posted by on Press Release

State Regulators Continue Their Misinformation Campaign on Crowdfunding—In an effort to Delay Implementation of the JOBS Act

New York, NY (December 7, 2012) –In an effort to increase access to capital to small business owners, the life blood of the American economy, Congress and the President passed the JOBS Act earlier this year. This bill was designed to help jump start small businesses by increasing access to capital and decreasing legal expenses. While the Crowdfunding provision of this bill is months away from implementation and currently not occurring in any form in the U.S., the North American Securities Administrators Association (NASAA) has launched a misinformation campaign about Crowdfunding, by associating a clear-cut fraud case with Crowdfunding.

“Crowdfunding isn’t legal yet.  We are still waiting for the rules to be written by the SEC and FINRA.  So in reality what happened in the story is just fraud that was perpetrated under the current regulatory regime,” stated Jason Best, Co-founder of the CfPA.

Crowdfunding, when it does go live (by law) must take place on SEC-registered websites only.  These websites aren’t live yet and hence isn’t crowdfunding.

Unlike boiler rooms that can operate from hidden locations anywhere, all Equity Crowdfunding Platforms will be accredited and operating in full view of the social media crowd, which will be a very transparent process for every investor that does their homework and researches companies before making an investment. The Crowdfunding industry will be going to great lengths to educate the general public and significantly increase the world’s knowledge of making wise investments.

“It is so farfetched to blame Crowdfunding, a yet-to-be employed investing mechanism, for a boiler-room scheme that was perpetrated over a year ago,” said Dara Albright, CfPA Board Member and Founder of NowStreet Journal. “Equally absurd is suggesting that the increase in domain names containing the word, ‘crowdfunding’ is indicative of future fraudulent behavior. It is a clear violation of American democracy for regulatory organizations to launch smear campaigns and propagate falsehoods about industries it will soon help oversee.”

“Security violations of the SEC’s current regulations are enforced rigorously,” said Sherwood Neiss, Co-Founder of the CfPA. “This trend will continue as the Crowdfunding industry establishes itself in the United States and is expected to follow a zero-fraud precedent that has been set in Australia for the past seven years and in the United Kingdom for the past two years.”

All media outlets are encouraged to contact the CfPA with questions regarding the new SEC guidelines that are due out later this year and into the early part of 2013.  Please review SEC’s FAQ Sheet at: http://www.sec.gov/divisions/marketreg/tmjobsact-crowdfundingintermediariesfaq.htm?goback=%2Egde_4401102_member_114785550

posted by on Articles and Commentary

Elisse Walter sworn in as a SEC Commissioner in 2008. Photo courtesy Securities and Exchange Commission.

Washington, DC — November 26, 2012 – President Obama announced today  he intends to appoint SEC Commissioner Elisse Walter to lead the Securities and Exchange Commission after Mary Schapiro declared today that she would step down as the SEC’s Chair.  Once appointed, Ms. Walter will have the task of leading the implementation of rules governing crowdfund investing under the Jumstart Our Business Startups Act, which was signed into law on April 5, 2012.

Ms. Schapiro became chairman of the SEC in the wake of the financial crisis in January 2009.  She oversaw a more rigorous enforcement and examination program, and shaped new rules by which Wall Street must play. In a statement issued this morning, Ms. Schapiro announced that she would step down as SEC’s  chair on December 14, 2012.

President Obama praised Chair Schapiro’s tenure, pointing out “I want to express my deep gratitude to Mary Schapiro for her steadfast leadership at the Securities and Exchange Commission. When Mary agreed to serve nearly four years ago, she was fully aware of the difficulties facing the SEC and our economy as a whole. But she accepted the challenge, and today, the SEC is stronger and our financial system is safer and better able to serve the American people – thanks in large part to Mary’s hard work.”

Elisse Walter, Courtesy SEC

“I am also pleased to designate Elisse Walter as SEC Chairman after Mary’s departure,” President Obama added. “I’m confident that Elisse’s years of experience will serve her well in her new position, and I’m grateful she has agreed to help lead the agency.”

