By: Rob Stott

Still in its infancy, the Crowdfunding Professional Association relied on the expertise of its founders and the skills of its staff to get an online education network successfully off the ground. The goal: to meet the needs of a rapidly emerging industry.

In an industry that seems to be growing and changing by the hour—thanks, in part, to the 2012 JOBS (Jumpstart Our Business Startups) Act—a new associations is moving quickly to help crowdfunding professionals, industry partners, investors, and the general public make sense of it all.

The Crowdfunding Professional Association announced that it is rolling out a Global Crowdfunding Education Network that will provide online resources including breaking news alerts, legislative updates, and crowdfunding classes to professionals in the industry and others interested in learning more about it.

The network is “built to help prepare and educate investors and entrepreneurs for the implementation of Title II and Title III crowdfunding,” the group said in a statement, referring to two sections of the JOBS Act that provide for funding mechanisms for startup businesses.

“The CfPA was founded under the principles of education, advocacy, and awareness at the global industry level for crowdfunding,” said Kim Wales, chair of the CfPA and founder of Wales Capital. “Our real mission is to make sure the entrepreneurs have a place that they can tap into mentorship, build relationships, and build partnerships.”

To launch the website after being formed just last year, CfPA relied on the expertise of its founders, many of whom played a role in creating the framework for the JOBS Act, Wales said. “We’ve taken their approach to create standards, best practices, and guidelines. That’s really what is going to make up the foundation in terms of being able to scale something long term,” she said.

CfPA is getting help from outside sources as well.

“We’re involving the third-party providers, the vendors, the professional service providers, people that are going to be really instrumental in making this process run smoothly, diligently, and transparently,” said Scott McIntyre, cochair of the founding executive committee for education and training, and managing director of Phabriq. “We have to make sure that we’re covering angles that everybody gets.”

Ensuring that the education network was properly designed and marketed meant putting key players throughout the organization in roles that worked to their strengths.

“It has to be organic,” said Wales. “You can’t really force the pieces. The organization is not created on a single person, and it is not created under the view of an individual company. It is a collective view, and that’s for the industry.”

Using the staff’s existing networks and properly promoting the program have been important tactics as well, something McIntyre said other groups can learn from.

“Find the workforce, the people that are going to spread the word voraciously,” he said. “You can have the best idea, the best pitch, or the best website, but if you don’t have a network of people that are following you, that are connected to you, then you are a tree in the forest and no one’s going to hear you fall. Networking is absolutely paramount to any business and is a very valuable asset, one that we cannot undersell.”

Association Now Website: associationsnow.com/2013/02/higher-ed-crowdfunding…network

Washington, D.C. (PRWEB) January 31, 2013

FINRA’s information request brings optimism to the crowdfunding industry’s leading trade organizations CFIRA and CfPA.

Kim Wales writes about the regulatory decisions looming for the JOBS Act and how instead of imposing heavy regulations that are likely to confuse the U.S. states and EU nations states; government should look at criteria for Intermediaries such as operational and financial transparency, security of information and payments, platform functionality and customer protection.

Read the article in the Cayman Financial Review Magazine

On January 25, 2013 Goldman Sachs and LaGuardia College hosted its 7th, 10,000 Small Businesses Funders Panel and invited Kim Wales, the founder of Wales Capital, a thought leader in Crowdfund Investing as a panelist.

Goldman Sachs 10,000 Small Businesses is a five-year initiative to unlock the growth and job creation potential of 10,000 small businesses across the United States through greater access to business education, financial capital, and business support services. The initiative is currently active in New York City, the greater Los Angeles area, the greater New Orleans area, and Houston, and will expand to communities across the country.

Objectives

10,000 Small Businesses is designed to help firms grow and create jobs. Small businesses play a vital role in creating jobs and growth in America’s economy and during the past 40 years, small businesses have created two-thirds of the net new jobs in the country. According to the National Federation of Independent Business (NFIB) and other research, these businesses are essential assets for the communities in which they operate.

Eligible Small Businesses

The program is designed for underserved small businesses which have the potential to grow. Broad characteristics of qualifying business owners include, but are not limited to: business revenues between $150,000 to $4 million in the most recent fiscal year; in operation for at least two years; at least four full-time employees; operations in economically disadvantaged areas; and a business model that can scale to create more jobs NYC Business Express. An online source, NYC.gov/BusinessExpress, takes the edge off of obtaining licenses, permits and certifi cations. At this continually updated website, entrepreneurs can fi nd step-by-step instructions for meeting all of those pesky government requirements. — Phyllis Furman

For more information,  Goldman Sachs 10,000 Small Businesses

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By ROBB MANDELBAUM

When the Jobs Act became law in April, supporters proclaimed a new era for small businesses seeking to raise money.

