Propel Arizona Crowdfunding Workshop 2-dec-11-2012

Practical

CrowdfundingWorkshop

www.propelarizona.com

Practical

CrowdfundingWorkshop

Agenda1. Crowdfunding overview

IP & Crowdfunding2. Crafting the Idea and Campaign3. Preparing the Visuals4. Perks and rewards5. Running a successful campaign


Crowdfundingoverview

1.

The Funding Gap

Concept to Product to Growth


$ $ $$


$Entrepreneur IPO


$Entrepreneur IPO

$Entrepreneur IPO

$

Venture Capital


$Entrepreneur IPO

$Entrepreneur IPO

$

Venture Capital

$Entrepreneur IPO

$

Venture Capital

$

Angels,accel & incub


$Entrepreneur IPO

$

Venture Capital

$


Crowdfunding

$$


$Entrepreneur IPO

$

Venture Capital

$


Crowdfunding

$$

Crowdfunding$


$Entrepreneur IPO

$

Venture Capital

$


Crowdfunding

$$

Crowdfunding$

Crowdfunding$


$Entrepreneur IPO

$

Venture Capital

$


Crowdfunding

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Crowdfunding$

Crowdfunding$

Crowdfunding$

CrowdfundingSoliciting & Collecting relatively small amounts

of money (“funding”) from a large number of people (“crowd”)


WYNTK(what you need to know)

What is Crowdfunding



• Debt Crowdfunding– microloans– P2P lending

• Donation Crowdfunding– Charity/Causes– Kickstarter Model– Rewards Based– Pre-Order/Presumer

• Equity Crowdfunding – JOBS act

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



BEFORE - (SEC “Reg D” Rule 504, 505, 506, 144a) … Since 1933– 35 Unaccredited Investors (max), Unlimited Accredited– 500 Shareholders (max)– $1M max per 12 months, or $5M+ w/Reporting & restrictions – No “General Solicitations”

AFTER - (JOBS Act) … 2012/2013, maybe– General Solicitations – to accredited investors– 35 Unaccredited Investors (max), Unlimited Accredited– 500 Shareholders (max)– $1M max per 12 months, or $5M+ w/Reporting & restrictions – No “General Solicitations”

But, if you think the JOBS act moves the SEC into the 21st century …

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 …

Fraud, Deceit, Scamming Widows, Retirees and Helpless Babies.

Fraud?• Case One: Australia – Equity Crowdfunding • The Australian Small Scale Offerings Board (www.ASSOB.com.au), founded in 2007, is the largest investment crowdfunding

platform in Australia and one of the largest in the world. It is an equity crowdfunding platform that has successfully served both accredited and non-accredited investors since its inception over 5 years ago, raising $130,409,669 since 2007. 132 companies have been funded to date and not a single case of fraud has been reported. ASSOB operates within the current securities structure in Austral

• Case Two: UK – Equity Crowdfunding• Crowdcube (www.crowdcube.com) is the largest equity-based crowdfunding platform in the UK has been operating since

February 15, 2011 with no reported fraud. Crowdcube operates within the current securities framework within the UK and allows issuers to raise equity capital using an online portal.

• 29 pitches have been funded with £4.25M. Average raise is £146,552. Average equity given up is 16%. Average numbers of investors is 63. Average days to fund are 51. Average age of entrepreneur is 40 and total number of registered investors is 24,023. No fraud has been reported.

• UK based, Funding Circle (www.fundingcircle.com) was founded in 2010. It is an online marketplace enabling savers and investors to sidestep banks and directly lend to small businesses. Funding Circle differs from other lending platforms in that it facilitates loans to businesses, rather than consumers while also proving easy access to investors’ money at any time. It provides low cost finance for small, UK firms frustrated by the loan terms offered by the

http://www.crowdfundcapitaladvisors.com/resources/26-resources/120-crowd-detects-fraud.html

http://www.assob.com.au/

http://www.crowdcube.com/

http://www.fundingcircle.com/

Fraud? • Case Four: US - Fraud Derailed• An example of fraud that was derailed on a portal is a campaign on Kickstarter called Mythic. From

Techdirt.com:• “A recent video game project on Kickstarter that turned out to be fake. As BetaBeat reports, the

crowdsourcing scam was exposed by a crowdsourced investigation:• ... a campaign for an action video game, MYTHIC: The Story Of Gods and Men, has just been busted by

forum users at Reddit, SomethingAwful and Rock, Paper, Shotgun. The creators claimed to be an independent studio, “Little Monster Productions,” of 12 industry veterans in Hollywood. “Our team has done a significant amount of work on the World of Warcraft series as well as Diablo 2 and the original Starcraft,” says the project page.

