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.

Friday, October 30, 2015

Securities and Exchange Commission says "Go ahead, make my day..."

As we forecast, today (10/30/15) the US Securities and Exchange Commission (SEC) voted 3 to 1 to allow small companies to raise up to $1 million online. Small firms and startups can now solicit anyone, regardless of their location, net worth or wealth, thereby giving small investors a chance to own what may be the next Facebook or Google (or not). 
More likely, it means the day care center or restaurant down the street can now offer ownership stakes, or shares of stock, to their most supportive customers and clients. This is great news for women and Black-owned firms, which tend to be small and capital starved. The SEC vote approving rules implementing Title III of the JOBS Act means greater opportunity for minority, women and veteran firms to obtain equity funding.
In addition to allowing firms to raise capital from anyone via a crowdfunding platform (a Financial Industry Regulatory Authority or FINRA registered internet website set up specifically for this purpose), the SEC also approved rules making it easier for companies to sell stock in small or startup companies to potential investors residing in the state in which the startup (or small firm) is located. This is another potentially beneficial capital raising option for Black owned firms, which tend to be hyper-local.
The new rules are not without drawbacks, however. Crowdfunding platforms will be allowed to accept stock in lieu of payment for capital raising services provided, so small firms will have to watch out for crowdfunding platforms that charge, say 50% of your stock to help you get funded. Given the lack of brokerage firm ethics we saw in the years leading up to the financial crisis, this is serious issue, but the potential for good far outweighs the downside.
Raising equity, or selling ownership shares, is a very difficult and complicated task, mainly because of the convoluted rules governing how you can do so. Today's SEC action makes it a little easier to get the capital needed to launch (or enlarge) your firm.

Tuesday, October 27, 2015

SEC to vote on Title III of the JOBS Act this Friday!

"Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Pub. L. 94-409, that the Securities and Exchange Commission will hold an Open Meeting on Friday, October 30, 2015 at 10:00 a.m., in the Auditorium, Room L-002. The subject matter of the Open Meeting will be:

The Commission will consider whether to adopt rules and forms related to the offer and sale of securities through crowdfunding under Section 4(a)(6) of the Securities Act of 1933, as mandated by Title III of the Jumpstart Our Business Startups Act. http://www.sec.gov/news/openmeetings/2015/ssamtg103015.htm "

Having said, in March, 2015 that the SEC wasn't going to do Title III, we changed our minds last week and declared that the SEC was going to approve Title III after all.
https://www.linkedin.com/pulse/sec-poised-implement-title-iii-jobs-act-cunningham-am-mba?trk=pulse_spock-articles

We think they will also announce new policies that allow them to move quickly when equity crowdfunding misconduct is identified.

Thursday, October 22, 2015

SEC to implement Title III of the JOBS Act

Yesterday, the U.S. Securities and Exchange Commission (SEC) announced "that it will hold its annual Government-Business Forum on Small Business Capital Formation at its Washington D.C. headquarters on Nov. 19, 2015. The morning session of the forum will feature panel discussions on exempt and registered offerings occurring after the passage of the JOBS Act." You can register for the forum here
We think the SEC will use this opportunity to release the final Title III crowdfunding rules. As I describe in my book on the JOBS Act, small businesses and startups will be able to raise up to $1 million in equity (or debt) funding online via what are called Crowdfunding Platforms―online communities and websites. Imagine an eBay-like site that allows you to post your idea for a commercial venture online and then allows investors to purchase equity shares or stakes in it. 
Recently,  two state securities regulators (Montana and Massachusetts) brought a suit in the United States Court of Appeals for the District of Columbia Circuit against the SEC to block the rules implementing Title IV of the JOBS Act. Title IV allows companies to raise up to $50 million. We were recognized as a "Friend of the Court" in the action, and suggested the Court vacate the Title IV rule, subject to the SEC immediately implementing Title III of the JOBS Act.
I think they will use the Forum as an opportunity to do so. Now, I am not suggesting that just because I urged a Court to tie their Title IV decision to Title III, the SEC will act. (I don't have that kind of influence AT ALL.) 
On Wednesday, September 16th, I spoke at a roundtable on crowdfunding at the Embassy of Italy in DC:  
Also speaking was the Special Counsel for the SEC in charge of implementing Title III. He did not say anything that could be directly interpreted as supporting my statement, but he did acknowledge that the SEC is very, very late with implementation: under the JOBS Act, they were to have Title III regulations in place by 12/31/2012. 
I also noticed that the summary of the Title III rule on Reginfo.gov has a date listed for the implementation of final rules governing Title III: Final Action  -10/00/2015.
I think this means they will announce the final rules on the 19th of November, but, of course, I could be wrong.

Wednesday, October 14, 2015

Wayan Brothers Come to Howard University...

I attended a HowU Innovate panel on how to raise money for your startup. The invitation encouraged people to "Come out and hear from some of the best minds in the field."


While not super well attended, I did find it interesting. There was much good information, but it seemed a less edgy, more conventional rehash of a talk I gave at Howard in April and of the talk I gave at the 2015 National Black MBA Association Washington DC Chapter (NBMBAA-DC) Entrepreneurship Expo. My talk, titled “Black People and Venture Capital” is on video below.


