Crowdfunding

WYNTK * (what you need to know)

Hands-on For Entrepreneurs

CJ Cornell – Propel Arizona

10+ companies$250M Funding 4 Exits (great !)$3B Revenues 4 Failures (awful !)

Lots of lessons. Chaos, Pain and Joy.

‘Serial/Parallel Entrepreneur”

EIR, Venture PartnerAngel Investor

5 Companies 9 Boards3,000 Tylenol Caplets. Ego and Brain Atrophy.

Investor/Venture Capitalist

Professor of Digital Media & EntrepreneurshipArizona State University, SJSU, Stanford (Lecturer)New York Institute of Technology Knight Center for Digital Media EntrepreneurshipResearch in digital media, behavior, entrepreneurship

University Professor

Advisor/Mentor, Author etc.

ASU – Skysong, Venture Catalyst, RSS etcArizona Commerce Authority / Venture readyArizona Innovation ChallengeBook: Age of Metapreneurship. Blog/Articles

CJ Cornell

@cjcornell

cj@cjcornell.com

The Funding Gap

Concept to Product to Growth

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Venture Capital

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Angels,accel & incub

The Kauffman Index of Entrepreneurial Activity is a leading indicator of new

business creation in the United States.

In 2012 - The state with the HIGHEST level of Entrepreneurial Growth was …

Arizona.

# 1 in Entrepreneurial Growth

# 46th in Venture Capital $

The Series-A Crunch

The Series-A Crunch

Source: http://theyec.org/making-sense-of-the-jobs-act-and-crowdfunding-infographic/

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Crowdfunding

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Crowdfunding

Soliciting & Collecting relatively small amounts of money (“funding”) from a large number of people (“crowd”)

WYNTK(what you need to know)

http://blog.intuit.com/trends/crowd-power-what-is-crowdfunding-infographic

“Crowdfunding is a term used to describe individuals

coming together to support – and directly fund

projects by other individual and organizations.

“

• Source – http;//crowdfunder.com

• Source – http;//crowdfunder.com

Equity Crowdfunding(aka Investment)

5 APRIL, 2012 (AND … AUGUST 2012, DECEMBER 2012 …)

Jumpstart Our Business Startup ACT, Title III (JOBS Act).

Equity Crowdfunding - JOBS• Eliminates ban on general solicitation and general advertising in connection

with private offerings to accredited investors under Regulation D (Rule 506) and to qualified institutional buyers under Rule 144A.

• Exemption from Securities Act registration “crowdfunding” transactions (involving access to small amounts of capital through the internet).

• Exemption to allow issuance of up to $50 million of securities in any 12-month period, up from the current $5 million threshold

• An increase in the number of shareholders a company may have before being required to register its common stock with the SEC and become a public reporting company from 500 to 2,000 total shareholders (including up to 500 “unaccredited” shareholders)

• Amount each person may invest in offerings of this type, tiered by the person's net worth or yearly income.

http://www.pepperlaw.com

SAN FRANCISCO, Dec 6 (Reuters) - Netflix Inc said on Thursday securities regulators warned they may bring civil action against the company and its chief executive for violating public disclosure rules with a Facebook post …

• Equity Crowdfunding - not in the USA (yet)

• JOBS act (April 2012) technically enables CF – but has not yet been approved by SEC.

• No documented fraud in USA or other areas.

• Equity CF is for “high growth companies” seeking significant funding from experienced investors

• Will dramatically change in 3-5 years (CJ prediction)

www.propelarizona.com

WYNTK(what you need to know)

“THE KICKSTARTER MODEL”Rewards-based, Donation Crowdfunding:

ALL OR NOTHING

Perks &Rewards

Updates (and Blogging)

Updates (and Blogging)

Comments & Engagement

Kickstarter (2012)

2.2 million people pledged a total of

$319,786,629

(up 221% from 2011)

Backers pledged $606.76 per minute

People in 177 countries backed a project in 2012

(That's 90% of the countries in the world)

Source: http://KickstartersHQ.com

WHY …Do people Crowdfund?

Lessons from Ethan Mollick’s “The Dynamics of Crowdfunding: Determinants of Success and Failure”

3 Why’s: 1. They connect to the greater purpose of the campaign

2. They connect to a physical aspect of the campaign like the rewards

3. They connect to the creative display of the campaign’s presentation

three main reasons why people unconnected to a

project or business would support it:

What Is Crowdfunding And How Does It Benefit The Economy - Forbeshttp://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy

The Real(Crowdfunding)

Why’s

• Passion– For the technology– For the industry– For the cause– For the product

• Affinity– For the Entrepreneur– For the region, industry etc

• Connection

• Every reason BUT R.O.I. …

emotional ROI.Not financial ROI

WYNTK(what you need to know)

Crowdfunding is about …

(when crowdfunding …)

“its not what you do, but why you do it,”

WYNTK(what you need to know)

http://www.kickstarter.com/projects/1104350651/tiktok-lunatik-multi-touch-watch-kits

http://trendwatching.com/trends/infographics/presumers/

“Consumers who want products before they are developed”

Pre-ordersEarly adopters

Supporters

UH OH …The Kickstart Model..

