Friday, March 4, 2016

Keys to Crowdfunding: "high quality photos and video, prior crowdfunding success, positive comments from backers..."

We note with interest a recent study from the University at Buffalo School of Management that shows "high quality photos and video, previous crowdfunding success and positive comments from backers are the keys to a successful campaign."

This syncs with what we uncovered in our two books, "The JOBS Act: Crowdfunding for Small Businesses and Startups" and in "Top 50 Crowdfunding Campaigns: Fifty Most Successful Crowdfunding Campaigns."

According to news reports, the University at Buffalo School of Management study "found that by receiving these signals, potential investors..gain valuable information that motivates them to participate and increases the likelihood of a project achieving its funding goal."

One part of the analysis we found in error, however. One of the authors of the study was quoted as saying that

"These sources are important because backers of crowdfunded projects have less access to information than typical private equity investors..private equity investors follow a stringent due diligence process to assess the quality of a startup, while crowdfunding backers rely more on the information on the campaign's webpage."

This shows a lack of understanding about crowdfunding and private equity firms, who lose 80% of the funds they invest, something that would not occur if they really followed "stringent due diligence process(es) to assess the quality of a startup."

For more, see: "Top 5 Reasons People Contribute to Crowdfunding Campaigns" by @CreativeInv on @LinkedIn https://www.linkedin.com/pulse/20140715171927-3448802-top-5-reasons-people-contribute-to-crowdfunding-campaigns

"How To Crowdfund Update" by @CreativeInv on @LinkedIn https://www.linkedin.com/pulse/how-crowdfund-update-william-michael-cunningham-am-mba

and

"How to become the biggest Kickstarter project..EVER!" by @CreativeInv on @LinkedIn https://www.linkedin.com/pulse/20140831023841-3448802-how-to-become-the-biggest-kickstarter-project-ever

Saturday, November 21, 2015

SEC to veterans, women and minorities: Fahgettaboudit!

I attended the Government-Business Forum on Small Business Capital Formation held at the US Securities and Exchange Commission on November 19th. 
According to the SEC, one of the Forum's goals "is to .. highlight perceived unnecessary impediments to small business capital formation and address whether they can be eliminated or reduced. Each forum seeks to develop recommendations for government and private action to improve the environment for small business capital formation, consistent with other public policy goals, including investor protection. Participants in the Forum typically have included small business executives, venture capitalists, government officials, trade association representatives, lawyers, accountants, academics and small business advocates..the format of the Forum typically has emphasized small interactive breakout groups developing recommendations for governmental action." 
Let me just say that the Forum was a confirmation of some of my earlier statements about the SEC.
Participants at the sessions I attended consisted mainly of lawyers, with the occasional right wing lobbying group (Heritage Foundation) thrown in to make sure the interests of low and middle income citizens went unrepresented.
I am not exaggerating. At one point in a breakout session to develop recommendations concerning crowdfunding under Title III and Title IV of theJobs Act, a collection of lawyers forwarded a proposal to let foreigners use crowdfunding in support of EB-5 visas. The EB-5 visa "provides a method of obtaining a green card for foreign nationals who invest money in the United States."
While I have nothing against foreigners who want to invest in the US, during the session I noted that Title VII of the JOBS Act seeks to provide opportunities for veterans, women and minorities, and that the SEC may want to consider this first, since it is, you know, the law.  Title VII says "The Securities and Exchange Commission shall provide online information and conduct outreach to inform small and medium sized businesses, women owned businesses, veteran owned businesses, and minority owned businesses of the changes made by this Act." 
The JOBS Act actually restricts foreign use of domestic crowdfunding, a good thing in that it lowers fraud and gives native US Citizens a chance to benefit from American crowdfunding first.
Unfortunately, the lawyers in the room were having none of it. Aided by a feckless SEC staff person and a moderator who was himself a lawyer (not a small business person) proposals to reinforce the SEC's commitment to veterans, women and minorities were voted down, in favor of a recommendation giving foreigners the right to use domestic JOBS Act crowdfunding in support of the EB-5 visa program. 
You just can't make this stuff up.