Bull____, said the Internet. Turns out the art was cribbed, the text for backer rewards was copied and pasted from another Kickstarter project, and even the office photos were from another game studio, Burton Design Group.

• When people brought their accusations to the Kickstarter comments, the developers made a few weak attempts at deflection then quietly shut down having raised just under $5,000 (far short of their goal, so that money won't actually be released). With Kickstarter gaining more attention every day, we're sure to see more attempts at scams—and maybe even some successes—but with a savvy community that polices itself like this, the scammers face an uphill battle.”


http://techdirt.com/

http://www.betabeat.com/2012/04/30/this-is-what-a-kickstarter-scam-looks-like/



http://www.kickstarter.com/projects/273246798/mythic-the-story-of-gods-and-men

http://www.reddit.com/r/Games/comments/sxa9b/kickstarter_scam_project_mythic_story_of_gods/

http://www.rockpapershotgun.com/forums/showthread.php?3301-Kickstarter-et-alia&p=122329&viewfull=1%22%20/l%20%22post122329

http://www.burtondesigngroup.com/

Bull____, said the Internet. Turns out the art was cribbed, the text for backer rewards was copied and pasted from another Kickstarter project, and even the office photos were from another game studio, Burton Design Group.


http://www.burtondesigngroup.com/

• 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)



Real Crowdfunding – that works.

Today

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

ALL OR NOTHING

Perks &Rewards

Updates (and Blogging)

Comments & Engagement

http://www.crowdcrux.com/wp-content/uploads/2012/12/kickstarter-vs-indiegogo1.jpg

Kickstarter 2011

• Let’s look at some statistics for 2011:• Launched Projects: 27,086• Successful Projects: 11,836• Dollars Pledged: $99,344,382• Rewards Selected: 1,150,461• Total Visitors: 30,590,342• Project Success Rate: 46%

A Few Words aboutIntellectual Property and Crowdfunding …

1a.

IP & CROWDFUNDING

Mary [email protected]

@traklight; facebook.com/traklightASUEF

Big Idea? Before you post:

IDENTIFY IP:- Existing & filed or

protected- Ideas- Know how

Who owns it?Patent vs. Trade SecretsEnabling Public Disclosure

PROTECT IP

• Mentors – ASU Venture Catalyst/Furnace

• Free Resources:- IP CLOUD- CEI/Gangplank/COHOOTS- SCORE/SBDC- ACA – Innovation Challenge-USPTO & Copyright office

TRAKLIGHT – ASUEF

WHY …Do people Crowdfund?

1b.

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

3 Why’s …

There are three main reasons why people unconnected to a project or business would support it:

• 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

• 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/

http://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy/


Overall (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



Crowdfunding is about …

(when crowdfunding …)

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



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-orders• Supporters

UH OH …The Kickstart Model..

http://www.indiegogo.com/blog/2011/11/indiegogo-insight-campaigns-with-teams-raised-180-as-much-money-as-individuals.html




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



HOW to Crowdfund?

1. PRE - Preparing

2. PUSH - Running the campaign

3. POST – Delivering on your Promise

Some initial rules ….

1. Crowdfunding takes work, new skills.2. It takes a strategy, and preparation. 3. The rules are different.4. You can’t just post and run …5. It’s a public success or failure – that “stays on

your resume”



2.Crafting the Idea and Campaign

HOW to Crowdfund?

1. PRE - Preparing– Build Credibility– Sharpen Pitch & Post– Perks and Rewards– Timefames & $$

first …

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.

http://mashable.com/2012/04/25/pebble-smart-watch/

http://mashable.com/2012/03/31/iphone-galileo/

• 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.

http://www.kickstarter.com/projects/ouya/ouya-a-new-kind-of-video-game-console

http://www.kickstarter.com/projects/1342319572/the-nifty-minidrive

What do successful campaigns have in common?

http://www.kickstarter.com/projects/hop/elevation-dock-the-best-dock-for-iphone



Projectio

http://www.kickstarter.com/projects/1209578799/projecteo-the-tiny-instagram-projector

http://www.kickstarter.com/projects/1209578799/projecteo-the-tiny-instagram-projector

http://www.kickstarter.com/projects/1719196889/iceblink-engine?ref=home_location

http://www.kickstarter.com/projects/1719196889/iceblink-engine?ref=home_location

http://www.kickstarter.com/projects/812916345/magnet-comic-a-custom-magnetic-and-dry-erase-comic?ref=home_popular



http://www.kickstarter.com/projects/mikebond/ti2-sentinel-titanium-cache?ref=home_popular

http://www.kickstarter.com/projects/mikebond/ti2-sentinel-titanium-cache?ref=home_popular

http://www.kickstarter.com/projects/poots/kingdom-death-monster?ref=home_popular



http://www.kickstarter.com/projects/smartthings/smartthings-make-your-world-smarter?ref=category



http://www.kickstarter.com/projects/thejumpshot/jumpshot-a-new-weapon-to-battle-pc-frustration?ref=category



http://www.kickstarter.com/projects/374405221/mary-elizabeths-sock-the-first-book-collection?ref=home_location



