Tag Archives: equity

The State of Reg A Plus. What’s Next?


Blaine McLaughlin is the Chief Operating Officer of VIA Folio, an innovative IPO, private and alternative investment platform that makes it easy for online platforms, issuers, investors, brokers and advisors to engage with IPOs, private and alternative debt and equity offerings.

The Best industries for Regulation Crowdfunding

 

 

 

By: Sherwood Neiss and Jason Best, Principals Crowdfund Capital Advisors, LLC

Into the second year of Regulation Crowdfunding there are now over 475 companies that have filed offering documents with the Securities and Exchange Commission (SEC) to raise up to $1,070,000 from their customers, communities, friends and family. But in which industries are these investors most interested in deploying their capital? The good news for companies considering using Regulation Crowdfunding, is that these online investors have a diverse appetite. While software/gaming application companies receive the most commitments, breweries, entertainment companies, personal transportation vehicles, restaurants and personal services (i.e. fitness training, veterinary, grooming, etc) aren’t far behind. They key data points for potential issuers to understand are: 1) How much money do you need to raise for your business in relation to the average amount raised for your industry? 2) Where is the crowd is engaged in deals and dollars? Meaning is there enough interest in your business (industry) to crowdfund. And 3) what is the crowd’s average check size – to determine how much you can realistically raise from your network compared with what you need?

At Crowdfund Capital Advisors, we track all Regulation Crowdfunding offerings across the entire industry. Our team of analysts maps each company to Morningstar’s Global Equity Classification Structure©. There are 148 industries in Morningstar’s classification. Once the data from each offering is on-boarded and cleansed, each offering is tagged with this Morningstar classification so we can track not only the progress the offering is making towards its funding target but which industries are receiving the most interest, and ultimately, which offerings close successfully.

Now that the market is over a year old, we can begin to see signs of where the crowd has an appetite and hence where prospective Regulation Crowdfunding companies should be considering this an attractive funding mechanism for at least a portion of your capital needs. The following Tree Map visually displays all the data to date. Each leaf measures an industry the number of commitments and the number of backers. The larger the leaf the greater the number of commitments the darker the leaf the greater the number of backers.

Source: Crowdfund Capital Advisors, LLC

By Number of Campaigns
Digging into the data, Application Software (i.e. Electronic Gaming and Software) had the most number of offerings (n=94). This was followed by Breweries, Wineries & Distilleries (n=29), Entertainment companies (i.e. movie studios, theatre, music, sports league, entertainment parks, n=29), Personal Service companies (i.e. spas, barber, kids activities, photographers, clubs, pet services, rideshare, wedding services, n=28), Restaurants (n=28), Consumer Electronics (n=25), Personal Transportation Vehicles (i.e. electric bicycles, cars, boating, etc., n=23), Apparel (n=21), Consumer Packaged Goods (n=19) and Retail (n=18).

However, when we filter for only those campaigns that hit their Minimum Funding Target and hence were successful, we see an interesting outcome. Electronic Gaming and Software drops to 40, a 43% success rate; Breweries, Wineries & Distilleries companies falls off but not as much to 23, a 79% success rate), Restaurants (n=18 or 64% success), Personal Service companies (n=17 or 61% success rate), Personal Transportation Vehicles (n=15 or 65% success rate), Entertainment companies (n=14 or 48% success rate), and Apparel (n=12 or 57% success rate). So, while the Gaming industry had the most offerings, the greatest success was with Brewers, Wineries & Distilleries who enjoyed 79% success followed by Personal Transportation Vehicles, 65%, Education 63%, Personal Services 61% and Restaurants with a 61% success.

By Dollars Committed

Table 1: Committed Dollars by Industry

Source: Crowdfund Capital Advisors, LLC

Where is investor money going? When we filter by total amount of capital committed (table to the right) we see that Software and Gaming companies received the most commitments. (Keep in mind, until a campaign closes and is funded those dollars are just pledges and not actual investments). This is followed by Breweries, Wineries & Distilleries and Personal Transportation Vehicles. These Top 10 industries received 71% of all the capital committed to Regulation Crowdfunding campaigns.
By Dollars Funded

Table 2: Funded Dollars by Industry

Source: Crowdfund Capital Advisors, LLC

However, Committed Dollars don’t mean much unless a campaign hits its Minimum Funding Target. So, we again filter for campaigns that did so and hence were “Funded.” The table at the right shows that nine of the Top 10 industries that received the most commitments also received the most Funded dollars – Computer Hardware fell off the list and Medical Devices was added. Pay close attention to the conversion rate of Committed dollars to Funded dollars. The higher the conversion means that if you are in any of these industries your chances of receiving the money that is pledged is greater than some of the other industries. It will be interesting to see if this trend holds over the next few months.