1. Crowdfunding = New “1st Money” for ventures($10k - $50k average– but wild exceptions)

2. Equity Crowdfunding is Still Far away3. Rewards based Model IS Crowdfunding today4. All or Nothing Crowdfunding – Standard5. Perks and Rewards: Pre-order Crowdfunding6. Social Media & Content Intensive

www.propelarizona.com

WYNTK(what you need to know)

What does success look like?

• The iPhone-friendly Pebble watch earned $7.6 million more than its $100,000 goal.

• And the Galileo iPhone platform closed its Kickstarter campaign at $702,000, far surpassing its $100,000 goal.

• Ouya raised $2 million in one day for a new Android gaming console (it’s raised more than $5 million to date),

• the Nifty MiniDrive, external memory for Apple MacBooks. The tiny storage company is more than 2,000% above its $11,000 goal with 15 days left in the campaign.

Successful campaigns took an average 11 days preparing for their launch.

http://blog.indiegogo.com/2013/01/12-insights-for-2012.html

Campaigns ran an average 49 days in 2012, as opposed to 60 in 2011.

Successful campaigns fundraised for 39 days.

http://blog.indiegogo.com/2013/01/12-insights-for-2012.html

Crowdfunding Myths & Mistakes

• Myth #1: If You Build It, They Will Come• Myth #2: Cash is Free• Making it about you• Unrealistic Expectations• Lack of clarity• No call to action• Expecting to be found: (No Marketing)• Ignoring Small Donations/Donors

http://kickstartershq.com/articles/5-project-crushing-kickstarter-mistakes-how-to-avoid-themhttp://www.crowdsourcing.org/document/3-big-crowdfunding-myths-via-funderhut/23804

focus on “them” – not your company

WHO are they?What motivates them?Interests, Values … PEOPLE

the

1.The new 4 P’s of Crowdfunding ..

www.propelarizona.com

PITCHthe

2.You are pitching to “them”

TELL A STORY !!

WHY is more important than $$

VIDEO(s) & VISUAL(s)

Tell the story in small ‘chapters’

VIDEO(s) & VISUAL(s)

And even smaller “sound bites”

Give them a Story they can tell to others.

PERKSthe

3.$$ Value is a negative driver !

UNIQUE

It’s about THEM

EXCLUSIVE

And what is important to “Them”

FIRST

Make sure it is …

BUZZWORTHY

PROMOthe

4.It’s a daily/hourly effort …

SOCIAL MEDIA

It’s a conversation …

UPDATES, BLOGS, NEWS

Provide Value, and Talking PointsRE-POST, TWEETable

It’s about … for their network

VALIDATION & EVIDENCE

First: Who What Why When …

• The 3 Who’s:– Who are the donors? (affinity & passion)– Who is benefits? (the market)– Who are you?

• The 3 Why’s– Why would your donors care?– Why does the market care?– Why are you the right team to do it?

First: Who What Why When …

• What is your project & goal?– Understandable & Simple– Compelling & Intriguing– Repeatable & Memorable

• How and When– How will you achieve your goal? Realistic?– When, after funding? When will I get my perks?

Perks & Rewards

Directed by

Patrick Million

Executive Producer

CJ Cornell

a Patrick Million FILM

American Grandmaster

Rewards Crowdfunding

• Incentives & perks• Pre-Orders• Pre-Sumers

• Market Validation

Rewards don’t have to worth $$

• $25 perk is the single most claimed perk, representing nearly 25% of all perks that are selected.

• While the $25 dollar perk is only responsible for raising 11% of total funds.

• $100 perks raise more money than any other perk price and make up nearly 30% of total funds. A $100 perk combined with the next three perk price points: $50, $500, and $1000 makes up about 70% of total money raised by perks

some

Rules for Rewards

1. Make perks unique & exclusive

Avoid T-shirts, Mugs & Hugs

2. Target them

3. Give them a connection

“The Cocktail Party Effect”

“The Restaurant Effect”

“The Carey School Effect”

The less tangible the perk,

the more public (visible) & EXCLUSIVE it needs to be.

Crowdfunding Arizona

Can it jumpstart entrepreneurship?

1. Kickstarter “Fails”

Arizona does poorly …

2. Members =/ Supporters

% of supporters is the key ….

3. Entrepreneurship is Different

Products, Companies, Entrepreneurs …

4. The role of “Ecosystem”

Incubators, accelerators, mentors etc ..

5. The power of Community

Shared Goals, Passions, Outcomes …

Shared Goals, Passions, Outcomes …

Crowdfunding for Entrepreneurship & Economic Growth

People as Important as Projects …

Organizations & Affiliations …

Entrepreneurs success as much as funding …

$15k - $100k *(Average $50k) ….

Local Perks

Unique Opportunity for Arizona Small Businesses

www.propelarizona.com

@PropelArizona

cj@propelarizona.com

Slideshare/PropelArizona