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

7 habits of highly successful crowdfunding campaigns

1. They already have fan bases2. They build off of something familiar3. They are simple4. They are (usually) NOT about the company5. They appeal to a specific interest ….6. They are BUZZWORTHY ….7. They work really hard at it!

Before you start, remember …

• For your target, – It's about emotion– It’s about “eliteness”– … being part of the cool group– feeling like you're important - – feeling powerful! Influential



Successful Crowdfunding Campaigns Focus on

The new 4 P’s …

PEOPLEthe

1. PITCH

the

2. PROMOthe

4. PERKSthe

3.

focus on “them” – not your company

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

the

1.The new 4 P’s of Crowdfunding ..


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 Exercise(s)

Checklist

1. Idea-check: (focus on target)– About “them” not you.– Emotional appeal: Passion, exclusivity, emotion.

2. Funding Level– Realistic (for you and them)– Use of proceeds

3. Timeframe4. Possible perks (not yet)

Assignment

1. Idea– What’s the story– What’s the emotional appeal, benefits

2. Who are the targets– Benefits. Connections

3. Describe, tell story.4. What visuals should you provide.5. How much, how long? When done?

Preparing

the Visuals

3.

Perks

and rewards

4.

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 them unique & Exclusive

2. Target them

3. Give them a connection

“The Cocktail Party Effect”

“The Restaurant Effect”

“The Carey School Effect”

Assignment

1. What is important to your target?2. What rewards can connect them to you or

your project3. What rewards are part of your project4. What unique rewards can you think of (that

others are not doing)5. What rewards will get them talking to others!

Running a

successful campaign

5.

HOW to Crowdfund?

1. PRE - Preparing

2. PUSH - Running the campaign

3. POST – Delivering on your Promise

HOW to Crowdfund?

PUSH - Running the campaign• Social Media• Comments & Updates• Networking• Personal Pitches

http://www.indiegogo.com/blog/2012/05/indiegogo-insight-campaigns-that-take-these-six-actions-raise-8-times-more-money-than-campaigns-that-dont.html



http://www.indiegogo.com/blog/2012/07/indiegogo-insight-winning-the-middle-game.html



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successful campaigns raise, on average, 49% percent of their goals during the first and

last 10% of the campaign length.

Your mission: To get them talking about your project

http://www.kickstarter.com/projects/1209578799/projecteo-the-tiny-instagram-projector?ref=home_popular



• most successful projects receive about 25-40% of their revenue from their first, second and third degree of connections.

• This could include friends, family, work acquaintances, or anyone that the owner is connected to, including their second and third degree connections.

• http://www.forbes.com/sites/tanyaprive/2012/11/27/what-is-crowdfunding-and-how-does-it-benefit-the-economy/



Continue the story…

Social Engagement

– Transparency & Trust– Social Proof & Viral FX

– Engagement & “The Fundamentals”– Twitter– Facebook– Blogging

1. Create:- A Facebook Account- A Twitter Account

(for your campaign)

2. Tweet & Post –Frequently–Uniquely–Personally

3. Post Updates & Blog•About your progress•About the subject•About the industry•About the People

4. Go 1-1•Reply to comments•Retweet/Repost

Your fans and donors are your most powerful advocates!

5. Target, Measure & Adjust•Different Messages for different groups

•Google, Hootsuite, others•Learn and Adjust focus

Metrics

http://www.perlsteinlab.com/blog/anatomy-of-a-crowdfund-week-3-slow-and-steady


• the importance of google analytics to track and improve performance

• + perks from fivvr

• http://www.perlsteinlab.com/blog/anatomy-of-a-crowdfund-week-3-slow-and-steady



HOW to Crowdfund?

POST - campaign• Thanks …• Perks and rewards• Updates• Completing your goals !!

The most important secret is …

Showing Momentum

(the perception of momentum)

The most obvious secret is …

Credibility

= trust, competence & follow-through

Practical Crowdfunding

Workshopwww.propelarizona.com @PropelArizona

Propel Arizona Crowdfunding Workshop 2-dec-11-2012

Economy & Finance

Transcript of Propel Arizona Crowdfunding Workshop 2-dec-11-2012