By Total Investors

Table 3: # of Investors per Industry

Source: Crowdfund Capital Advisors, LLC

Finally, we answer the question, what industries are driving the most investor interest? The table at the right answers this. Again, Software and Gaming had the most backers, followed by Entertainment, Breweries, Wineries & Distilleries and Personal Transportation. The Top 10 here represented 74% of all the individual backers. So if you aren’t in one of these industries it doesn’t mean you won’t attract the crowd, it just might be more challenging.
Source: Crowdfund Capital Advisors, LLC

But perhaps most important is what’s the average check size for industries where campaigns are funded? Here are the current results: Entertainment $2,448, Personal Transportation, $2,375, Personal Services, $1,292, Breweries, Wineries & Distilleries, $1,231, Software and Gaming: $1,196, Apparel $979, Computer Hardware $857, Restaurants $598. This seems to indicate that that so far, crowd investors are willing to more money individually into things that benefit them or they consume directly. Seems they are investing in brands, experiences, and people they trust.

Conclusion

While we talked extensively about the “Top 10’s” as we analyzed the data, it is very important to understand that there have now been successful campaigns in 56 of the 148 industries in the Morningstar classification system, and the geographic distribution of campaigns is also expanding (now at 44 states). Investors are deploying capital across a significant and growing number of industries across the country. They are especially investing in companies that deliver a direct benefit/relationship with the product, in addition to the desire for long term appreciation of their capital. We estimate that over $100M will be committed to Regulation Crowdfunding campaigns by the end of 2017. All from a standing start 18 months prior. This is a strong early signal of the long-term success of this funding channel.

Into the second year of Regulation Crowdfunding there are now over 475 companies that have filed offering documents with the Securities and Exchange Commission (SEC) to raise up to $1,070,000 from their customers, communities, friends, and family. But in which industries are these investors most interested in deploying their capital? The good news for companies considering using Regulation Crowdfunding, is that these online investors have a diverse appetite. While software/gaming application companies receive the most commitments, breweries, entertainment companies, personal transportation vehicles, restaurants and personal services (i.e. fitness training, veterinary, grooming, etc) aren’t far behind. The key data points for potential issues to understand are: 1) How much money do you need to raise for your business in relation to the average amount raised for your industry?  2) Where is the crowd is engaged in deals and dollars? Meaning is there enough interest in your business (industry) to crowdfund. And 3) what is the crowd’s average check size – to determine how much you can realistically raise from your network compared with what you need?

At Crowdfund Capital Advisors, we track all Regulation Crowdfunding offerings across the entire industry. Our team of analysts maps each company to Morningstar’s Global Equity Classification Structure©. There are 148 industries in Morningstar’s classification. Once the data from each offering is on-boarded and cleansed, each offering is tagged with this Morningstar classification so we can track not only the progress the offering is making towards its funding target but which industries are receiving the most interest, and ultimately, which offerings close successfully.

Now that the market is over a year old, we can begin to see signs of where the crowd has an appetite and hence where prospective Regulation Crowdfunding companies should be considering this an attractive funding mechanism for at least a portion of your capital needs. The following Tree Map visually displays all the data to date. Each leaf measures an industry the number of commitments and the number of backers. The larger the leaf the greater the number of commitments the darker the leaf the greater the number of backers.

Crowdfund Capital Advisors (CCA) delivers strategic insights to government agencies, financial institutions, regulators and multilateral organizations seeking to both create and implement innovative strategies to utilize crowdfund investing (CFI) technologies to drive innovation, job creation and entrepreneurship. We also study and invest in the emerging ecosystem of crowdfunding and the new solutions being created that will impact the broader private capital markets. We are passionate about creating innovation, entrepreneurship, and jobs through the use of crowdfunding.  CCA delivers strategic services and implementation programs that create, proprietary deal flow for professional investors, better access to capital for businesses and policy and regulatory innovation for governments.

