Saturday, May 23, 2015

Illinois Approves Intrastate Crowdfunding

As one author noted, "Here are some of the main points of the Illinois Intrastate Crowdfunding Bill (HB 3429).

Adds new definition of 'accredited investor' which is now tied to the federal definition (see new 815 ILCS 5/2.34).

Amends the transaction exemption provided by 815 ILCS 5/4(H) to allow for offers, sales and/or issuances of securities to any 'accredited investor' and for the general promotion of the same (to the extent specified in the Bill).

Provides new definition of  'qualified escrowee,' which includes title insurance companies and banks authorized to do business in Illinois who maintain at least one (1) physical location in the state (see new 815 ILCS 5/2.35).

Provides new Intrastate Crowdfunding Exemption (see 815 ILCS 5/4(T)). Highlights include:
$1,000,000 funding cap unless the Issuer has made available to prospective purchasers audited financial statements, in which case the funding cap will be $4,000,000. – See subsection (2)
Max amount received by an issuer from any particular purchaser (other than accredited investors) is limited to $5,000 per year. – See subsection (3).

Requires use of a 'qualified escrowee' for the collection of funds from potential purchasers. – See subsection (8).

Requires the issuer, and each internet portal used, to establish commercially reasonable measures for limiting access to information to residents of Illinois. – See subsection (11).

Allows for 'general announcement' of offering by issuer. – To be in final administrative rules.
Requires delivery (or electronic access to) internally prepared quarterly financial statements/business reporting of issuer.  – To be in final administrative rules.

Provides new definition of 'registered internet portal.' (see 815 ILCS 5/2.36).

Establishes new provision related to offerings made through a 'qualified internet portal' (see 815 ILCS 5/8d). Highlights include:

Provides for an exemption from registration as a 'dealer' or 'investment adviser' under the Act for an internet portal that meets certain requirements. Specifies certain actions which do not, by themselves, constitute offering investment advice or recommendations. – See subsection (b).

The portal shall be owned by an entity organized, or otherwise qualified to do business, in Illinois and in good standing. – To be in final administrative rules.

Allows for 'general announcement' of offering by internet portal. – To be in final administrative rules."

Sunday, April 12, 2015

How to Crowdfund in 2015

We posted an article with the title "How to Crowdfund" in 2012. Given all that has happened in the interim I thought we would update it. This data is from our Online Class on How to Crowdfund - https://www.udemy.com/how-to-crowdfund/

(Video previewhttps://youtu.be/nL5svW7pN7w)

As I noted in 2012, crowdfunding, getting investments and donations from individuals via the internet, has taken off, giving individuals who have, until now, been shut out of funding markets access to much needed cash. It will especially help socially responsible individuals and those seeking to fund socially responsible projects. These are exactly the types of projects that have had an extraordinarily difficult time raising capital in the current economic downturn. 

In my book on crowdfunding (The JOBS Act: Crowdfunding for Small Businesses and Startups, published by Apress) I discuss how to raise money online. For those with an interest, let me offer a few updated hints.

1. It is still the case that successful crowdfunding campaigns will bring the first part of the crowd with them. Here’s what I think is going on. Your friends and family don’t have to fund your entire campaign, but they must vouch for you. Your Facebook friends provide social data that validates your identity and your character. It turns out that this social media provided validation is critical to any crowdfunding effort. The bottom line:  crowdfunding is about the crowd, and you must have at least the beginnings of one to be successful.

2. Modesty still pays. In 2012, the average, GoFundMe campaign raised $1,126.00. In 2015, 60% of successful Kickstarter campaigns raise between $1,000 and $10,000. It is very unlikely that you are going, like Pebble Watch, to raise $20 million online. You might, but is is unlikely. The bottom line: start small.


3. As the table at left (successful campaigns by category on Kickstarter as of March, 2015) shows, certain types of solicitations work. In 2012, on GoFundMe, Medical, Education and Volunteer projects made up 47% of projects on the site. Different crowdfunding websites have different focal areas and specialties. Do your homework. Review all of the major Crowdfunding websites. Bottom line: make sure you post your project on the right site.

Key Takeaways

A. You have a fan base. It is just not large enough to generate a million dollars in a day.
B. Your fan base may, however, generate $1,000 in a day.
C. If your crowdfunding goal is $1,000, then you are there.
D. For your fan base, you also have something in your possession that will prove to them that you are all in. Think of what this might be and offer it (or a chance to possess it, if only temporarily.)
E. Set a reasonable monetary goal, relative to what you are trying to do.
F. Your entire campaign should be about something people can't get anywhere else, at any price.
G. It should be for something that makes life better for someone else.

Of course, these are just hints. Crowdfunding is complicated. It requires discipline and skill. Again, for more, please sign up to our Online Class on How to Crowdfund - https://www.udemy.com/how-to-crowdfund/

If you think this has been useful, please "like" our Facebook page: http://www.facebook.com/CrowdfundingBook