One person sent me the photo at left in response to a photo I tweeted out during the meeting. 


Now, that's a little harsh, but I understand why they sent it. Much of the advice was super conventional and rests on the fiction that Black people can actually get money from VC's.

At one point, the person on the panel who works for a VC referenced the small number of Black professionals he knows, implying that there were only a handful of Black people working for VC firms. This is false. According to our database, there are probably 250 Black men and women in the field now. The issue is not having one more Black person with a job at a VC firm. The issue is performance. One study found that "while less than 1 percent of venture-capital-backed company founders were African American and 12 percent were Asian, 83 percent had a racial composition that was entirely Caucasian."

Someone reminded me of the speech Lyndon Johnson gave at Howard 50 years ago: "Johnson spoke of a widening gulf between blacks and whites in unemployment, infant mortality and economic opportunity. 'It is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates,' he said.

VCs are widely regarded as one way to walk thru the gates of opportunity, but we know, given the statistics cited above, this is false. 

Wednesday, October 7, 2015

Obama Turns to Crowdfunding to Aid Fleeing Syrians

As the New York Times reported, "Syrian refugees continue to flee the violence at home, President Obama is turning to the modern tools of Silicon Valley entrepreneurship as a supplement to the more traditional means of humanitarian relief. At the request of officials from the White House Office of Digital Strategy, the crowdfunding website Kickstarter has begun its first social service campaign aimed at raising money for the United Nations refugee agency on behalf of Syrian refugees." 

Here is my 10/7 talk on NPR's Press Play with Madeleine Brand: http://www.kcrw.com/news-culture/shows/press-play-with-madeleine-brand 

How effective is this? They raised $700,000 in six hours. Six hours. For more, visit the links below. 

http://www.nytimes.com/2015/10/07/world/middleeast/obama-turns-to-crowdfunding-to-aid-fleeing-syrians.html?_r=0http://qz.com/519438/kickstarter-just-crowdsourced-a-million-dollars-for-syrian-refugees/http://www.huffingtonpost.com/entry/kickstarter-syrian-refugees_5613f2e5e4b022a4ce5f90adhttp://www.theguardian.com/world/2015/oct/06/kickstarter-pairs-with-unhcr-to-help-syrian-refugees-after-white-house-callless

Thursday, September 3, 2015

Crowdfunding news article and stories

Book: The JOBS Act: Crowdfunding for Small Businesses and Startups

Top 50 Crowdfunding Campaigns: Fifty Most Successful Crowdfunding Campaigns

Businesses, Brushed Off by Banks, Look to Customers for Funding

New Crowdfunding Site Supports Black Entrepreneurs

Crowdfunding Site Targets African Americans

A Crowdfunding Site for Black Entrepreneurs

As Crowdfunding Grows, the Rewards Increase — but So Do the Risks

Commentary: Crowdfunding can provide new financing option for minority firms

Commentary: The quest for crowdfunding enters a complicated, but critical phase

Sunday, August 23, 2015

Black People, Venture Capital and Crowdfunding

I recently gave a talk at the 2015 National Black MBA Association, INC. Washington DC Chapter (NBMBAA-DC) Entrepreneurship Expo. My talk, titled “Black People and Venture Capital: Why You May Never Get Funded,” available below.


I started with a discussion of the key financial institution in the country, the Federal Reserve Board, which controls the allocation of capital via monetary policy, the tools used to control the supply of money.  The Fed is located at 20th Street and Constitution Avenue N.W. and I encouraged DC entrepreneurs to visit the institution, since the Fed directly impacts the ability of small businesses to get capital.

I also encouraged Black businesses in DC to use the recently established Offices of Minority and Women Inclusion as a powerful potential source of capital and contracts. Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act contains a provision creating an Office of Minority and Women Inclusion (OMWI) responsible for monitoring diversity efforts at the agencies, regulated entities and agency contractors. (For those unfamiliar with these Offices, we offer a seminar describing in detail the duties and performance of the 29 OMWI Offices. http://www.eventbrite.com/e/office-of-minority-and-women-inclusion-omwi-performance-opportunities-for-minority-and-women-firms-tickets-4633212062)

In the video, I cite my belief that crowdfunding, or raising money online for people, projects and products, is one of the only viable ways Black companies can get funded. I referenced my books on the subject: Top 50 Crowdfunding Campaigns: Fifty Most Successful Crowdfunding Campaigns at: http://www.amazon.com/dp/B00RKK4NL0 and The JOBS Act: Crowdfunding for Small Businesses and Startups at: http://www.amazon.com/JOBS-Act-Crowdfunding-Businesses-Startups/dp/143024755X/ 

Key trends in crowdfunding include the following:
•             Kickstarter and Indiegogo continue to dominate crowdfunding.
•             Corporate America is into crowdfunding..major brands, including Kia and Kimberly-Clark, have launched campaigns to test the market for new products.
•             Startups raised $204 million through equity models in 2013; that number was expected to top $700 million—7 percent of the overall crowdfunding market—in 2014.