 

 

 

SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities

Crowdfund Beat News Wire,

SEC issued an investigative report stating, “tokens offered and sold by a ‘virtual’ organization known as ‘The DAO’ were securities and therefore subject to the federal securities laws.”

U.S. Securities Laws May Apply to Offers, Sales, and Trading of Interests in Virtual Organizations

FOR IMMEDIATE RELEASE
2017-131

Washington D.C., July 25, 2017—

The Securities and Exchange Commission issued an investigative report today cautioning market participants that offers and sales of digital assets by “virtual” organizations are subject to the requirements of the federal securities laws. Such offers and sales, conducted by organizations using distributed ledger or blockchain technology, have been referred to, among other things, as “Initial Coin Offerings” or “Token Sales.” Whether a particular investment transaction involves the offer or sale of a security – regardless of the terminology or technology used – will depend on the facts and circumstances, including the economic realities of the transaction.

The SEC’s Report of Investigation found that tokens offered and sold by a “virtual” organization known as “The DAO” were securities and therefore subject to the federal securities laws. The Report confirms that issues of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors’ protection.

“The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us,” said SEC Chairman Jay Clayton. “We seek to foster innovative and beneficial ways to raise capital, while ensuring – first and foremost – that investors and our markets are protected.”

“Investors need the essential facts behind any investment opportunity so they can make fully informed decisions, and today’s Report confirms that sponsors of offerings conducted through the use of distributed ledger or blockchain technology must comply with the securities laws,” said William Hinman, Director of the Division of Corporation Finance.

The SEC’s Report stems from an inquiry that the agency’s Enforcement Division launched into whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for “Ether,” a virtual currency. The DAO has been described as a “crowdfunding contract” but it would not have met the requirements of the Regulation Crowdfunding exemption because, among other things, it was not a broker-dealer or a funding portal registered with the SEC and the Financial Industry Regulatory Authority.

“The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. 

Steven Peikin, Co-Director of the Enforcement Division added, “As the evolution of technology continues to influence how businesses operate and raise capital, market participants must remain cognizant of the application of the federal securities laws.”

In light of the facts and circumstances, the agency has decided not to bring charges in this instance, or make findings of violations in the Report, but rather to caution the industry and market participants:  the federal securities laws apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are purchased using U.S. dollars or virtual currencies, and regardless whether they are distributed in certificated form or through distributed ledger technology.

The SEC’s Office of Investor Education and Advocacy today issued an investor bulletin educating investors about ICOs. As discussed in the Report, virtual coins or tokens may be securities and subject to the federal securities laws. The federal securities laws provide disclosure requirements and other important protections of which investors should be aware. In addition, the bulletin reminds investors of red flags of investment fraud, and that new technologies may be used to perpetrate investment schemes that may not comply with the federal securities laws.

The SEC’s investigation in this matter was conducted in the New York office by members of the SEC’s Distributed Ledger Technology Working Group (DLTWG) — Pamela Sawhney, Daphna A. Waxman, and Valerie A. Szczepanik, who heads the DLTWG — with assistance from others in the agency’s Divisions of Corporation Finance, Trading and Markets, and Investment Management. The investigation was supervised by Lara Shalov Mehraban.

Crowdfunding to Meet Energy Demands

By Anum Yoon Crowdfund Beat Guest Editor, 

The idea of crowdfunding has gained popularity in the past few years. Individuals contributed approximately $880 million in 2010, when the concept was still new and innovative. Today, the practice of crowdfunding generates tens of billions for startup enterprises, budding entrepreneurs and motivated professionals on an annual basis.

But the concept behind this relatively new phenomenon isn’t limited to financial investments. Some of the more tech-savvy and energy-conscious leaders of today are now exploring the value of crowdfunding to meet our nation’s growing energy needs. The results are showing tremendous potential to revolutionize the way we look at our utility bills from this point forward.

Embracing the Shared Economy

Crowdfunding is paving the way for what many experts refer to as a “sharing economy.” Expected to be worth over $300 billion by 2025, the sharing economy provides new opportunities around the world. When applied to energy production and consumption, this amounts to newly built, sustainable energy sources and the establishment of new facilities in remote regions of the world.