Before appointed as an SEC commissioner, Elisse Walter served as senior executive vice president of regulatory policy and programs for the Financial Industry Regulatory Authority. She also is the former general counsel of the Commodity Futures Trading Commission.Chairman Schapiro previously served as a commissioner at the SEC from 1988 to 1994. She was appointed by President Ronald Reagan, reappointed by President George H.W. Bush in 1989, and named Acting Chairman by President Bill Clinton in 1993. She left the SEC when President Clinton appointed her as chairman of the Commodity Futures Trading Commission, where she served until 1996. She is the only person to have ever served as chairman of both the SEC and CFTC.

“It has been an incredibly rewarding experience to work with so many dedicated SEC staff who strive every day to protect investors and ensure our markets operate with integrity,” said Chairman Schapiro in a statement released today by the SEC. “Over the past four years we have brought a record number of enforcement actions, engaged in one of the busiest rulemaking periods, and gained greater authority from Congress to better fulfill our mission.”“It has been an incredibly rewarding experience to work with so many dedicated SEC staff who strive every day to protect investors and ensure our markets operate with integrity,” said Chairman Schapiro in a statement released today by the SEC. “Over the past four years we have brought a record number of enforcement actions, engaged in one of the busiest rulemaking periods, and gained greater authority from Congress to better fulfill our mission.”

posted by on Articles and Commentary

Washington, D.C., Nov. 26, 2012 — , SEC Chairman Mary L. Schapiro today announced that she will step down on Dec. 14, 2012.

Mary Schapiro, courtesy Securities and Exchange CommissionChairman Schapiro became chairman of the Securities and Exchange Commission in the wake of the financial crisis in January 2009. She oversaw a more rigorous enforcement and examination program, and shaped new rules by which Wall Street must play.

“It has been an incredibly rewarding experience to work with so many dedicated SEC staff who strive every day to protect investors and ensure our markets operate with integrity,” said Chairman Schapiro in a statement released today by the SEC. “Over the past four years we have brought a record number of enforcement actions, engaged in one of the busiest rulemaking periods, and gained greater authority from Congress to better fulfill our mission.”

Chairman Schapiro previously served as a commissioner at the SEC from 1988 to 1994. She was appointed by President Ronald Reagan, reappointed by President George H.W. Bush in 1989, and named Acting Chairman by President Bill Clinton in 1993. She left the SEC when President Clinton appointed her as chairman of the Commodity Futures Trading Commission, where she served until 1996. She is the only person to have ever served as chairman of both the SEC and CFTC. “I’ve been so amazed by how hard the men and women of the agency work each and every day and by the sacrifices they make to get the job done,” added Chairman Schapiro. “So often they stay late or come in on weekends to polish a legal brief, review a corporate filing, write new rules, or reconstruct trading events. And despite the complexity and the intense scrutiny, they always excel at what they do.”

The SEC has the task to formulate regulations to govern crowdfund investing under the Jumpstart Our Business Startups Act. President Obama signed into law the JOBS Act on April 5, 2012. The JOBS Act required rules for equity crowdfunding by the end of 2012. General speculation is that rules for crowdfund investing will not go public until some time in 2013.

posted by on Articles and Commentary

How much do you know about Crowdfunding?  This was the context of a survey conducted by Crowdfunding Professional Association in conjunction with Crowdfund Capital Advisors.  They asked 442 entrepreneurs, investors and intermediaries about their interest in crowdfunding, and also about themselves. What they discovered was encouraging as to the level of interest and how much capital they wish to invest, but there still is confusion about all the “CF” buzz words and how specifically equity-based crowdfunding platforms will differ from things like the popular platform Kickstarter.

Since the survey was hosted by Crowdfunding Professional Association, many of the responders (68 percent) were already very familiar with crowdfunding.  However, when asked to rank their understanding on a scale of 1 to 10 as to the difference between what is allowed under current crowdfunding, and how it differs from what we will have in 2013 under the JOBS Act, 36.64 percent ranked themselves as a 5 or less, showing there is a real opportunity to educate the public. Fortunately, a majority of those sampled self-reported a high level of understanding of the implications of this new law, with a full 20.14 percent ranking themselves as having an understanding of 10.

“The general awareness of investment crowdfunding has increased substantially since April but there is still a meaningful opportunity to help entrepreneurs and investors better understand both the nuances of the JOBS Act and early-stage investing in general,” said Ryan Feit, CEO of SeedInvest, an equity-based platform and a leader within the Crowdfunding Professional Association. “Both of these objectives are critical in order to ensure that the investment crowdfunding industry takes off with the massive potential it possesses.”

