CrowdfundingUsing the power and reach of the Internet to raise money for your startup

Presentation Overview

• Introduction

• Securities and Crowdfunding

• Three ways to crowdfund your business

• Wrap-up

• Questions

Traditional Fundraising Models

• “Bootstrapping”

• Public Offerings

• Private Offerings

Securities Law

What is a security?

Securities Law

Raising money under the U.S. Securities laws:

Offering must be either:

• Registered; or

• Meet an exemption

The JOBS Act

• Passed April 5, 2012

• Aimed at helping to make fundraising easier for startups

The JOBS Act

• Title IIo Removed ban on general

solicitation

• Title IIIo Enabled crowdfunding

under the securities laws

• Emerging Growth Companies

• Higher Reg A Fundraising Limit

Crowdfunding

What is “crowdfunding”?

Crowdfunding

Three Methods of Crowdfunding

• Kickstartero $746 million (successful)o 5.2 million pledgeso 51,000 projects fundedo 44% success rate

• IndieGoGoo about of Kickstarter⅙o 34% success rate

Contribution Crowdfunding

Contribution Crowdfunding

Pros and Cons

What are the costs?

Contribution Crowdfunding

Who will this benefit?

Contribution Crowdfunding

506(c) Private Placements

What is a “Private Placement”?

506(c) Private Placements

Pros and Cons

506(c) Private Placements

• Requirementso Accredited Investorso “Reasonable Steps” to

verify

506(c) Private Placements

• Accredited Investorso Individuals who have an

annual income of over $200,000 (or $300,000 with spouse)

o Individuals who have a net worth, excluding primary residence, of over $1,000,000

o Institutional Investors

506(c) Private Placements

• “Reasonable Steps”o Review of tax formso Review of assets and

liabilitieso Agent takes reasonable

steps to verify

New Form D Proposals

• One year disqualification

• Must file Form D in advance

• Must file a “closing amendment” after raise

• Must file all solicitation materials with SEC

506(c) Private Placements

Who will this benefit?

Equity Crowdfunding

Pros and Cons

Equity Crowdfunding

• Proposed Requirementso Maximum of $1 milliono Limits on investment by

each individualo Mandatory disclosures to

the SECo Use of specified

crowdfunding platforms

Equity Crowdfunding

• Form C Disclosureso Directors and Officerso 20% equity holderso Planned use of proceedso Offering targeto Business plano Financial conditiono Price of securities

Equity Crowdfunding

• Potential Issueso Advertising restrictionso Restricted shareso Liquidity exit strategyo Lack of shareholder

coordinationo Lack of investor

sophisticationo Valuation volatility

The Timeline Going Forward

• Sept. 23, 2013o General solicitation ban lifted

• Oct. 23, 2013o Crowdfunding rules proposed

• Nov. 4, 2013o Comments due for Form D changes

• Feb. 3, 2014o Comments due for Crowdfunding proposal

Takeaways

• Pros and cons of the different crowdfunding methods - use what works for you

• Use professionals - don’t go it alone

• Get involved - take advantage of the SEC commenting process

Questions?