The Africa Regional Climate Change Programme, a part of the United Nations Environment Programme, or UNEP, points out that more than 60% of Africans do not have access to a standardized power grid. Crowdfunding and the sharing economy are poised to help these communities by developing energy sources that are clean, renewable and sustainable.

Mosaic, which recently launched in the U.S., serves as a go-between on behalf of clean energy investors and solar projects that need funding. Investments start at the low price of $25 for annual returns of 4.5%. Like with all investments, those who put in more money will have a greater chance of receiving significant profits in the long run.  

Crowdfunding Energy Around the World

According to recent studies, the United States currently leads the world in active energy crowdfunding projects with eight different initiatives. Germany boasts six, the United Kingdom has five and Netherlands has four of their own.

There has been a strong push toward eco-friendly and sustainable energy around the globe. In 2014, nearly 10% of all the energy consumed in the U.S. was drawn from renewable sources. This number has remained consistent and will likely increase even further as more crowdfunding campaigns pop up.

Europe is making huge strides in the effort to curb fossil fuels. Approximately 90% of new energy generators installed in 2016 utilized renewable sources. The majority of this new power is coming from large-scale windfarms in countries like Germany, France, Finland, Ireland and Lithuania.

Some of the most popular energy crowdfunding platforms are based in the United Kingdom. GenCommunity and Abundance Generation, two of the most popular options to date, are both based in the U.K.

Overcoming the Obstacles

As bright as the future of crowdfunded energy seems, there are some roadblocks to overcome. Given the large scale of many projects in the energy sector as well as the high costs and extended timeframes needed to complete such jobs, the industry doesn’t lend itself to the idea of crowdfunding.

In an economy where investors want to see instant results, there simply aren’t many projects in renewable energy that match the format.

Proof of these challenges can be seen in current projects. Although Europe is on the forefront of energy crowdfunding, most of the campaigns to date were focused on small or medium-sized jobs. This is great for hobbyists and those who want to participate in a community-oriented effort, but it does little to address the growing issue of worldwide energy consumption — at least for now.

One of the primary points of crowdfunding energy is to make it possible for smaller investors to raise the capital needed for bigger and better projects. This opens up the industry to a far greater number of investors and even more minds trying to solve such challenges.

Larger Investments Will Lead to Greater Advancements

Although the number of renewable energy projects to benefit from crowdfunding has been limited thus far, proponents of the platform are optimistic about the future. With more investors starting to consider crowdfunding as a viable means of financing projects, and as more investment groups begin to target the renewable energy sector, we’re bound to see even larger investments and greater advancements across the board.

NextGen Announces Finalists for Crowdfunding Video Awards

Crowdfund Beat News Wire,

NextGen Announces Finalists for Crowdfunding Video Awards Season Finale, Recognizing the Year’s Most Creative Campaign Videos

NextGen Crowdfunding® – the leading company that helps people explore new types of crowdfunding – announces the finalists for the season finale of the Crowdfunding Video Awards (CVAs). The CVAs is a new online series from NextGen showcasing videos from both rewards-based and investment crowdfunding campaigns featured on Indiegogo, Kickstarter and other leading rewards-based and investment crowdfunding platforms. This innovative show provides entrepreneurs with new ways to promote their companies to supporters and investors.

 

 

The first season of the CVAs included six preliminary awards shows and will culminate in a final seasonal awards showon Wednesday highlighting the first-place winners from all six rounds of voting. These six campaigns will go head to head to be recognized as one of the top three campaigns from this season and win:

  • First place: $10,000
  • Second place: $5,000
  • Third place: $2,500

 

The finalists include:

  • Limitless Phone Case by Mous (Round One): Will protect your phone from breaking
  • Noria by Noria Home (Round Two): First window air conditioner designed with you in mind
  • FireFlies Audio (Round Three): Truly wireless earbuds
  • Farm from a Box (Round Four): Complete off-grid toolkit for tech-powered agriculture
  • Purple Pillow (Round Five): World’s first no-pressure pillow
  • MuConnect (Round Six): World’s first fast charging magnetic adapter

 

Viewers can log on to NextGenCrowdfunding.com to watch the season finale on Wednesday, May 3 at 3 PM PT / 6 PM ET.