The “game changer,” as President Obama put it in the Rose Garden as he signed the bill, was a provision to let small companies “crowdfund” — that is, sell stock and other securities over the Internet directly to the public. “For the first time,” the president said, “ordinary Americans will be able to go online and invest in entrepreneurs that they believe in.”

But it now seems that dawn will break late on this new age of democratic investing. The Securities and Exchange Commission appears certain to miss its end-of-year deadline for issuing regulations to put the provision into effect. And with the departure of the S.E.C. chairwoman, Mary L. Schapiro, and three of her top deputies — including two who manage the offices writing the regulations — some in the nascent equity crowdfunding industry worry that it could be 2014 before their line of business becomes legal.

The delay has frustrated many crowdfunding backers. The 270 days that Congress gave the S.E.C. to write the rules “is not a suggested timeline; it is a Congressional mandate,” said Kim Wales, an organizer at Crowdfund Intermediary Regulatory Advocates, a lobbying group formed in April to represent the new industry, in an e-mailed statement. “The S.E.C. answers to Congress, not the other way around.”

Read more…
 
Originally published in the New York Times on December 27, 2012
http://www.nytimes.com/2012/12/27/business/smallbusiness/why-the-sec-is-likely-to-miss-its-deadline-to-write-crowdfunding-rules.html

By Chelsea Dommert

As AnnMarie explained last week, equity-based crowdfunding has huge potential to help startup or small business owners raise capital from lots of supporters. Crowdfunding can also validate a business idea and simultaneously build a customer base. Creating a successful campaign, however, requires some savvy, and savvy comes from experience. For many, the first crowdfunding campaign has to succeed – small business owners can’t spend time running multiple semi-good campaigns just to gain experience. Luckily, it is possible to learn from other people’s experiences instead of relying on our own.

There are some really excellent case studies out there. I could throw a hundred at you, but we’re going to start with just one from England–Righteous– where crowdfunding for equity is already legal.  In the U.S., crowdfunding for equity is expected to be legal in 2013.

Righteous used a crowd investing campaign to raise £75,000 (about $121,000) for supermarket outreach.  The CEO, Gem Misa, recently did an interview with BBC radio(Gem’s interview starts at 9:13). The interview points out three crucial aspects of a successful crowd investing campaign:

1.    Gem started validating her idea before she started the campaign.

Gem already had some supporters before she started her crowd investing campaign. She had asked strangers whether they would buy a vegan, chemical-free, great-tasting salad dressing. She had already tried the product in a few stores. People had already tested the product, and supported the brand. Guess what? Those were the people who invested first in the company.

That surprised Gem. “I was thinking it was more of friends and family that were going to be participating, but I was so amazed that people have heard about the brand and wanted to be able to be part of it.”

 2.    Gem’s company idea was easy to explain and easy to understand.

Everybody gets the idea of an all-natural salad dressing. Crowdcube CEO Darren Westlake explains, “People invest in things that they can understand.” He says, “We’ve had a lot of success in consumer products that have been in supermarkets…people can understand those; they’re very simple.”

Take note: crowd investing isn’t for all companies. Westlake explains, “We’ve had a few kind of scientific, more complicated businesses on the site and people just don’t understand them; if you don’t understand them, you’re probably not going to back them because you can’t feel confident in your investment.”

3.    Gem had planned what she would do with the crowd’s investment. 

Righteous intended to launch a TV and radio ad campaign with the crowd’s invested capital. The comapany’s clear vision made it easy to take quick, cost-effective action after the crowdfunding campaign was over. The advertising campaign made listeners want to try the product and helped Righteous break into more supermarket chains.

There was never any question around the destiny of the crowdfunded money. It wasn’t just for administration or odd projects around the office. Gem had a plan, and Righteous executed on the plan once their crowd funded it.

In summary: Righteous had a simple, easy-to-understand idea. They tested that idea in the market before pursuing expansion, and their crowd investment campaign was only part of their larger strategy.

The Righteous example offers some great lessons for designing your own crowd investing campaign; soon, business owners in the United States will be able to seek crowd investment just like Righteous did. Any startup or small business owner can go start preparing their pitch right now at one of many companies including earlyshares.com. Also, anyone, regardless of income, can sign up to invest so that when crowdfunding for equity is legal in the U.S., they are ready to get in on the ground floor of innovative new businesses.

By AnnMarie McIlwain, Founder and CEO, www.careerfuel.net

Tom Szaky is a 30-year-old successful entrepreneur with a high growth, $15 million business. He, like many, believes that crowdfunding for equity—a new vehicle for raising capital, expected to be available in 2013—will make it substantially easier for small businesses to get off the ground and/or take their business to the next level. Hear Tom describe how this new avenue for fundraising could have helped him when he started out 10 years ago and how crowdfunding for equity may democratize the investment upside of early-stage companies. For anyone who doesn’t understand what crowdfunding for equity is and why they should care, Tom will put you “in the know”!