Distinguishing between token crowdfunding and equity or debt-based crowdfund investing could pose a challenge for new investors, and it is important that people understand these differences if they are to meet their investment objectives. Token crowdfunding, the current model, only allows crowdfunding campaigns to reward donors with gifts, free

samples of their product , or other perks. In contrast, under the JOBS Act, the crowd will be able to be full-fledged investors with an equity stake in the company and a right to a share of the profits. A third popular kind of crowdfunding is debt-based, which allows investors to provide small loans to entrepreneurs similar to the kind of micro lending we have seen used for international development from people like Dr. Muhammad Yunus’ Grameen Bank.

One issue with debt-based crowdfunding is the loans are often unsecured by collateral, meaning investors take on the same level of risk as they would with equity-based crowdfunding, but the upside potential of a company taking off is removed as investors would only receive their loan repayment plus interest.  However, statistics are showing low or no default rates, particularly on debt-based crowdfunding platforms like SoMoLend.

As for concerns within the crowdfunding space, respondents were generally enthusiastic and did not, on average, place one concern over another (on a scale of one to five). The respondents were more concerned about lack of business prowess (3.07), lack of entrepreneurial education (3.07) and fraudsters (3.05), than they were about the investor’s level of sophistication (2.98) or whether they will be overloaded with information (2.84).  Interesting enough, ‘investors only’ ranked their concern over fraud a bit lower (3.02) than ‘entrepreneurs only’ (3.11) — surprising many who assumed investors would be markedly more concerned. 

However, seeing fraud not at the top of the list is good news for the industry considering that crowdfunding in the UK has over the last two years produced a sterling record when it comes to fraud. Similarly, crowdfunding has been legal in Australia for seven years with no incidence of fraud. One widely reported incident of fraud involving a Massachusetts company was falsely associated with crowdfunding in the U.S. by the North American Securities Administrators Association, a major regulator of the traditional securities market — however they failed to point out that this particular incidence of fraud did not actually involve crowdfunding; it took place in 2010 long before the crowdfunding law was under consideration by Congress, and furthermore, all under the watchful eye of the old (and current) securities regime. The current securities laws, for several reasons, allow more secrecy in small investments (e.g.: they don’t require background checks) and make them harder to do (because of legal/compliance fees) and hence less common.

While we don’t like to harbor on fraud because the markets do operate at 99.9 percent efficiency, the truth is that there has been much more fraud in the traditional regulated market than there has been in crowdfunding.  “We believe this is due to the community-based system,” says Sherwood Neiss, co-founder and principal at Crowdfund Capital Advisors.  “Committing fraud within the crowdfund investing (CFI) framework is going to be hard to perpetrate. In CFI, all deals will have to flow through SEC-registered portals.  These portals will be regulated and the offerings policed by the crowd.  If there’s one thing we’ve seen come from social media, is it is nearly impossible to pull the wool over thousands of watchful eyes on the Internet.”

Since the data revealed 41 percent of responders had a desire to help companies get capital where they couldn’t before, 44 percent wanted to be part of something bigger than themselves, and 35 percent wanted to make a difference in the life of an entrepreneur, it seems investors are not afraid to roll up their sleeves and really look into what a company is doing to judge the viability of the investment themselves. The community aspect comes into play within the portals where current and prospective investors will be able to rate and comment on the activities of the various investments and hold management’s feet to the fire if things are being mismanaged.  Such open dialog on a medium like the Internet, where thoughts and comments are recorded for history, leads to transparency and accountability.

In the seven years crowdfund investing has been legal in Australia and in the two years it has been legal in the UK, no cases of successful fraud have been discovered. In donation-based crowdfunding in the US, fraud has been caught rapidly, and always before funds are distributed, as social networks uncover the truth. Experience has already shown that potential sponsors are able to collectively crowdsource a startlingly effective due diligence machine far better than the eyes of a single Wall Street analyst. They are able to shed light on every aspect of the business. This is very different from the market of the early 2000′s when people bought and sold derivatives products blindly without looking at the underlying assets or what the original investment actually was. This type of community driven investing means people will have intimate knowledge of the activities of the few crowdfunded ventures in which they are able to participate before they reach a legal cap based on their income and net worth. This is a system by which friends, and friends-of-friends,  get together to grow an idea they understand and personally support.