 

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.

 

 

 

 

Setting Up an Efficient Crowdfunding Platform

BY Rachael Everly ,CrowdFund Beat Guest Post,

Crowdfunding platforms are a product of technological advancement. However at the end of the day they are a financial solution and their success is dependent on the economic situation at a given time. Many businesses prosper when the economy is booming and all is good. Crowdfunding on the other hand has always prospered when the economy is not doing well, and even during the worst recessions.

During the last recession of 2008, there was a great lack of confidence among banks. This led to a drying up of sources of finance for the small business owner and for individuals who were just starting out. Either their loan applications were outright rejected or they were given such high interest rate offers that they were forced to decline. But with the advent of digitalization came the much flexible option of crowdfunding that led smaller business achieving the necessary finances much cheaply and much easily.

crowdfunding concept. Chart with keywords and icons
crowdfunding concept. Chart with keywords and icons

 

Setting up a crowdfunding platform is an excellent business idea for it is something that the entrepreneurs need. However to be successful it has to meet the finance needs of people successfully.

 

 

  1. Initial set-up

Crowdfunding platforms are a place where investors and people looking for finance gather. So you need to be sure about how you are going to attract investors in your starting days. Your whole business is dependent on them.

You also have to ensure that you offer a “deal” that is both acceptable to investors and the people looking to borrow. The system has to be set up in a transparent way in order to induce trust from all the involved parties. In order to achieve this you will have to focus on a marketing strategy that delivers the maximum information. Information about how you operate, the charges for the borrowers and how are you going to handle the funds at your disposal. You will especially have to convince people that your platform is a secure place to invest. You will need to figure out your marketing channels. The most basic will be your own company blog and possibly even your own in-house developed app (which could be done via crowdfunding).

  1. Developing a brand

Once the crowdfunding concept was new and there were hardly any platforms on the scene. Now competition is arriving and the first mover advantage is long gone. You will have to differentiate yourself from your competition. In the simplest way, it could be by the way of focusing on the aesthetics on your website that is the logo and theme and the usability.

Secondly you should match the features being offered by the competition and where possible streamline your processes even more. You will have to communicate your “differences” via email marketing and company blog. The best way to do this is to provide content that is actually useful for the reader and yet brings your platform to attention.

  1. The technical expertise

At the end of the day customers prefer businesses that provide them with a superb quality service or product. Crowdfunding is essentially a fintech product and thus technology is its backbone. Your crowdfunding platform must not only be user friendly, but it also must be secure and have features that help you make better decisions. For example, Zopa has its own algorithm for deciding which borrowers are more likely to stick to repayment schedules.

In order to succeed it is very important that you analyze your existing competition and see what features you have to match in order to attract customers and what you can do better than them.

 

 

 

New to Crowdfunding? Here’s What to Expect.

40Billion.com, Crowdfund Beat Guest Post.

With the popularity and success of crowdfunding as a new way to fund new projects, it’s easy for other aspiring entrepreneurs to believe that sites like Kickstarter are their golden ticket to launching a business. But the reality is, crowdfunding isn’t always as simple as it seems.

Whether you’re looking to raise a small amount of startup cash or acquire a larger sum through equity crowdfunding, there are a few challenges you might face during the process that you may not have expected.

cartoon concept for crowdfunding, businessman hand with light bulb and with money. vector illustration in flat design on blue background
cartoon concept for crowdfunding, businessman hand with light bulb and with money. vector illustration in flat design on blue background

Choosing the right platform

The first step is to choose the right platform. Not all of them are created equal. Platforms like Kickstarter or Indiegogo are great for raising smaller amounts of money, but equity crowdfunding portals are best for entrepreneurs looking for large sums of money. If you’re interested in the latter, it’s important to do your research and find the platform that meets your needs. Also, find an experienced attorney who specializes in equity financing.

Establishing a realistic goal amount and time frame

Many entrepreneurs, especially those new to the crowdfunding scene, tend to think that they will be able to quickly raise all the money they need and then more by the time their campaign ends. It’s important to be realistic about time and money when it comes to planning your campaign.

Consider how much capital you would need to take your business to the next major milestones, and don’t rely solely on crowdfunding sites for your fundraising.

