that applying statutory liability to intermediaries would have a chilling effect on intermediaries’ willingness to facilitate crowdfunding offerings. Others cited the cost of being subject to this liability as overly burdensome on funding portals, to the extent that they may not be able to conduct business. Several commenters also explained that the nature of funding portals, as intended by Congress, is distinct from that of registered broker-dealers. According to these commenters, a funding portal’s role is not to offer and sell securities, but rather to provide a platform through which issuers may offer and sell securities. As such, these commenters asserted that it would not be appropriate to hold them liable for statements made by issuers.

Section 4A(c) of such Act (15 U.S.C. 77d–1(c)) is amended by adding the end the following:

‘‘(4) LIABILITY OF FUNDING PORTALS.—For purposes of this subsection, an intermediary shall not be considered an issuer unless, in connection  with the offer or sale of a security, it knowingly—  ‘‘(A) made any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or ‘‘(B) engaged in any act, practice, or  course of business which operates or would operate as a fraud or deceit upon any person.’’.

EXEMPTION FROM REGISTRATION

  1. Amend Section 12(g)(6) of the Securities Exchange Act

Reader note- (The words in bold are new text)

(6 )Exclusion for persons holding certain securities.— The Commission shall, by rule, exempt, conditionally or unconditionally, securitiesSecurities acquired pursuant to an offering made under section 4(6)  of the Securities Act of 1933 [15 U.S.C. 77d(a)(6)] shall be exempt from the provisions of this subsection.

ALLOWING SINGLE-PURPOSE FUNDS.

  1. Amendment to Section 4A(f) of the Securities Act of 1933:

(f) APPLICABILITY.—Section 4(6) [8] shall not apply to transactions involving the offer or sale of securities by any issuer that—

(1) is not organized under and subject to the laws of a State or territory of the United States or the District of Columbia;

(2) is subject to the requirement to file reports pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934;

(3 2 ) is an investment company, as defined in section 3 of the Investment Company Act of 1940, or is excluded from the definition of investment company by section 3(b) or  paragraphs (1) to (14) of section 3(c) of that Act; or

(4) the Commission, by rule or regulation, determines appropriate.

  1. AMENDMENT TO THE INVESTMENT COMPANY ACT OF 1940 :

Add to Definition of Investment Company (Investment Company Act of 1940 Section 3(c))

(c) Notwithstanding subsection (a), none of the following persons is an investment company within the meaning of this title:

ADD ‘‘(15) any issuer that holds, for the purpose of  making an offering pursuant to section 4(a)(6) of  the Securities Act of 1933 and the rules issued pursuant to such section, the securities of not more than one issuer eligible to offer securities pursuant to such section and such rules.’’.

  1. APPLICATION OF RULES.—Single-purpose funds that are excluded from the definition of investment company under paragraph (15) of section 3(c) of the Investment Company Act (15 U.S.C. 80a– 3(c))— (A) shall be allowed to sell and offer for sale securities under section 4(a)(6) of the Securities Act of 1933 (15 U.S.C. 77d(a)(6)) under the rules adopted on October 30, 2015, pursuant to title III of the JOBS Act (Public Law 112–106); and (B) shall be considered venture capital  funds for purposes of section 275.203(l)–1 of  title 17, Code of Federal Regulations.

SOLICITATION OF INTEREST

Section 4A of the Securities Act of 1933

  1. Add “(f) SOLICITATION OF INTEREST.—

(1) IN GENERAL.—At any time prior to the  filing of information with the Commission and the commencement of an offering made in reliance on section 4(a)(6), an issuer may solicit non-binding indications of interest from potential investors in a prospective offering using the same means and pursuant to the same regulations (other than the filing of information with the Commission) as if conducting an offering pursuant to such section if—

(A) no investor funds are accepted by such issuer; and

(B) any material change in the information provided to potential investors during the  actual offering pursuant to such section from  the information provided to potential investors  during such solicitation of interest are highlighted to potential investors in the information  filed with the Commission.

(2) STATUS.—Such solicitation of interest shall not be considered an offer or sale of securities under this Act or the Securities Exchange Act of  1934, regardless of whether or not the issuer actually conducts an offering pursuant to such section 4(a)(6).