One major industry that will be big in crowdfunding is technology. A full 30 percent of the entrepreneur responders were in the technology sector with 10.3 percent in media and entertainment, 9.87 percent in finance, and 9.44 percent in consumer goods. 19.47 percent were in the catchall “Other” category, which included ideas such as Space and Robotics , Energy, Health, Beauty, Medical Devices and others. Crowdfunding seems to have natural allies among the tech sector innovators of Silicon Valley, as they are constantly starting new ventures and they understand the power of social media. “What they don’t have access to is the capital that only resides within 60 miles of Silicon Valley — which is where CFI steps in.  It allows tech companies in Anytown, USA to raise capital for their ideas locally,” says Jason Best, co-founder and principal of Crowdfund Capital Advisors.

Where will the entrepreneurs gravitate to fund their ideas?  The largest portion, 34.67 percent of respondents, said they would go to the most visible portal or platform to help raise the most capital, while another 34.34 percent were interested in industry-specific platforms. We surmise the interest in industry-specific platforms is based on a belief those platforms might better target more savvy investors interested in funding innovative technical niche ideas.  The thinking driving that statistic might be that industry-specific ideas may not get traction from the average investor looking at returns alone on some other platform with more ‘generic’ offerings, despite the platform’s visibility. “

Since a large portion of the respondents were in technology and a sizable portion were interested in industry specific portals and platforms, it is likely that there will be room for several tech industry crowdfunding platforms to become successful in the new market.

Are these all zero revenue companies?  Surprisingly, they are not.  The respondents were generally small companies. Of the 122 that responded to the question about 2011 revenues, 81 percent reported under $100K. 15.7 percent reported having 2011 revenues between $500K and $1 Million. 1.65 percent had 2011 revenues between $1 million and $5 million, with another 1.65 percent reporting 2011 revenues of over $5 million. Don’t let their small sizes fool you, these entrepreneurs have big dreams! Although 36 percent of respondents were looking to raise capital for the first time, 35 percent have been part of a startup before, showing they have experience with startups. 

While 15.88 percent of respondents had only an idea for a startup, 33.48 percent had a formal business plan, 27.04 percent  had a product or prototype, and a full 23.61 percent were already operating and bringing in revenue. Those figures show the error in the notion that anyone and everyone with an idea will be throwing it up on CFI platforms, as the majority of respondents had much more than simply an idea.

36.64 percent of entrepreneurs were looking to raise under $100K in capital from portals to fund their venture. 35.34 percent wanted to raise between $100K to $500K. 16.81 percent wanted to raise between $500K and $1 million, while the remaining 11.21 percent were hoping to raise more than $1 million. With  88.79 percent of the respondents looking to raise amounts under the $1 million dollar threshold set out by the JOBS Act, it is clear that this new asset class will find an under-served market.   It wouldn’t make sense for these companies to go though the red tape and regulatory burden of an IPO or formal Reg D to raise such a relatively small sum of capital. An exorbitant percentage of that raised capital would be taken up in attorney and investment bank fees under the traditional IPO process.

These companies aren’t looking for huge amounts of capital, but they do want to grow. 79.39 percent have three or fewer employees, and of that group 44.05 percent are companies made up of only one individual. They want money to expand, 41.24 percent of the companies want to take their employee count to five or more.  “Jobs might be the biggest thing to come out of Crowdfund Investing,” says Neiss.  “Capital to fund an idea is just one part of the equation.  Having the capital you need to build a successful team to help you grow your business to the next level is another.  Getting these entrepreneurs the capital they need will allow them to hire the Americans they want to launch great businesses.”

Small businesses find it difficult to get the eyes and ears of professional investors. With the current economy banks are failing to lend and refusing to take a chance on small businesses, to the point where many people have stopped trying. Out of 124 respondents 18.22 percent tried to get a loan from a traditional bank. Compare that figure with the 20.44 percent that approached Angel Investors, 13.78 percent that went to VC’s and 12 percent that went to private equity.  To add further credibility as to why the community will be where these entrepreneurs find their funds, 35.56 percent went to friends and family.  Clearly, people are eschewing the institutionalized paths to capital and opting for less formal sources of money that may be more interested in the upside potential of their business or idea rather than concerned about collateral.