Creating a buzz

Having a great business idea that is supported by friends and family is good, but it does not mean that the donations will come pouring in once you launch your crowdfunding campaign. Doing a lot of prep work before your campaign will help create and maintain interest in your project.

Before starting the project, gauging level of interest for your investment opportunity or project is a critical part of the process. Even though supporters have told you that they would support the campaign, it gets lost in their email inbox. Without specific requests, it’s difficult for people to actually pull the trigger on an investment or funding opportunity. Make sure you have personalized outreach to your first degree networks, and remember to ask for assistance in spreading the word.

When you’re ready to spread the word and create a buzz around your crowdfunding campaign or project, sites like 40Billion.com make this easy. They broadcast and promote your campaign to their large network of several million users across the most popular social networking sites for businesses – including Twitter, LinkedIn, 40Billion, and even Facebook. Innovative services like tweet ads and promoted company listings were created for crowdfunders to tap into a growing, active network online without spending thousands on pay-per-click ads or traditional advertising.

The risk factor

Everyone knows that there’s risk involved in any business venture. What investors want to know is, exactly how much of a risk will they be taking by offering you a large sum of money? Even small venture funds express interest in investing, but ask the entrepreneur to come back to them when they have an investor who is leading the round of funding. Everyone wants to know the amount of risk.

A lot of investors at the early stage simply want to de-risk investing by being the last money in the round once a lot of other sophisticated investors have already committed. This often creates a scenario where founders have a few hundred thousand dollars in “commitments” for months without any way to actually close on anything. Using a reputable equity crowdfunding platform with accredited investors can help solve this problem.

While the “lead investor” issue most commonly affects startups seeking large-scale investors, the same basic principle can apply to a smaller Kickstarter campaign: If potential funders see that no one is backing the project or that people are only contributing a few dollars, what incentive do they have to donate a large amount of money? This is where building interest and spreading the word become critical to raising the funds you need.

Even if you aren’t launching a crowdfunding campaign at this time, it’s important to learn about the industry, as well as what it takes to succeed.

Source:

http://upflow.co/l/5cIW/2017/01/02/new-to-crowdfunding-heres-what-to-expect-2

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

By Shane Liddell is the CEO and chief Crowdfundologist , CrowdfundBeat guest post.

eli-wallach-with-clint-ea-011

 

 

Introduction

Crowdfunding is by definition, “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.” The earliest recorded use of the word was by Michael Sullivan in Fundavlog during August 2006. The term crowdfunding was used for the first time in the year 2006 when Michael Sullivan launched Fundavlog. This, however, was a failed attempt to fund events and projects related to a video blog.

With the signing of the JOBS Act on April 5th 2012, the word of the day became “crowdfunding” and publicity from this historic event generated interest from all corners of the world and helped push crowdfunding into mainstream news.

The first instance of online crowdfunding took place during 1997, when fans funded the entire U.S. tour for the British rock group Marillion, raising just over US$60,000 in donations through a fan-based Internet campaign.

If the crowd and the web are considered to be two essential elements of crowdfunding, its very first examples came into being in the 1990s with the emergence of platforms for charity fundraising and projects funded by Internet-based campaigns. The UK-based charity fundraising platform JustGiving was founded in the year 2000.

The modern crowdfunding model is generally based on three types of actors: the project creator who proposes the idea or project to be funded, individuals or groups who support the idea, and a platform that brings the parties together and facilitates the transactions.

Part 1-The Good

The crowdfunding industry is doubling or more every year, and is spread across several types of funding models including rewards, donation, equity, and debt/lending.

Just five years ago there was a relatively small market of early adopters within online crowdfunding, helping raise $880 million during 2010. Things changed fast with $6.1 billion raised in 2013, $16.2 billion in 2014, and a whopping $34.4 billion in funds raised during 2015. In comparison, the Venture Capital industry invests an average of $30 billion each year. By 2016 the crowdfunding industry is on track to account for more funding than venture capital, according to a 2015 report by Massolution.

 

The highest reported funding by a crowdfunded project to date is Star Citizen, an online space trading and combat video game being developed by Chris Roberts and Cloud Imperium Games, which – as of 21 November 2016 – claims to have raised over $133,000,000 USD using a combination of crowdfunding platforms including its own.

