Since President Obama passed the JOBS act in 2012, we’ve been witnessing the beginning of a new movement in the U.S. – one that empowers entrepreneurs to raise money from almost anyone, anywhere. It’s a movement that removes the barriers to fundraising so that it’s not just those who know the right people or who are in the right place at the right time that can work on their passions.
Title III of the JOBS Act, passed in May 2016, opened doors for both entrepreneurs and investors alike. Now, entrepreneurs can raise money from investors all over the world.
In November 2016, Indiegogo and MicroVentures launched First Democracy VC, a registered equity crowdfunding portal. As one of the foremost players in the space, we’ve learned a thing or two.
Here are a few things founders should know about Title III, also known as Reg CF, equity crowdfunding.
1) It’s called equity crowdfunding, but you don’t necessarily have to do an equity raise.
You can do an equity, debt, or even revenue share offering. Different structures are better or worse depending on your specific company, industry, stage, and financials. We suggest researching the different options to see what structures might work best for your company, and once you’re ready to move forward, our team can help you figure out what the best structure is for your particular company.
2) Equity crowdfunding isn’t only for tech startups.
Equity is all about empowering entrepreneurs, and over the last six months we’ve helped fund founders in categories as diverse as hardware, software, food and beverage (including restaurants, distilleries, and bars), gaming, film, and media.
3) An equity crowdfunding raise can be part of a larger raise that you’re doing with institutional investors and angels.
You can carve out a piece of the round for your community and let them invest right alongside the more traditional investors.
4) Your engagement directly influences the success of your raise.
It’s very important that you as founder/CEO are engaged both during the due diligence process and during the raise itself. We’re not going to lie: it’s an intensive process and there are a lot of “i”s to dot and “t”s to cross. The entire process is a partnership, and while we as the platform will promote your listing to our audiences, it’s critical that you do your part and engage with yours. As an engaged founder, the setup process will move along more quickly and smoothly, and you’re likely to raise more money when your deal goes live.
5) You can decide your minimum and maximum raise.
For example, you might attempt to raise between $100K-$500K. $1M is the maximum amount you can raise via Reg CF in a 12 month period.
6) Equity crowdfunding is more than just about money.
It’s also about engaging your passionate community of friends, family, customers, and supporters, building a tribe of ambassadors for your company and brand, and also letting those key people share in the potential upside of your company’s success. Plus, as we’ve seen in Indiegogo perks-based crowdfunding, equity crowdfunding can also provide market validation for your company and/or product.
7) Anyone can invest.
Under SEC Title III/Reg CF, the companies raising money need to be incorporated in the U.S., but anyone over 18 can invest from anywhere in the world as long as your country allows it. Investing in startups and private companies is no longer limited to just the wealthy.
8) SPVs currently aren’t allowed but there are ways of dealing with lots and lots of small, individual investors.
Special purpose vehicles (SPVs) where all investors are pooled into one entity, and therefore one line on your cap table, aren’t currently allowed for a Reg CF raise. One way of dealing with lots of individual investors is a revenue share structure. This structure doesn’t make sense for every company, but for some it’s a great way to reward your investors without giving away any equity.
Another option is a Crowd Safe. This is similar to the popular SAFE (Simple Agreement for Future Equity), but you can extend the conversion to equity beyond your next round of financing. For example, you can set the conversion to an exit so that even if you get hundreds of investors in the raise, they won’t actually be converted to equity holders on your cap table until an exit.
Equity crowdfunding is the next generation of how fundraising works. Since day one, our mission has been to empower entrepreneurs to work on projects they’re passionate about. If you’re interested in pursuing equity crowdfunding for your company, let us know at equity.indigogo.com/entrepreneurs.
Ready to learn more about equity crowdfunding? Join Indiegogo co-founder Slava Rubin and Techstars founder David Cohen for an AMA on Thursday, July 13, 2017 at 9am PT/10am MT. Register here.
5 hand-picked articles from across the Startup Digest Reading Lists. Sign up to receive great weekly content on various topics from expert curators.