From the survey we also learned quite a bit about potential Crowdfund Investors. Most respondents were not accredited investors. 71.43 percent self identified as non-accredited investors while 28.57 percent stated they were accredited. After the passage of Dodd-Frank in the US, the definition of an accredited investor changed to a person with a net worth over $1 million dollars, not including home equity, or a person making $200,000 per year for at least the past two years .This change in definition bumped many investors who were formerly accredited investors out of that class because many had a large portion of their assets tied up in home equity. 8.51 percent of responders had an annual income or net worth less then $40,000, 25.53. percent between $40,000 – $100,000, 42.55 percent between $100,000 and $500,000, 9.55 percent between $500,000 and $1M, and 13.83 percent had a net worth or annual income over $1 million. 

According to the legislation, there are restrictions placed on how much each person can invest through crowdfunding,  based on income or net worth.. If you make less than $40,000 per year you can only invest $2,000 in to all crowdfund projects. You can put up to 5 percent of your income (or net worth) if you make between $40,000 and $100,000. If you make or have over $100,000 in net worth you will be able to invest 10 percent of your income in crowdfund equities. It was important to look at these numbers from both an accredited and unaccredited point-of-view.  Based on the chart below certain things became clear.  1) Accredited investors will be investing larger amounts in terms of dollars (34 percent said they would invest over $25,000), 2) the bulk of the contributions will come from unaccredited investors (71 percent), and 3) the median investments look to be in the $2,000 to $5,000 range. 

If we drill down to the data some more and make some (overly) general assumptions that the middle of each of the ranges in the columns above is where the average investment will fall (and no investment will be greater than $100,000) then, on average, it would appear that unaccredited investors will deploy $4,347 per year and accredited investors will deploy $29,987per year. (If we toss out the top 10 percent and bottom 10 percent, the figures change to $26,188 for accredited and $3,635 for unaccredited).

You can see how quickly an entrepreneur who is one of the 72 percent hoping to raise under $500K in capital could meet his benchmark if only he can get the attention of enough of those investors looking to invest $29,987. It also is readily apparent that there is a sizeable group of people who fall outside the accredited parameters but are willing to invest in crowdfunding. The change in the legislation will allow this for the first time.

Since the folks who can invest more than $20,000 in crowdfunded ventures are likely to be accredited investors (if they have earned that $200K for two years or more) then we can see by the fact that we have some respondents wanting to invest $25K, $50K, and even more than $100K in crowdfunded equities, that this industry has tremendous potential.

At the end of the day, the fight to legalize crowdfunding was about democratizing access to capital so startups and small businesses could get back to innovating and creating jobs.  Who was more excited?  Entrepreneurs ranked it a 3.48 while investors put it at 3.37.  Entrepreneurship was second and tied with investors at 3.25, and innovation was third with 2.98 for entrepreneurs vs. 2.87 for investors.  What about the excitement over investment opportunities? Well, that’s where the investors came in above entrepreneurs, at 2.78 vs. 2.59.  Seems like the investors really are interested!

One part of the survey results stood out from the rest with surprising results. When asked what the biggest driver is to investors in making their investment decisions,  while 33 percent said the obvious answer was investment returns, 20 percent said their biggest driver was helping companies get capital where they couldn’t before. Another 20 percent said their main driver was being part of something greater than themselves. 17 percent said the ability to make a difference in the life of an entrepreneur was their biggest driver. Try getting that from the traditional economy.

“I think this survey shows how inspired people are by the unlimited possibilities that can happen with the crowdfunding bill. For once our entire society can play an active role in job creation and help level the playing field for access to capital for entrepreneurs everywhere.The Crowdfund Professional Association will continue to take a leading role in educating one and all, and help to create a strong and solid foundation for this new industry to thrive, ” stated Ruth Hedges, CEO of Funding RoadMap and Founding Governance board member of the CfPA.

 

posted by on Articles and Commentary

Las Vegas, Nevada (PRWEB) October 17, 2012 – The Crowdfunding Bootcamp and CFPA Convention in Las Vegas Nevada, October 9-11, was a pivotal event in the establishment of the Equity Crowdfunding industry. Hundreds of crowdfunding thought leaders, service providers, nascent funding portals, social media experts, accounting, legal and policy professionals, and individual entrepreneurs gathered to understand the challenges, the promise, and the nuts and bolts of the coming equity crowdfunding era, how it will be executed, and how it can be made to work for everyone.