One of the most influential factors behind the rapid growth of crowdfunding over the past 10 years was due to the global recession of the late 2000’s and early 2010’s. This highly turbulent time saw many small and established businesses struggling to survive.  Crowdfunding saved some of these businesses from crumbling into nonexistence by facilitating the raising of much needed capital. Traditional sources of funding – bank loans, overdrafts, credit cards – were all but drying up as the financial industry strained under the immense pressure the recession brought, with several household brand names suddenly put out of business too!

There are many success stories around, some of which I have personally been involved in helping reach way beyond their initial funding goals. FOBO TIRE, the tire pressure monitoring system (TPMS) managed to raise a total of $186,105 USD through their Indiegogo campaign back in 2014 but then went on to even greater things. Their products entry into retail happened through UK retailer Maplin and since then they have picked up a few awards along the way too.

Just last week, Phazon CEO, Chris Houle was chosen to appear on the CBC show Dragons Den, securing a great deal from the Dragons. His Indiegogo campaign, having raised over $2M earlier this year.

Many have heard of the highly successful Occulus Rift Kickstarter campaign launched during Q3 of 2012, raising a total of $2,437,429 and with Mark Zuckerberg of Facebook announcing the purchase of the company for a huge $2B USD on March 25th, 2014

There are many other similar successes out there including the renowned Pebble Watch who managed to raise a total of over $30M through 2 crowdfunding campaigns on the Kickstarter platform.
Conclusion

Startups rarely survive without funding and crowdfunding has enabled entrepreneurs to bring their ideas to the crowd for validation, and through engagement with potential customers, gain valuable feedback too.

Crowdfunding is here to stay!

Look out for Part 2 – The Bad, where I delve into the aspects of crowdfunding that are rarely spoken of, including the use of the dreaded word “scampaigns”.

About The Author

Shane Liddell is the CEO and chief Crowdfundologist at Smart Crowdfunding LLC, the crowdfunding marketing agency. He became active within the crowdfunding industry early in 2012, seizing the opportunity to offer help to crowdfunders from all corners of the world. He has delivered successful campaigns for entrepreneurs, startups, corporations and filmmakers and has assisted over 500 crowdfunders with campaign development, consulting, marketing and promotion services, some of which have raised millions of dollars in the process. He has attended numerous equity crowdfunding industry events, including the SEC Small Business Forum and the CfPA Summit in Washington DC. Shane holds the position of Executive Director of the Crowdfunding Professional Association (CfPA)

Special Report: Kickstarter and Silicon Valley VCs Blockchains

CrowdFund Beat Special Report,

Move Aside Kickstarter and Silicon Valley VCs Blockchains Disrupt Project Financing

As online crowdfunding leaped in recent years, taking a cut from the expansive activities of venture capitals which peaked at US$148 bln  as invested through 8,381 deals in 2015 according to EY, Blockchain technology has been making inroads into the world of project financing with a prospect that could take it to another level.

EY, the global transaction and advisory firm, says in Back to reality that 2015 saw the highest venture capital (VC) activity in nearly two decades globally with a projection that the move will continue through 2016 as the focus shifts to companies’ proven ability to execute. It also notes that the US dominated global VC activity by deals and value.

This corresponds with the PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA)’s MoneyTree Report which cites that VCs in the US deployed $58.8 bln within the same period. Based on data from Thomson Reuters, the report says the deployed amount made 2015 the second second highest full year total in the last two decades.

Online crowdfunding, on the other hand, climbed from a reported $880 mln in 2010 to $16 bln by 2014 and was estimated to grow to over $34 billion by 2015.

The Massolution Crowdfunding Industry 2015 Report confirmed the target with a break down that estimated the total global crowdfunding volume of $34 bln in 2015 as mainly going to P2P lending ($25 bln), reward and donation crowdfunding ($5.5 bln) and equity crowdfunding $2.5 bln.

The report points out that North America has the lionshare of the total sum with $17 bln followed by Asia $10.54 bln and Europe $6.48 bln.

Types of online crowdfunding

Though key among the platforms that dominated the online crowdfunding landscape are KickStarter and Indiegogo – the world’s first crowdfunding platform, the advent of the Blockchain technology has opened up new grounds for startups seeking to raise capital.

