Equity Crowdfunding 101

Roy Morejon, PresidentCommand Partners

www.commandpartners.com

Presented By:

Equity CrowdfundingHQ Charlotte at Packard Place

http://www.commandpartners.com/

Who am I?

● President @CommandPartners, A Top Marketing Agency for Startups by Hubspot

● 2014, Best Place to Work in Charlotte

● 2015, #17 Fastest Growing Private Company in Charlotte

● Crowdfunded over 170 Successful Projects

● Raised over $65 Million in past 4+ years

● Featured in CNN, Entrepreneur, Forbes, AdWeek, SEJ, Fast Company, Pando Daily, Yahoo! Tech, Crowdfund Insider

@RoyMorejon #HQCrowdfunding


What is Crowdfunding?

● Is the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations.

● Use an online community to solicit pledges

● It uses word of mouth and wisdom of the crowd to generate interest and pledges


There are 4 main types of crowdfunding;

1. Rewards, 2. Equity, 3. Donation,4. Loans


● Is it a good fit?

● Video and Design

● Rewards that matter

● Realistic Funding Goal

● PR = People + Relationships

● Social Media Shares

● Stretch Goals

● Paid Media

● Friends and Family


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Crowdfunding Stats

● In 2013, crowdfunding was a $7,000,000,000 industry

● In 2014, crowdfunding was a $16,200,000,000 industry

● $34.4 Billion in 2015

● Projections for 2016 are over $80 Billion!


What is Equity Crowdfunding?

● Investors receive equity in a company and (potentially) receive a return on their investments in the form of the company’s profits.

Accredited v. Non-Accredited Investors


Are You Accredited?

● To qualify as an Accredited Investor in the US, an individual must meet one of the following criteria:

● A net worth exceeding $1 million (excluding their primary residence equity), either individually or jointly with their spouse

● If single, an annual individual income of more than $200,000 for each of the last two years

● If married, a joint annual income of $300,000 for each of the last two years

● Serve as a partner, executive officer, director or similar role in the company seeking investment


Are You Non-Accredited?

● Those that have a net worth (joint or individual) less than $1 million and have earned less than $200,000 annually ($300,000 including spouse) over the last two years.

The passage of the Jumpstart Our Business Startups or JOBS Act in 2012 means that

Non-Accredited Investors can participate in equity-based crowdfunding.


April 5, 2012 - Jumpstart Our Business Startups Act (JOBS Act)

September 23, 2013 - General Solicitation (Title II)

June 19, 2015 - Reg A+ (Title IV)

January 29, 2016 - Reg CF Rules Set (Title III)

May 16, 2016 - Reg CF Launches



The JOBS Act

● Equity crowdfunding made legal in 2012 when President Obama signed into law the JOBS Act

● Goal of Act was to reduce constrictive regulations, allowing for the funding of small businesses by outside investors

● Five Titles, each addressing problems and challenges facing startups and small businesses

● Titles II, III and IV directly impact equity crowdfunding

Title II

• Enacted in September 2013• Streamlined communication and general

solicitation of Accredited Investors• Before, investors could only be solicited through

private, in-person meetings with family, friends and colleagues

• Now, companies can advertise their intent to acquire funding for their projects, including online and through social media

Crowdfunding Under Title II: Accredited Investor Equity Crowdfunding

Benefits and Drawbacks

• No limit on the amount you can raise• Can advertise online and solicit investors• Most affordable JOBS Act provision to use• Only accredited investors• Additional legal requirements over a regular

private placement• Hard to raise private money unless company is

revenue producing

Title III

• Enacted in October 2015, becomes legal to use on May 16, 2016

• Opened equity crowdfunding to Non-Accredited Investor participation

• Startups and small businesses can raise up to $1M in a period of a year through crowdfunding

• Significant disclosures are required for companies to help provide transparency

Title III

• Investors making <$100,000 per year can invest the greater of $2,000 or 5% of annual income

• Investors making >$100,000 per year can invest up to 10% of their annual income

• During a 12-month period, the aggregate of securities offered to an investor through crowdfunding offerings may not exceed $100,000

Crowdfunding Under Title III: True Equity Crowdfunding

Benefits and Drawbacks• Lots of restrictions on marketing - can only use

“tombstone” ads and must do all “marketing” on the funding portal where the offering is, can’t really build a crowd before launch - not legal under the rules

• Biggest issue other than cost - All or nothing offerings like Kickstarter. If you set a goal, and don’t hit it, you do not get anything. Given the up front cost of legal, accounting, marketing, etc. this is very dangerous

• Requires “reviewed” financials if raising more than $500K - expensive - not as expensive as audits.