1. I Grew Up Poor in a Rich Person’s World
By Deborah Chang
Curators: Zubin Chagpar & Chris McCann
“Entrepreneurs are generally driven to solve the problems they themselves have experienced. The problem with the vast majority of entrepreneurs coming from middle or high income backgrounds is that the problems they choose to solve are not necessarily the ones of greatest impact.” Read More
More from this reading list: http://eepurl.com/bR4yRT
2. Did you miss Startup Grind’s Global Conference?
By Startup Grind
Digest: Women Entrepreneurship
Curators: Babs Lee & Lilibeth Gangas
Missed the largest startup conference in the US? No sweat – check out the plenary session on demand. Read More
More from this reading list: http://eepurl.com/bR5kHT
3. Teens have a smart reason for abandoning Facebook and Twitter
By Felicity Duncan
Curators: Sophie-Charlotte Moatti & Reza Ladchartabi
New data shows that teens are moving from broadcast social media to narrowcast. Read More
More from this reading list: http://eepurl.com/bR49Ij
4. The Crowdfunding Guide
Curator: Michael Ryan Norton
A general overview of the elements of crowdfunding and a practical step-by-step guide to building your own campaign. If you think crowdfunding might be the right route for your business, this is a great place to start. Read More
More from this reading list: http://eepurl.com/bR4FKb
5. Someone is pretending to be the IT guy at Hogwarts and it’s hilarious
By Stephen Daw
Curators: Aurelio Jimenez Romero, Vicky Guo & Deborah Chang
Meet the Tumblr account bringing WiFi to Harry Potter. And, you thought you had it rough… Read More
More from this reading list: http://eepurl.com/bR4bc5
Sign up for these or other Startup Digest reading lists, here.
They came, they pitched, they presented, they won.
They are the 4 winning teams who just slogged through 54 hours non-stop over the weekend of July 17th to 19th at the recently concluded Startup Weekend Asia-America held at Block71 San Francisco. In line with the theme, the venue was chosen because of its history – a collaborative initiative between three iconic Singapore organizations – NUS Enterprise, Infocomm Investments Pte Ltd (IIPL) and Singtel Innov8, as well as its mission to connect entrepreneurs from both Asia and America.
The crowd favorite is OFF/Packers, a travel platform that promises to connect local guides with travelers who are travelling to an unfamiliar place. Hoping to capitalize on the on-demand trend, OFF/Packers specializes in on-demand guides for nature and outdoor experiences.
Coming in 3rd place, Givfolio aims to solve the huge paperwork and bureaucratic burden surrounding dollar-for-dollar matching corporate donation programs through an app that manages the employee’s donations and automates the reporting on the corporate side. The brainchild of an ex-Disney employee who experienced the problem herself, Givfolio can potentially help employees and charities take full advantage of the donation budget set aside by companies.
First runner-up is Seeker, a platform built on top of LinkedIn that solves the biggest headache of recruiters – how do we know when a person is open and looking for new opportunities in their career? Through monitoring changes in a person’s LinkedIn profile, Seeker hopes to identify active and passive job seekers and provide this information to HR recruiters.
And finally, the winner of Startup Weekend Asia-America goes to Food to Fame. The team beat out 11 other teams to clinch the top prize of a Startup Exhibition Alley booth at TechCrunch Disrupt SF 2015 worth $1995, among other prizes worth a total of $6000. Food to Fame aims to help food brands market their products through Instagram influencers, helping influencers monetize their social value at the same time.
Team leader, Sylvia Look, was pleasantly surprised to know that her team won. The National University of Singapore (NUS) undergraduate currently on NUS’s Overseas College Silicon Valley (NCSV) program competed against teams with experienced working professionals, some of whom work in the Bay Area’s top tech companies.
It was a close call, as the point difference between the 3 winning teams were just fractions of a point from each other. The event certainly saw a lot of well-thought-out ideas and the coaches who attended commented on the high quality of work they saw this weekend.
While not everybody won prizes, everyone certainly got something out of the event. Some made new friends from a new country. OFF/Packers truly lived up to the spirit of the event as a multi-national team made up of members from Brazil, Switzerland, Austria and America. Connections with Venture Capital (VC) firms were made and the VCs got to know about some interesting startups. Last, but not least, everyone had fun!
TechCrunch is a platinum sponsor of Startup Weekend Asia-America. For more information on tickets to TechCrunch Disrupt SF 2015, click here.