Examples are Ethereum’s TheDAO and WINGS DAO, which recently took in about $1 million in donations, that have given the world a glimpse of what blockchains can achieve in the organization of scattered strangers to share a common purpose. With its smart contract features, which uses a programming language to make legal binding between parties, the concept of the crypto-enabled DAO – or Decentralized Autonomous Organization – has gained popularity particularly in 2016 after it was used to raise over $150 mln on the Ethereum platform though it later had a flaw.

One thing is clear about the crypto-enabled platform, together with the donation-based and equity-based crowdfunding platforms such as Kickstarter and Indiegogo (which recently launched equity crowdfunding that allows anyone to invest in startups and growing companies): they have all established the level of believability that people of all differences could share when they are inspired by a good idea.

Donations, Coins & Equity: The Differences

However, despite their commonality, the three types of crowdfunding platforms operate based on different models – with differing results.

Everyone is familiar with the donation based models pioneers by companies like Kickstarter that depends on charity, but where donors take a hands-off role.

Unlike donation-based crowdfunding like Kickstarter in which backers get perks in exchange for their investment, interested investors using the equity crowdfunding model receive shares or other forms of financial stakes in the company they back.

The introduction of cryptocurrency-backed crowdfunding as a new innovation brought about much differences. It can use a DAO,  an organizational model that implements self-determining and independent governance, management and operations using immutable blockchains and smart contracts execution, to allow a large group of people to function as contributors and decision-makers for a project with or without any form of central leadership.

Blockchain in project financing
In the wake of Ethereum’s recent inactivity, the new DAO-powered crowdfunding platform, WINGS, emerged as an embodiment of what TheDAO represented with added features that protect and reward donors or project supporters. This is in addition to its enabling donation crowdfunding like Kickstarter and Indiegogo but in a crypto-enabled format.


The platform creates an incentive-based system that encourages participation by rewarding participants submitting new proposals and those who forecast a DAO project’s ability to raise funds or meet certain milestones.

This will allows the interests of project supporters and startups to be clearly aligned to ensure the success of their business and the satisfaction of its donors through a governance structure and a milestones control that make it a dependable decentralized platform for DAOs which are embodied by smart contracts running on various blockchains supporting the Ethereum Virtual Machine.

One of the platform’s benefits for startups seeking to raise capital for their decentralized app ideas in a new era of organizational collaboration and governance is the transparency of its funding system based on regulatory requirements.


Like KickStarter and Indiegogo give people and creative projects the opportunity to raise money via online donations or pre-purchasing of products or experiences, WINGS could be used for project-based endeavors that are on a one-off basis like an art or film project, a new product or the funding of a life event.

WINGS will be the first project governance and backing social platform to use new technologies including swarm intelligence through decentralized forecasting markets, smart contracts generators, DAO contracts accessibility and engagement solutions, and flexible governance and participation models which presents an open opportunity for all to pursue ideas of interests and values without any restriction like, for example, Kickstarter on whose platform donors can only choose from given categories and only users from the United States, Canada or the United Kingdom are allowed to create projects though anyone may donate.

Outlook

The Blockchain has been touted to be the greatest innovation that would revolutionize our existence as the web did in the 90s. Its future outlook – as well as for cryptocurrencies – looks promising. This forward-looking prospect blends with the World Bank’s projection that crowdfunding would reach $90 billion by 2020 – or $90 billion by 2017 if the trend of doubling year over year continues.

Coupled with the plethora of ideas that are springing forth every day, seeking supporters that would bring their conception into reality, the Blockchain seems the go-to technology that would transform various sectors including project financing.

“Live” US Election and Crowdfunding

slider-the-election-1-1

CrowdFund Beat News Wire,

The Crowdfunding Professional Association is proud to host a first ever open discussion on how federal elections may affect our maturing industry.

Hosted by several members of the CfPA board of directors and a group of distinguished industry colleagues, join the discussion on election day, Tuesday, November 8th at 2pm Eastern time by dialing (866) 922-3257 or (206) 315-1752. Passcode 151328.

Featured participants include Brian Korn, Richard Swart, Scott McIntyre, Georgia Quinn, Mark Roderick and Anthony Zeoli.

2016 US Election coverage

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.

News & Information for Crowdfunding People