Title IV

• Enacted June 2015• Also referred to as Regulation A+ or the Mini-

IPO• Grants exemptions from certain registration

requirements for small offerings for companies that don’t exceed $50 million in a 12 month period (increased from $5 million)

• Gives companies the option to submit a draft offering statement for confidential review by the SEC before the offering goes public

Title IV

• Breaks offerings into two tiers:

• Tier 1: Offerings up to $20 million in a 12 month period

• Tier 2: Offerings up to $50 million in a 12 month period

• Tier 2 Offerings subject to additional requirements, including audited financial statements

• Non-Accredited Investors can annually invest in a Tier 2 offering up to 10% of their income or net worth, whichever is greater

Crowdfunding Under Title IV: Regulation A+/The Mini-IPO

Benefits and Drawbacks

• Can market and generally solicit and “Test The Waters” before you go live

• Not “all or nothing” - keep whatever is raised• Requires filings with the SEC and “qualification”

of the offering, which is expensive and time consuming

Growing Your Company Through Crowdfunding In Multiple Steps

1. Rewards-based campaign - cheapest to do - proof of concept, raise some seed money and give away none of your company

2. Title III equity campaign - If already successful with rewards, this will be a logical next extension. Build more brand ambassadors, bring in the next round of up to $1M

3. Mini-IPO - Now that company is revenue producing, capitalize on this and raise up to $50M to take it to the next level.

Recap: Why Choose Equity Crowdfunding?

• Allows a company to publicly fundraise• Everyone can contribute (230 Million

Americans)• Low cost mass market funding option• Customers become investors and, in

turn, evangelists

Planning and Executing a Crowdfunding Project

Using crowdfunding for seed money requires a concrete plan and strategy from start to finish

Picking a Platform: Consider the Following…

What tools/features does the platform offer?

What features do you need?

Consider branding, multimedia, donor databases, additional fundraising events, tax-deduction information and more


Does the platform have any restrictions?

• Some platforms have deadlines, project approval requirements and restricted access to donor information


Should you go with a platform that serves a niche market?

• Depending on your project, a niche platform may serve you best

Logistics

• Create a detailed timeline of everything your campaign will require

• Consider requirements and regulations from both your crowdfunding platform and the SEC

• Determine what your costs will be, and set a funding goal depending on your costs

Marketing & Outreach

Start building up steam and gathering your “crowd” well before you plan to launch. You may want to…• Assemble a social media presence to reach

backers beyond your network• LinkedIn can be especially helpful here!• Create a landing page where interested

investors can enter their email address for more information

• Run email marketing campaigns with your email list

• Create a strong pitch and reach out to the media

Managing a Campaign

A crowdfunding campaign is a full-time job - you can’t “set it and forget it.” You’ll need to…

• Communicate and interact with your investors regularly - Keep them informed by providing regular campaign updates

• Go beyond your platform to reach investors - Use social media and pitch journalists to reach more investors; don’t rely on your funding platform alone

• Be flexible - crowdfunding campaigns can be wildly unpredictable, so be willing to change your strategy as needed

Communicating With Your Investors

• Create a communication strategy, including all content• Use videos and multimedia to make a personal connection

with potential investors• Use the right communication platform - it may be your

website, your crowdfunding campaign page, your social media channels, emails or a combination

• Extend your reach beyond your network through social media

• Create a strategy for follow up and investor relations once your campaign is over

• Stay engaged with your investors throughout your entire campaign

Case Study

Command Partners helped build every aspect of Digitzs’ equity crowdfunding campaign, including:

• Creating and designing a pitch deck for the founders to use while meeting with investors

• Design and draft the materials for the campaign on EquityNet, such as business models, revenue projections, board member bios, etc.

• Writing the video script for the landing page and investor page

• Developing the landing page and investor page wireframes and create the design work

Command Partners led the PR initiatives for the entire equity campaign, including:

• Drafting several press releases for the launch of the EquityNet campaign and other milestones

• Reaching out to interested media partners about the startup

• Spearheading the #LessWorkMoreLife initiative that the founder of Digitzs brainstormed- the goal was for people to share what they wanted to do with the time they gained through using a payment platform such as Digitzs

Command Partners served as the between Digitzs and investors. This entailed:

• Reaching out to between 20-500 investors per day on EquityNet, Crowdfunder and AngelList

• Scheduling meetings between investors and the Digitzs founder

• Answering any questions about Digitzs that investors may have

Overall, Command Partners helped Digitzs raise over $2.6 million

Roy Morejon, PresidentCommand Partners

www.commandpartners.com

Presented By:

Crowdfunding Questions?@RoyMorejon

Presented To:

http://www.commandpartners.com/

Equity Crowdfunding 101

Marketing

Transcript of Equity Crowdfunding 101