GRACE PERIOD

Consistent with the effective date of the final rules on regulation crowdfunding adopted by the Securities and Exchange Commission on October 30, 2015, pursuant to title III of the JOBS Act (Public  Law 112–106), funding portals established under such Act shall make a good faith effort to comply with all such  rules. Notwithstanding such effective date, no enforcement action may be brought against a funding portal before May 16, 2021.

CONCLUSION

Regulation Crowdfunding is in its infancy stages. The crowdfunding industry, the SEC and FINRA will hopefully be able to work together to cultivate the crowdfunding marketplace to empower entrepreneurs while protecting the crowd. Crowdfunding today will continue to evolve as different funding models and Issuers use regulation Crowdfunding.

New CrowdFunding Rules are a Game Changer

Joel Block

By  CEO at Bullseye Capital MarketPlace Partners, LLC , CrowdFund Beat Guest Post,

This was an historic week in the securities industry. Rules that have been in place for more than 80 years were smashed and replaced with new, modern rules that allow citizens from every walk of life to invest in start-up companies right on the Internet. In the past, private placements had to be kept private which effectively meant that you had to be a millionaire to get into a private placement and make any money.

game-changer
Nothing seems more un-American than having to be a millionaire to make money in the United States of America. But the final deployment of the new rules, as a result of the JOBS Act of 2012, with partial implementations in 2013, 2015 and now 2016, has modernized the old capital formation rules and is changing the landscape of fund raising – for the better.

It’s unclear if the new rules under Title III of the JOBS Act will have much impact on real estate. Allowing non-accredited investors into real estate deals that require a substantial amount of capital doesn’t seem like it’s going to make a very big difference in an overall capital raise. This is compounded by the limits on projects: deal sponsors are restricted to $1M per year and individual investors can only invest (generally) about $5,000 each. So, not much money is going to come from non-accredited investors on a deal-by-deal basis for real estate. But for early stage companies, these small amounts could be a game changer.

The new Title III rules were enough to cause celebration in the streets of Washington DC this week. Hundreds of entrepreneurs, lobbied for the bills that became the JOBS Act, and many of us have been educating the investing public about how all of these new rules work.

Our company has put together a consortium of professional syndicators, who are promoting deals to accredited investors. We already have 53 groups that have joined our company and have signed our Operating Agreement. Our website will be live this summer. We’ve procured relationships with two different broker/dealer (BD) firms. One BD will oversee the relationship with the investors. The other is charged with overseeing the promoters (who are refered to as “issuers”.

We are very serious about making CrowdFunding work. Investors want more choices and deal sponsors want more investors. It’s a win/win for everyone. And we are dedicated to educating the marketplace and sharing information about how these new rules can positively and safely affect investors from every walk of life.

We teach this material in-depth at the Syndication and Hedge Fund Symposium that we host twice a year. The next one will be held in late October 2016 in Las Vegas, Nevada. We hope you’ll join us.

We also hope that you’ll partake in the new capital raising opportunities that exist. And if you’re a professional sponsor please consider joining our CrowdFunding company. Please be in touch with me so that we can share more about how this works and what the opportunity is for you to join us and participate in the modern capital raising revolution.

A New Era begins for Equity Crowdfunding under Title III of the JOBS Act

By Sydney Armani, CrowdFund Beat CEO & Publisher

On May 16, the Securities and Exchange Commission’s (SEC) crowdfunding rules under Title III of the JOBS Act go into effect, allowing early stage and growth companies, which may be unable or unwilling to raise capital from institutional or private investors, to gain access to another source of capital.

images (15)

“Title III of the JOBS Act was originally meant to be a game changer for growth companies, adding another way businesses could raise capital in today’s marketplace,” said Alex Castelli, partner and leader of the National Liquidity and Capital Formation Advisory Group at CohnReznick, a top accounting, tax, and advisory firm serving the middle market. “But the SEC has put forth requirements and complexities that might make it extremely challenging for companies to truly consider these opportunities.”

