Crowd-Funding new Paths to $$$

From: Peter
Sent on: Thursday, May 15, 2014 11:22 AM

Crowd-Funding new Paths to $$$

A talk by Ralph Patterson,
BAE Workshop at Entrepreneur Meetup 08 May 14

On-line CFs: (Angel List), Caplinked

[Both are loose communities of accredited
investors & entrepreneurs] +
Funders Club & Equity Net

Super Angels / Micro VCs: Mainly ex-entrepreneurs, who got bought out
& Invest as individual angels & in small groups.

New Models: Y-Combinator [Incubator], BAE Workshop [Help write Biz Plan & Find Funding]

Large VC Firms: Set up small funds ($100M) to invest in Seed
stage - even pre-revenue


Essentially donations (exceptions discussed later)

People send in $ because they like what they

- Exchanged for Mdse, T-shirts, coffee mugs,

Sometimes money is deposited on a gadget that may/not be created

You might get your money back if the company fails to meet its target or you
might not

- Most likely little difference in CF with
legislation (JOBS Bill)

Impact of the JOBS Bill

1) Implemented 05 April 12, 2) JOBS Stands
for Jumpstart Our Business Startups, 3) Securities & Exchange Commission
(SEC) has published prelim-inary regulations on the implementation of the law,

4) it’s charged with protecting Widows &Orphans,

5) to ensure there are protections against
Get-rich-quick & Too-good-to-be-true schemes,

6) otherwise, it’s just a Crooks &
Shysters full employment law LoL,

7) SEC proposed no significant change in the rules. [Only people with either $1M net worth or
$200k revenue for previous two years (Accredited Investors) can invest for

What the JOBS Bill did

Modified Securities Law: 1) Increased the number of investors a private
Startup can have from 500 to 2,000, 2) Lifted the prohibition on “general
solicitation,” allowing Startups to solicit Investors on their website, for
instance. But they have to

be “Accredited Investors.” 3) The “Funding”
is limited to $1M, 4) Another provision (yet to take effect), will allow
companies to raise funds from average investors through a process known as
“Equity Crowd-funding” & ups the amount to $5M.

What’s New?

Some Crowd-funding sites are
setting up sections for Accredited Investors:
1) This allows Investors
to buy equity, 2) The entrepreneur would set Terms & Valuation, (as with
traditional angel groups), 3) Then they hope Investors would be attracted. 4)
Disadvantages: Not much opportunity for Due Diligence, therefore a very risky

Cross section of
Entrepreneurial Ecosystem:

1) 50% are unfundable by anybody at any time,

2) Other 49.9% have one problem or another

3) Hard to
separate the wheat from the chaff

What Else is New?

Some Start-ups are using CF
as Sales channels:

Market-entry strategy, 2)
Charge full or partial price for a future delivery, 3) Another way to get
Bridge financing by showing sales (ie, LumenLED, Gogi)

Crowdfunding Sites Site Web address Comments


Appbacker Wholesale mkt. for
mobile apps

Chipin Agnostic -
Creative projects

Cofondos Open-source SW

FansNextdoor Creative projects

IndieGoGo Agnostic -
Creative projects [BAE*]

Kickstarter Creative
projects [#1]

MicroVentures Tech, products &services

Peerbackers Business owners, peer focus

Pozible Novelty

get “a share of the Revenue”

RockectHub Agnostic -
Creative projects


BAE recommended

Your approach to CF

1) Google to find new sites [they spring up like
weeds all the time], 2)
Read the
fine print: a)
Some crowdfunding
sites charge only $10 to list and take only 8% of the gross money raised, if
you meet your goal and b) Others charge $100 to list, take 10% of the total,
& charge PayPal fees [Most are somewhere in between], c) Some offer
extensive Marketing tools, d)
on your website, blog, etc, e) Links to FB, Twitter, etc. (
Some don’t), f) Investigate thoroughly before
you sign up

Kickstarter: Launched in ’09, is the biggest of them all
Has raised $1B for
over 100,000 projects

Kickstarter Project Categories

Category Total $$ Pledged # of Projects Average $$

Film/Video $60M 7,135 $6,236

Music $38M 7,545 $5,140

Design $29M 854 $29,409

Games $20M 857 $26,910

Publishing $11M 2,128 $5,482

Art $11M 2,426 $4,312

Technology $10M 356 $27,673

Theater $8M 1,867 $4,085

Food $7M 751 $9,009

Comics $5M 647 $8,382

Other $8M
1,799 $4,637

So If You Are Interested in CF: 1) Investigate the Sites carefully, 2) Make sure you know what it will
cost if you succeed & if you don’t, 3) Pick one that has appeal to people
in your market, 4) Make a Video (there are many Pros on the Internet), who will
do it for you). Good Luck!

Contact Speaker - Ralph Patterson (CEO Bay Area Entrepreneurs Workshop) @ [address removed]


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