El crowdfunding se remonta a la primera vez en la historia que un grupo de individuos juntan o reúnen su capital para lograr un objetivo común, sin embargo el primer caso de Crowdfunding moderno, en el que se emplea un medio de comunicación masivo para extender una invitación de participación a la comunidad y a cambio se ofrecen “recompensas” o agradecimientos como incentivos, es el caso de la finalización de la estatua de la libertad en Nueva York entre 1883 y 1884.
No se contaban con los recursos suficientes para finalizar la construcción del pedestal de concreto en el que se iba a montar la estatua por lo que Joseph Pulitzer extiende una invitación a través de su periódico a la comunidad ofreciendo a cambio reconocimientos de participación ciudadana y una réplica de la estatua como agradecimiento por aportaciones mayores a un dólar. Se reunieron los fondos en un periodo de 5 meses.
El primer caso de Crowdfunding en línea es el caso de la banda británica “Marillion” que en el año de 1997 financió su gira por los Estados Unidos. En el momento la banda no contaba con los recursos para viajar a los Estados Unidos y no tenían la certeza de llenar un foro por lo que crearon una página donde ofrecían la pre-venta de los boletos del evento. Se reunieron $60,000 dólares.
¿Por qué está creciendo tanto?
Durante las elecciones internas del partido demócrata del 2008 se enfrentaron Hilary Clinton y Barack Obama, dos candidatos muy diferentes en estilos, Hilary contaba con el apoyo de grandes nombres de la industria y viajas familias adineradas y por otro lado Barack tenía un carisma que le consiguió muchos seguidores o “fans” por lo que sumó a su estrategia de promoción una campaña de Crowdfunding que le permitió capitalizar muchas pequeñas cantidades que eventualmente le permitieron vencer a Hilary en una de las contiendas más cerradas de la historia.
El Crowdfunding se ha posicionado como la alternativa de financiamiento que permite al consumidor determinar que es lo que quiere consumir, por lo que hablamos de dos conceptos principalmente “Democratización del capital” y “Cultura colaborativa”.
Te presentamos a nuestro nuevo aliado: Fondeadora, la primera plataforma de crowdfunding en México cuyo objetivo es democratizar el acceso al capital, ofreciendo a cada persona la oportunidad de financiar sus ideas a través de una plataforma en internet.
¿Cómo funciona eso?
El crowdfunding se ha convertido en una dinámica mundial, que permite a proyectos creativos, innovadores y con impacto recibir el capital que necesitan a través de pequeñas o grandes aportaciones de individuos.
En Fondeadora no se trata de conseguir inversionistas. Tampoco de conseguir personas que te presten dinero. Como creador, tu eres el propietario y puedes controlar el desarrollo de tu idea. Lo único que debes hacer es reconocer a tus fondeadores con recompensas relacionadas con la idea que deseas financiar.
¿Quien lo puede utilizar?
Lo que comenzó siendo una opción muy interesante para el desarrollo de ideas creativas, sociales o culturales, ha empezado a llegar también a las ideas de negocio, ya que las plataformas de crowdfunding han popularizado entre la gente que puede acceder a productos de manera exclusiva por medio de la modalidad de pre-compra. Cada vez son más los emprendedores y las startups que recurren al crowdfunding como una forma de lograr unos apoyos iniciales para lanzar al mercado el producto que han ideado.
En Fondeadora, no aplicamos filtros, es decir, aceptamos todo tipo de proyectos (mientras sea legal), desde tu proyecto de negocio de chapulines hasta el desarrollo de tu nueva nave espacial.
¿Por qué nació esta alianza?
UP Latam y Fondeadora tienen un objetivo en común: darte más oportunidades para convertir tus ideas en proyectos concretos. UP Latam lo hace a través de programas y eventos, como Startup Weekend y Startup Next y Fondeadora lo hace a través de su plataforma de fondeo colectivo. Nos interesa impulsar la innovación, la creación y el emprendimiento, dándote las herramientas necesarias para materializar tus proyectos creativos.
Para saber más acerca del crowdfunding:
Fondeadora estará publicando un post mensual en el blog de UP Latam, a fin de hablarte de las tendencias mundiales del crowdfunding, los diferentes modelos y ventajas de cada uno, las diferentes plataformas que puedes utilizar, y sobre todo, darte los mejores tips para realizar tu propia campaña de crowdfunding.