Help us tell the Securities and Exchange Commission to make it happen- click here to sign a petition  telling the SEC that we need them to finish the regulations on time (by the end of this year!) so that we can start raising money for our businesses and create jobs.

AnnMarie McIlwain, Founder and CEO of CareerFuel, is a Board member of CFIRA, a leading advocacy group working with the Securities and Exchange Commission, the Financial Industry Regulatory Industry Regulatory Authority (FINRA) and other affected governmental entities to help establish industry standards and best practices for equity based crowdfunding.

Video Production by Mayer Dubinsky Videography

By AnnMarie McIlwain, Founder and CEO, www.careerfuel.net

By AnnMarie McIlwain, Founder and CEO, www.careerfuel.net

If you are a small business owner or an aspiring entrepreneur you might be wondering what you need to know about the new crowdfunding law. If so, keep reading!

*The JOBS Act was signed into law on April 5, 2012. One of the Act’s provisions will allow startups to raise capital using crowdfunding. The basic idea is that entrepreneurs will be able to offer equity in exchange for investments in their startup. At present, startups can raise an unlimited amount of money using crowdfunding, but they cannot offer equity. Today’s incentives range from free product, to tee-shirts and karma.

*The Securities and Exchange Commission (SEC) has until December 31, 2012 to create regulations for how crowdfunding will be executed. Fall 2012 is the earliest time this might be completed, but realistically it is expected to take until year’s end.

*Money can only be raised through brokers or on Internet “funding portals” (such asKickstarter and HelpersUnite) registered with the government. Entrepreneurs cannot go directly to consumers to crowdfund for equity.

*Monies raised are dispersed  if they achieve their stated goal.  So, if a company’s fundraising goal is $500,000 in 30 days and they only raise $490,000 at the end of 30 days, then the company does not receive any funds and the crowdfunded investments are returned to the individual investors.

*Entrepreneurs can raise $1M every 12 months until they reach $10M in total assets.

*The entrepreneur can decide how much equity is being offered in exchange for the total investment being raised.

*The SEC will need to rule on whether any or all crowdfunding investors will count toward the 2,000-investor limit that triggers the requirement for a company to register its common stock and become a publicly reporting company. The JOBS Act, as written, does not limit the number of crowdfunding investors. If the SEC decides to include crowdfunded investors in the 2,000 investor limit, entrepreneurs will then need to limit the number of small investors (as in only 20 people can invest $200, 30 at $400, etc.). If this were the case, crowdfunding would be more like group funding.

*Any person who owns 20% or more of the company stock will be required to go through a background check, the details of which will be made public on the crowdfunding site (e.g., credit history, tax liens, etc.).

*Any money raised through family and friends prior to the first crowdfunding round will need to be disclosed.

*Investors will be limited to a total annual investment based on their net worth. For those with annual income of less than $100,000 or equivalent net worth, investments are limited to the greater of $2,000 or 5% of their income/net worth. For those whose annual income/net worth exceeds $100,000, they can invest 10% or up to $100,000.

*Regulations will require platforms to use a pop-up box, where investors will read disclaimers and take a quiz ensuring that they understand the high risk associated with such an investment.

*All social media forums will be connected to the crowdfunding platforms and openly shared. Questions raised by potential investors will be publicly available to read, as will the answers to these questions. This includes inquiries pertaining to the business model, financial projections, use of investment monies, etc.

*Entrepreneurs will be limited to solicitation via existing social media contacts. Email/Facebook/Twitter etc. contacts will be uploaded to the government-approved crowdfunding site that the entrepreneur has selected. Entrepreneurs will then solicit from those people via that specific site. Outbound marketing via email or public relations to previously unknown parties will not be allowed.

*Investments will be tracked by affinity circles (i.e., 1^st degree is someone from the entrepreneur’s LinkedIn, Facebook, Twitter, etc. connections; a 2^nd degree affinity is someone from a 1^st degree connection and 3^rd degree affinity is someone completely unknown to the entrepreneur but who came to the crowdfunding site).

*It is expected that the vast majority of investors will come from 1^st and 2^nd degree affinity circles.

Upon reviewing the current JOBS Act provision for crowdfunding, the key conclusion I draw is that it is not going to be as useful to small business America as I had hoped. Unless you have a large social network, savvy communication skills, and a well-conceived business plan, I am not sure that you would feel comfortable navigating these regulatory waters.  And would it be worth the time for a small dollar amount (say below $100,000)?

My guess is that existing businesses with a following are probably the most likely to succeed under the new crowdfunding law.

Maybe this is the way it should be?  I’m not sure, but time will certainly tell. And nothing will really get going until 2013.

A final note: Sherwood Neiss of StartUpExemption.com provided more insight on this subject than any other person I heard speak or whose articles I have read. He was one of the few laypeople “at the table” with Congress and The White House advocating for this law and advising on the details. I am very grateful to Sherwood for his time and input.