Combined with the event was the first annual Crowdfunding Professionals Association CfPA Conference, a group of first movers in the industry. The Crowdfund Intermediary Regulatory Advocates was a co-sponsor of the event.

“Reflecting crowdfunding itself, the CFPA conference had an authentic DIY spirit and excitement that more ‘corporate’ conferences lack.” said Paul Spinrad, “I connected with people doing a diverse range of great things there, and gathered some information that will really help me. I look forward to an even bigger crowd at the 2013 event.”

CfPA board member Kim Wales said, “We all have a role to play! Whether you led from the front or led from the back; showed up to learn, teach, encourage or laugh – sell products or just to be seen – the conference hall was 250+ persons strong. All of our hands and minds came together in unity; forming the industry’s first Annual Crowdfunding Bootcamp and Crowdfunding Professional Association Conference in October 2012.”

Ruth Hedges, Crowdfundingroadmap.com bootcamp creator and organizer and board member of CfPA, hosted and moderated the event. “We are on the threshold of a new era in the financing and creation of new businesses. The JOBS Act crowdfunding provisions will allow for vastly expanded participation by all Americans who will be able to make small investments to participate in job creation and capital formation,” says Hedges, “the challenge now is two-fold: for the SEC to meet their responsibilities in finalizing the rules of the road by the end of the year, as stipulated in the bill, and the education and creation of a pipeline of entrepreneurs and as well as the education for a country of newly enfranchised small investors -that means you!- to be able to take advantage of this opportunity.”

Keynoter Peter Shankman, founder of Help A Reporter Out (HARO) and now small business evangelist for Vocus, was on hand to help frame conference business in terms of “understanding the rapidly changing technological, social and economic ecosystems that enable crowdfunding, along with examples of viral success stories and why they worked.” said Meghan Cole, VP of Operations for Laughlin Associates one of the event’s coordinators and sponsors.

Alix Shaer, fundraiser and well known for raising millions of dollars for the American Cancer Society, helped entrepreneurial attendees to think about how to leverage and recruit who they know and the importance of communicating one’s passion directly.

Wednesday’s panel featured a heady line-up including; Maurice Lopes of Early Shares, Candace Klein of Bad Girl Ventures and SoMoLend, Scott Purcell of the crowdfunding platform Arctic Island, Joy Schoffler of Leverage PR, D.J. Paul of Crowdfunder, Rodney Sampson of Legacy Opportunity Fund and Dara Albright of NowStreetMedia. “If one could choose one element of the event that people would have wanted a lot more of, it was this incisively intelligent and practical-minded panel,” said conference staffer Joe Phelan.
Other amazing speakers included Douglas Ellenoff, of Ellenoff Grossman & Schole LLP, who has consulted with the SEC on crowdfunding rules and whose firm, along with Sara Hanks founder of Crowdcheck, has played leadership roles in communication with the SEC to help establish those rules; bringing further credibility, Gary Milkwick of 1800Accountant- a firm specialized in small business; Michael Fultz of Fund All Be All, a full spectrum crowdfunding service provider; Bruce Johnston and Zachary Hedges of CaptureTrackConvert, a customer acquisition optimizing platform, and; Karl Burl of Navicate, a service to streamline the valuation process and Arron Young CEO of Laughlin Associates a first mover in providing Incorpoation and corporate veil protection to the crowdfunding industry.

The event featured the first Funding Portal Pavillion TM, with booths featuring 30+ companies who provide services and support to entrepreneurs. Many new portal companies were able to interact with their future customers and each other. “The CFPA conference was an incredible event, probably the largest CrowdFunding event to date in number of attendees. The vibe and deals were so positive that even direct competitors became great new friends.” said Maurice Lopes CEO of EarlyShares.com “When the right people get together to support a new industry great things can really happen!”