I also discuss my belief that the key to getting angel or venture capital funding lies in being referred to investors by another investor or entrepreneur. I identify Keiretsu Forum, a global angel investor network, as a good resource, but noted they have not funded a single African American firm, however.

I referenced “Dunbar’s Number”, named for psychologist Robin Dunbar, who found that “humans are able to maintain relationships with no more than roughly 150 people at a time.” Dunbar’s research shows that “when it comes to meeting people who can help you professionally, three degrees of separation..is the magic number because when you’re introduced to a second- or third-degree connection, at least one person in an introduction chain personally knows the origin or target person.” 

As I said on Mashable, http://mashable.com/2014/07/21/startup-racism/  1% of VC funding goes to Black people. This is no accident. Other studies http://elitedaily.com/money/venture-capitalists-still-overwhelmingly-fund-white-male-entrepreneurs-minorities-women/ have confirmed that “venture capital funding overwhelmingly goes to white men.” Given this, it makes no sense to solicit funding from a group you know is not going to fund you. Viable alternatives include crowdfunding, angels, bootstrapping and possibly bank financing (but not really).

At one point, I outlined a strategy of buying real estate in Black communities to use as an asset for a startup franchise location. Further, I referenced my Blank Crowdfunding Business Slides https://drive.google.com/file/d/0Bx3S91AlzNJ4Uk1qc3czckpKRWRIcC1RX0dVcWlkUjJsZ2M0/view?usp=sharing as one way to begin to outline your startup capital needs and strategy.

I discussed using credit cards, personal loans and other resources to accumulate enough capital to start a business and about how “an increasing number of VCs want startups to engage in crowdfunding before requesting backing” but how VCs are still too racist and greedy to allow Black companies the room they need to serendipitously discover and uncover market value. I pointed out how this was exactly how Google uncovered the strategy that eventually led them to a $200 billion market value.

Finally, for those foolish  enough or determined to pursue VC funding, I discuss the main reasons why people don’t get funded:

·  Your character, integrity or leadership is questionable
·  You failed to spot issues with your team because you’re too trusting, too polite, or too focused on yourself
·   Not referred to investors by another investor or entrepreneur
·  Hard-headed to the point of being unable to listen to input from an experienced, reasonable and knowledgeable investor
·  Not deeply embedded in your niche or area of expertise
·  An inability to stop, and think, and finally, 
·   99% of VCs are racist and/or sexist

Thursday, June 4, 2015

Tech808 is this Saturday June 6th at George Washington University

Tech808 is this Saturday June 6th at George Washington University and it's shaping up to be one of the rarest types of tech conferences to hit the DC area. Tech808's mission is to bring awareness of the possibilities of tech entrepreneurship within the urban culture.


Who Should Attend Tech808?
Wantrepreneurs: You are the new guy/girl on the block. You want to start a company but have no idea how. You might have a 9 to 5 gig, been laid off, or decided it was time for a change. All of our speakers have been there, #Tech808 will not only educate you on tactics needed, but it will also leave YOU INSPIRED TO CHASE YOUR DREAMS!



Entrepreneurs: So you already started to chase your dreams? Salutes on that! Now join us at #Tech808 to learn how to take your company and yourself to the next level. We’ve brought together some incredible speakers to teach YOU their tactics that have led them to success.



Speakers/sessions include:
Paul Brunson - "Business Lessons I Learned From 3 Billionaires"
Sheena Allen / Benjamin Young - "How To Build Your First App" These two combined have over 10 millions downloads on the app store.
Dwight Peters - "Hustlers Ambition" How he came from sleeping on a couch to a $100,000 in profits building a tech business in 1 year.
And many many more!

Tickets are on sale now for $75, but using the promo code "family" will bring the cost down to just $55.
RSVP now to learn actionable tips you can apply to your business the same day.
RSVP: http://Bossup.us/tech808dc

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 

Wednesday, April 8, 2015

Online Class: "How To Crowdfund"

"How To Crowdfund" on Udemy: https://www.udemy.com/how-to-crowdfund/

Course Contents:
  • What is Crowdfunding?
  • The JOBS Act's definition of "crowdfunding," “crowdfunding platforms," and “emerging growth companies"
  • How to get up to $1 million through crowdfunding
  • The risks and rewards of taking advantage of crowdfunding
  • Intellectual property protection
  • Choosing a crowdfunding platform
  • SEC Title IV Regulation A - how does this work?
  • Indiegogo vs Kickstarter
  • State-level crowdfunding
  • How to stay on the right side of the law when soliciting funds
  • How to identify and deal with reliable crowdfunding platforms and companies
  • How businesses owned by women and minorities can raise new capital, as well as those now shut out of the capital markets (restaurants, day-care centers and others ignored by finicky venture capitalists and skittish bankers)
  • How investors can identify opportunities, avoid fraud, perform due diligence, and then make an intelligent investment
  • Understanding Title IV of the JOBS Act
  • The course is divided into five sections, 14 classes.
  • Course material include .pdf and text documents, and audio explaining the subject.
  • It will take five hours.
  • Take this course if you want to know how to create and manage a crowdfunding campaign.