“Whether it is in the public markets, through private equity or venture capital or from individual investors, a solid balance must be maintained between fueling the needs of growth oriented businesses, and investors eager to support the next generation of innovation while maintaining an appropriate level of oversight to protect investors.”

  • The key components of the rules that investors must understand and how they can ensure compliance.
  • The advantages crowdfunding offers, such a decrease in cost of capital, or a wider and more efficient distribution through selling securities through the internet.
  • The challenges that crowdfunding may bring, especially to a private company not accustomed to sharing operational and financial information publicly and as transparently.
  • Understanding the regulations and requirements required, such as utilizing funding portals or registered broker dealers and will have certain disclosure requirements to investors.
  • Inherent risks that come with crowdfunding as a method to raise capital and the appropriate amount of diligence necessary before committing funds.

5 Tips for Everyday Investors Participating in Equity Crowdfunding

Equity Crowdfunding under Title III of the JOBS Act is coming to fruition next week.  Many questions remain and a steep learning curve is inevitable for both investors and entrepreneurs.  Under the new guidelines anyone can participate in equity crowdfunding instead of just accredited investors who meet sufficient levels of wealth. Now anyone can become a startup investor.

Amro Albanna, CEO of ieCrowd, a startup with six years of experience and over 17 Million dollars already raised, has tips to help the everyday investor make smart decisions if they decide to jump in and participate in equity crowdfunding.  ieCrowd will launch its own Title III raise shortly – they currently have two products coming to market – Kite natural mosquito repellant that blocks mosquito CO2 receptors from detecting human blood and the Nuuma air pollution sensor to create a digital nose in smartphones.

“On May 16th and beyond, a large number of startup companies are going to try to raise money using equity crowdfunding,” said Albanna. “Having been in this business for several years now, I can offer the following attributes the everyday investor should look for as they choose a company to fund.”

1.     Already raised capital. Most of these companies are going to be raising money for the first time.  If you can find one that has already been in business for a while and raised capital, you can rest assured they have already learned some of the hard lessons of starting a business.

2.     Has a Board of Directors. Typically most startups begin as a one or two person show.  Single entrepreneurs can have a one track mind and it isn’t always moving in the right direction. Companies with a solid Board of Directors can demonstrate that professionals have done their due diligence and are on board to help with strategic direction.

3.     Knows how to deal with investors. There is going to be a steep learning curve with equity crowdfunding, both for entrepreneurs and investors.  Any company that already has investors knows how to keep them informed and meet their expectations.

4.     Diversifies its offerings. Investors can diversify by investing in several different companies, or by investing in one company that has products and interests in several different markets.  Initially the risk for equity crowdfunding is fairly high but the best bet for success is diversification.

5.     Has an exit plan. A startup that already has plans for an IPO or a purchase has more potential for a successful exit where everyone makes money.

About:

Sydney Armani

sydneyarmani.jpgSydney Armani is a long time silicon valley entrepreneur, with more than twenty ​five ​years experience in Valley’s community acting in both an entrepreneurial and investing capacity. Sydney’s vision for starting and successfully managing innovative companies, like Hello Net ​A ​Mobile telephony appliance services​ on ​Minitel and Videotex​​ A online a first generation of touch Screen tablets. His international experience in trade and International banking takes him around the world, projects with OPIC Overseas Private Investment Corporation for free trade with business engagement in Europe and UAE’s Dubai.
A creative person at heart, he’s working on building CrowdFunding platform Live Crowdfunding demo pitch contest building bridge for new generation of Startup’s in the Crowdfunding industry.
He has been an active speaker and moderator at conferences and plenary sessions on Real Estate crowd​ finance, capital markets, secondary liquidity, disruption in banking and a host of other topics. He has lectured at major universities such as Georgetown and ​Hult International business School​, while authoring articles for or being interviewed by INC Magazine, Housing Wire, Forbes, Fortune, The Economist, amongst others.
​S​ydney is publisher of CrowdFundBeat.com, an online daily crowdfunding news site in US​, Canada​ and UK​​. He is also the organizer of the annual Silicon Valley Meets Crowdfunders conference in Palo Alto, CA​ & CrowdFunding USA at National Press Club in DC​.