Toward the end of the last day, Sherwood Neiss, a founding member of the Crowdfund Professional Association, who also helped push the Jumpstart Our Business Startups Act in Congress, stood up and talked about the issues of potential fraud, transparency and accountability, and noted that with equity crowdfunding, as with the current gift-based crowdfunding, the safety is in that one has to build support from your friends and family who expand out to their friends and family; without the trust of the people who know you, there is little chance of your campaign going viral and getting funded. Support doesn’t come from an impulse. The internet has a memory. Neiss explained. “Con-artists will for the most part be identified and the disclosure and transparency as stipulated in the bill and registration process will keep fraudsters from even starting.”

Ms. Hedges emphasized the need for getting entrepreneurs educated and prepared in the crowdfunding process: “To feed the demand next year from these new funding portals and the millions of new investors who will be looking for quality deal flow, we need to start now and build a pipeline of one million crowdfund compliant small businesses who will be ready to launch an equity crowdfunding campaign once its legal to do so. We need to ramp this up now in order to provide a continuous flow to create the new businesses and jobs that will power our economy forward.”

On the last day, Jed Cohen, CEO of Rocket Hu b gave the closing keynote, brilliantly explaining the logical dynamics of crowdfunding with diagrams that in one case resembled the clusters of star systems he studied as an astrophysics student. Rocket Hub is one of the existing crowdfunding sites that sees equity crowdfunding in its own future.

posted by on Articles and Commentary

At a time when small businesses cannot find capital, it’s hard to believe that small businesses do not know where to look to raise funds. Credit agency Experian discovered that more than two-third of small businesses surveyed by Experian are unaware of crowdfunding.

Experian surveyed 300 small and medium enterprises (SME) and found that awareness of different types of business finance is very low among SMEs, with most continuing to rely on traditional bank overdrafts or personal sources of cash for additional funding. Alternative sources of finance are yet to have made a significant impact.  ”Of the various forms of business funding options, crowd-funding was the least well-known among respondents, with 69 per cent never having heard of it,” Experian reported. “Meanwhile, angel investment, business cash advances and government grants also scored poorly in terms of awareness.”

When questioned about the first thing they do when thinking about additional financing, the respondents disclosed:

  • 42 per cent of them would go to their personal bank.
  • One in ten said they would try all the major banks first.
  • Seven per cent said they would search the internet for the best deals.
  • Six per cent said they would speak to a broker.

The findings also reveal that 60 per cent of respondents had sought some form of extra funding in the last 12 months and the need to alleviate short-term cash flow problems was by far the biggest reason for applying for extra cash (58 per cent). This outstripped activities for growth, such as expanding their product portfolio (20 per cent) or hiring more staff (12 per cent).

Experian also found that only one in four (27 per cent) SMEs definitely planned to apply for some form of extra funding in the coming year.

Image (c) by Crestock

posted by on Articles and Commentary

Washington, D.C., Sept. 20, 2012 – The Securities and Exchange Commission will hold its annual SEC Government-Business Forum on Small Business Capital Formation on November 15 at its Washington, D.C. headquarters.

This year’s forum will begin with panel discussions on the implementation of the recently enacted Jumpstart Our Business Startups Act, or JOBS Act, and on small business capital formation issues not addressed by the JOBS Act. During the afternoon, participants will work in groups to formulate specific policy recommendations.

The forum begins at 9 a.m. ET with the panel discussions, which will be webcast live on the SEC’s website. The afternoon breakout group sessions will be open to the public and accessible by teleconference, but will not be webcast. Anyone wishing to participate in a breakout group, either in person or by teleconference, must register online by November 12.

The names of panel participants and the full agenda for the forum will be announced at a later date and posted on the SEC’s website. Members of the public are invited to make suggestions for recommendations or topics to be discussed at the forum. These suggestions, and any questions about the forum, should be e-mailed to the SEC’s Office of Small Business Policy at [email protected]. For more information, call (202) 551-3460.

posted by on Articles and Commentary

Sarah Hanks

Washington, DC – September 20, 2012 – Sarah Hanks, CEO of CrowdCheck, Inc. and a CfPA board member, has published a whitepaper through Bloomberg BNA’s Securities Regulation & Law Report that sheds some light on the legislative and regulatory process of crowdfund investing.

Equity crowdfunding will offer small businesses a new tool to raise capital once the Security and Exchange Commission (SEC) and self-regulatory groups formulate rules for such investing under the new Jumpstart Our Business Startups Act. Beforehand,  the “crowd” could offer donations to projects online, but unregistered offers for equity through crowdfunding portals would have violated Section 5 of the federal Securities Act.