As the Securities and Exchange Commission continues to stall in finalizing the long-anticipated crowdfunding and investment rules for startups and entrepreneurs, states have steadily been enacting their own laws to spur intrastate economic activity and open new avenues to capital. Maine is the latest state to pass a new crowdfunding law, which went into effect January 1, joining 13 other states that have passed crowdfunding legislation since 2012. These laws enable entrepreneurs building businesses in their state to raise capital in the form of equity or debt in a company, giving investors ownership in the businesses they choose to support.
Jess Knox, president of Olympico Strategies, a startup consulting group in Maine, believes laws like this one support the growth of the state’s budding innovation ecosystem. The new crowdfunding legislation complements Maine’s Seed Capital Tax Credit, a program designed to encourage private equity investments in eligible Maine businesses. Crowdfunding now opens investment opportunities for all of Maine’s 1.3 million citizens. “There are people who invest in their community in a variety of ways,” said Jess, and equity crowdfunding, “reduces barriers to people to become investors in their community and their state.”
Meanwhile, entrepreneurs and small business advocates in Minnesota are working with state officials to pass equity crowdfunding legislation there as well. The grassroots movement has named the legislative proposal, MNvest, which was recently introduced in the Minnesota state legislature. The group of business and community leaders behind MNvest believes their new law will “allow ordinary Minnesotans to own a stake in emerging Minnesota businesses.” And from our travels to Minneapolis this fall, we saw for ourselves the thriving community of young technology companies there.
Plenty more states are joining the trend too: Virginia’s House of Delegates passed a bill last week, sending the proposed crowdfunding legislation to the state’s senate. Arizona and Colorado lawmakers recently proposed similar bills and Washington D.C. just authorized its first equity crowdfunding offering after finalizing rules in November.
Ultimately, however, many of these new financial tools are limited in their scope, because most state crowdfunding regulations restrict companies and their investors to the states in which they live and do business. Further, as one corporate lawyer and startup adviser explains, utilizing these intrastate funding tools may preclude businesses from pursuing some of the new funding opportunities provided by the JOBS Act such as general solicitation and a new SEC exemption for raising funds, Regulation A+. While Maine’s new law does allow entrepreneurs to raise money from investors outside the state, the SEC exemption the statute relies on can require issuers to provide the state with lengthy disclosure documents. Thus, while companies may be afforded broader reach, that could come with much higher costs.
Despite the inherent limitations of intrastate funding, these laws demonstrate the appetite for expanding capital opportunities for emerging businesses across the nation. Traditional sources of capital investment are often out of reach for burgeoning entrepreneurs outside the coasts or established tech hubs like Austin. While venture capital soared in 2014, the highest amounts of investment are nonetheless concentrated in these areas. These laws also indicate a willingness to allow middle-income Americans to take part in the growth of our startup economy. Without final rules on the JOBS Act from the SEC, startup investing nationwide remains limited to accredited investors, individuals with a networth of at least $200,000.
We hope officials in Washington are paying attention to the flurry of state-level activity and take the hint. Capital access is critical to sustaining the startup economy. Their lack of action leaves much-needed sources of capital untapped.
Metavallon is a model social enterprise that empowers and accelerates startups at the very early stages. Through its three-stage program (Τhe Lab, The Accelerator, and The Hub), Metavallon seeks to motivate talented individuals, expose them to experienced entrepreneurs, experts and investors, and provide them with the necessary resources to start their own high impact businesses. Its mission is to uplift the endeavors of active entrepreneurial spirits around the world and generate a powerful venturing movement in Greece and beyond.
Yiannis is a serial entrepreneur with over 7 years’ experience in the High-Tech and Security Industries. Prior founding Crypteia Networks, he has been active in the fields of Telecommunications, Network Optimization and Security enabling Telecom Operators to optimize their networks, expand their added value services and enhance their customers’ experience. He holds a B.Sc. in Electronics Engineering and an M.B.A. from Athens University of Economics & Business.
StartTech Ventures is the investment & incubation arm of the Materializing Innovation Group, having three divisions: Seed Fund, Incubator and Business Angel Network. StartTech capitalizes the experience gained out of starting Virtual Trip, the first successful student start-up in Greece, spinning out more than 10 high-tech companies via investing 4.5 MEur and creating a next generation start-up accelerator via introducing the “Entrepreneurial Ecosystem” concept.
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