The JOBS Act, signed into law on April 5, 2012, will enable small businesses to raise up to $ 1 Million per year from small investors through online, crowdfund investing portals. The JOBS Act requires the SEC to formulate rules to regulate such crowdfund investing.

More on the whitepaper here.

posted by on Articles and Commentary

2984347029_fe0d55a107_z

The Consumer Electronics Association’s CEO urges the Securities and Exchange Commission to implement “immediately” rules for the new JOBS Act.  The Jumpstart Our Business Startups Act changes US securities laws to make it easier for small businesses to raise capital, including, raising funds from crowdfund investing. CEA’s Gary Schapiro pointed out “Delaying implementation of the JOBS Act will hinder U.S. job creation, economic growth and continued U.S. leadership in innovation. We urge the SEC to implement the JOBS Act immediately.”

CEA’s Gary Schapiro

“With overwhelming bipartisan support, Congress passed the JOBS Act earlier this year,” Schapiro noted, adding that the JOBS Act allows for easier capital creation, like crowdsource funding, for new ventures, and promises to spur the creation of new companies and much-needed American jobs.

“The recent announcement by the SEC that it will postpone implementation of the JOBS Act until some point next year limits funding of innovative ventures and thus hurts U.S. job creation, exports and the economy,” Schapiro said. “This delay contradicts the SEC’s previous statement to Congress in which it committed to implementing the crowdfunding provisions of the JOBS Act this summer. We understand that the SEC has limited resources. However, in today’s economy, our top priority must be putting America back to work. By enabling easier capital formation, the JOBS Act will create many new jobs for U.S. workers.”

The Consumer Electronics Association (CEA) promotes growth in the $206 billion U.S. consumer electronics industry. More than 2,000 companies are members of the CEA. CEA provides legislative advocacy, market research, technical training and education, industry promotion, standards development and the fostering of business and strategic relationships.

Feature photography (c) Nick Ares under Creative Commons Atribution-Share Alike License.

 

posted by on Articles and Commentary

Capture

Washington, DC — September 13, 2012 – The Securities and Exchange Commission should move with “due speed and clarity,” a panel urged the House Joint Subcommittee Hearing on JOBS Act Implementation.  Naval Ravikant, CEO of AngelList, tesified that crowdfund investing will bring more capital to small business, adding ”Today’s small start-ups are tomorrow’s Fortune 500 employer.”

The committee originally scheduled the hearing to get a progress report from SEC chair Mary Schapiro, regarding the creation of rules that will implement the JOBS Act. The Jumpstart Our Business Startups Act requires the Securities and Exchange Commission to launch regulations to govern crowdfund investing. The Act will enable small businesses to raise up to $ 1 million per year from small investors through online, crowdfund portals.

Although Ms. Schaprio could not attend, members of academia, small businesses and the crowdfund communities urged that job creation visioned under the JOBS Act should move forward with due speed and clarity. “Critics have argued loose rules may invite fraud, Mr. Ravikand testified. “Rules that are too tight, however, may repel the good companies – the ones who drive all of the economic returns for investors.”

Mr. Ravikand suggested that regulators can discourage fraud by allow crowdfunding portals to “curate,” that is, decide what gets featured and what gets buired on the site and in communications.  “Non-equity crowdfunding sites such as Kickstarter, curate heavily to avoid becoming hotbeds of fraud.”

Jeff VanWinkle, an attorney and treasurer of the National Small Business Association, testified that crowdfunding applies to a broad swath of equity, including peer-to-peer lending. “Title III of the JOBS Act will effectively permit P2P lending to small firms under the rubric of crowdfunding,” he said. Mr. Winkle further recommended that crowdfund portals should not be required to register under the same requirements as general dealers. “It is important that the Commission make it clear that funding portal fees set, in whole or in part, as a percentage of the amount raised do not trigger dealer registration requirements.”

Just the day before, the NSBA reported the sobering news that 44 percent of small-business owners think the national economy is worse today than it was six months ago—up from 31 percent in December 2011.

Article by A. Brian Dengler, Member of Crowdfund Intermediary Regulatory Advocates and attorney with Vorys, Sater, Seymour and Pease. Mr. Dengler also is an adjunct instructor in emedia business at Kent State University and a former Vice President of AOL, Inc.